Revamping the export market

By Ian Katusiime

Elly Twineyo was recently appointed Executive Director of Uganda Export Promotions Board (UEPB). He spoke to Ian Katusiime about the issues affecting the export sector and his vision for the institution.

What is your overall management strategy?

I believe in team leadership; I see myself as a team leader. My promise is that I will deal with a team of top management. My role is not to micromanage. I want systems to work – finance, human resource, etc – once these systems are working then management becomes easy. You do not need to micromanage, you just set systems.

What do you see as the main challenge facing the export market?

There are both demand-side and supply-side challenges.  On the demand side, the challenges come from the market. The market requires very stringent standards; they have set tough conditions because they are the consumers. The European Union (EU) is our main market and they have thus set tough conditions for our fruits and vegetables. Our role is to ensure that exporters comply. ‘The customer is king’ and therefore if you do not give them quality, they will go elsewhere. On the supply side, we have a market but not with enough quantities to sell. Most of our agriculture is subsistence. We don’t have many commercial farmers so most of the work is done by poor peasants

.So we have a challenge of getting the right quality let alone the right quantities, this affects export performance. The reason flower exporters are a bit successful is because they are commercial. I think the government has done some good work by supplying inputs such as seeds and animals to households to boost their production. We want to work with NAADS and Operation Wealth Creation. Recently, International Monetary Fund (IMF) was visiting Kanungu and they were impressed by government’s role of distributing seeds and then the households that are growing tea. Kanungu is now a model district for fighting poverty. We want to work with the Ministry of Agriculture, Animal Industry and Fisheries to bring in the marketing angle because you have to work towards producing for the market.

Our key regional export markets such as South Sudan are politically unstable. What is the way forward?

Our key markets are the regional markets that is East African Community (EAC) and Common Market for Eastern and Southern Africa                (COMESA), then we also have the EU.  South Sudan was the biggest market because it took manufactured products like cement, sugar, iron and steel, value added products like tomato sauce, freshfruits and vegetables, grains, animals. Unfortunately, internal challenges there have cost us a lot. Uganda was earning over Shs 400 billion from South Sudan alone in one year.We are working with the line ministry to resolve the issue because South Sudan owes Ugandan traders $45m and they agreed to pay. For us, we are implementers not policy makers so we engage the ministry but Cabinet is also involved. We need a regional solution to regain the South Sudan market. It is easy to reach by market requirements.

How are you going to help the fish and flower farmers to capture those key European markets?

We want to work with exporters to the EU of fish, flowers, and vegetables to develop the right products for the market.  We are going to explain the conditions and market requirements to farmers and producers and some of these have to do with quality. There are entry requirements. Remember that Ugandan exports are zero-rated; this means that we do not tax them as they leave the country but you have to prove to government that your consignment was actually exported. This is meant to encourage exports. We are also going to undertake matchmaking where exporters go to a country and meet buyers of their products. This is going to be done by working with our embassies and other private sector agencies to organise these buyers of our products.  So by the time one leaves, they have people writing letters of intent as opposed to the traditional trade fairs where you meet somebody for the first time. This also involves going with the group to negotiate, they move with their samples, make presentations, get to know about the technical expertise, we give an overview of what the country is capable of in terms of its potential and current production.

Is value addition going to improve with you in charge?

The President is right to say that we are losing employment because of exporting raw products. We are also losing profit by exporting unprocessed products. The best example is of hides and skins where we just remove the fur and export. But if we semi-processed it and got leather out of it and exported it to Italy, Italy would have to undertake only a few processes to make bags, shoes, belts etc. We are also exporting labour; the President always talks about how we export raw coffee and we import Nescafe yet one tin of Nescafe is equal to the price of a sack of coffee beans. Value addition is important and we are encouraging it. It has been working in the region. We lost a big chunk of the market in South Sudan but we are selling value-added products such as cement, steel products, roofing materials, value added agro-based products to Rwanda and DR Congo. Value addition is possible; we want to engage producers by showing them the market for these value added products so as to motivate them. We want to show them the profit value because value addition must make economic sense.

Earnings from non-traditional exports like fish have severely declined over the years. How is this going to be addressed?

The challenge is with informal trade. We have realised that fish is one of the products in informal trade. There are more volumes of informal trade that are not captured along the border as formal trade. UEPB wants to come in by telling traders that exports are zero-rated. We have also asked them to use the EAC simplified certificate of origin. The reason people are exporting without documents is because UEPB, which awards the certificate of origin in preferential markets, has only one office in Kampala. People from northern Uganda come to Kampala to pick a certificate to export to Sudan. Those in Kabale who export to Rwanda, and those who export to DR Congo also come to Kampala for the document.

Secondly, informal trade is also on the rise in the region. Informal exports since 2010 to 2014 have been ranging from $41m to $36m.

There is debate about government banning the export of iron ore. Some people are saying the ban should be lifted?

The government banned the export of iron ore in line with value addition. There should be a return on our minerals. People who get money from the mineral sector are those who process the minerals.  I have listened to different voices but I also do not think we should be exporting ores. At this level, we should be exporting value added products, some kind of flour of an ore which is semi processed.  We have a young but growing iron and steel sector and the demand for steel and iron products is growing. It is the mining companies that are agitating for the lifting of the ban because they want to sell and make profit. The role of the government is to create an enabling environment but its commitment to value addition is well known. We just need to have a meaningful discussion on how to realise processing plans of minerals.

What is your take on the progress of the East African Community regional integration process?

I believe in regional integration and it has so many benefits. First at the political level, it fosters peace within the region. Rarely will countries in the same region go to war. For example you saw how Kenya and Uganda resolved the Migingo crisis. Secondly, at the economic level, it creates a big internal market especially with the free movement of labour, goods and services. Third, when you are a region of five countries, it gives you a bigger voice when you are negotiating with organisations like the World Bank, World Trade Organization or regional blocs like EU. We are a market of around 140 million people. It also increases the margins for traders both importers and exporters once you remove most of the obstacles. For instance, Uganda, Kenya and Tanzania are working together to collect customs all the way from Mombasa. It also improves the revenue generation of countries.

For long, coffee has been Uganda’s main export earner – bringing in about 80% of foreign exchange earnings. What diversification plans are in place?

Coffee has been a major export since the early 1990s. We have non-traditional exports like fish, fruits, vegetables and flowers, which we began exporting some time back. We also have hides and skins and we also have minerals and hopefully crude oil. Oil exploration and extraction is an expensive undertaking. People who invest in the sector weigh a lot of options because they have calculated their risks but government is committed to having oil tomorrow. The challenge is that the oil companies have their agendas, strategies and balance sheets. The sector has inflows and leakages. It is a challenge in the investment sector. One day the oil will flow and there will be more geopolitical interest coming in.