CHINA-UGANDA TRADE

Chinese investments in Uganda for the past two decades have grown to $596 million with over 250 companies operating in the country. Bilateral trade generates $400 million annually.

China also significantly consumes Uganda’s coffee, and trade statistics show that china imported coffee beans worth $7.6 million in the first half of 2010.

Favorable investment policies in Uganda have also significantly attracted the Chinese into the construction and manufacturing industry, accelerating the pace of growth in the sectors.

With the discovery of oil in Uganda, which now stands at 3.5 billion barrels following the successful appraisals in the fields of Gunya, the country expects to see more Chinese investment. The China National Offshore Oil Corporation already is significantly participating in the oil sector after buying a third of an oil stake from UK oil giant Tullow Oil for $2.9 billion.  Experts predict large amounts of Uganda’s oil will eventually go to China.

After dislodging Britain as the number one economic partner for Uganda, China also launched a plan to build infrastructure and donate scholastic materials.  China is currently planning a school to teach Ugandans the Chinese language, and will begin construction of the Kampala Entebbe international Airport highway.

EXCERPTS FROM ECONOMIC REPORT

During the period of 2012, the total trade volume between Uganda and China grew at a relatively steady pace. A total trade volume of US$538 million was realized for the period January 2012 to December 2012. Out of which, China’s Exports to Uganda were recorded at US$495.145 mil and imports from Uganda generated US$42.87 mil respectively. When compared to a similar period in 2011, total trade volume was recorded at US$400mil, representing an increase of 35%. On the whole, Uganda still has a trade imbalance with China on a ratio of 9:1, however, it is expected that the preferential tariff treatment offered to the least developed countries is one of the measures taken by the Chinese government to address this challenge. More importantly, Uganda’s discovery of oil and abundant mineral resources are expected to attract more Chinese investors and assist in reducing the trade deficit. The table below illustrates the trade volume from January to December 2012.

Year:2012	Total volume of Trade (million $)	Import from Uganda(million $)	Export to Uganda(million $)
January	64. 700	1. 648	63. 052
February	19. 583	1. 231	18. 352
March	61. 969	4. 261	57. 708
April	33. 617	6. 789	26. 828
May	54. 993	3. 335	51. 657
June	54. 063	3. 543	50. 520
July	33. 651	5. 584	28. 073
August	39. 947	4. 077	35. 676
September	52. 141	3. 325	48. 816
October	32. 945	2. 537	30. 408
November	46. 127	3. 041	43. 086
December	43.808	3.240	40.568
Total	538.020	42.875	495.145

Source: Ministry of Commerce, PRC

Comparative Analysis

Uganda–China Total Trade Volume (US$ Million)

For the period 2011 & 2012

Month	2011	2012	Variance
January	25.93	64.70	38.77
February	16.77	19.58	2.81
March	42.38	61.97	19.59
April	31.88	33.62	1.74
May	34.66	54.99	20.33
June	37.53	54.06	16.53
July	34.50	33.65	-0.85
August	40.30	39.95	-0.35
September	29.08	52.14	23.06
October	37.08	32.95	-4.13
November	38.57	46.13	7.56
December	31.32	43.81	12.49
Total	400.00	538.02	+138.02

Source: Ministry of Commerce, PRC

According to information released by the Guangdong Provincial Bureau of Foreign and Economic Trade, during the period of 2012, the total trade volume between Uganda and Guangdong province slightly declined. A total trade volume of US$91.80 million was realized for the period January 2012 to December 2012. Out of which, Guangdong’s Exports to Uganda were recorded at US$83.73 mil and imports from Uganda generated US$8.08 mil respectively. When compared to a similar period in 2011, total trade volume was recorded atUS$100.76 million, this represented a decrease of 9.7% respectively. Whereas exports from China registered a decline of 12.12%, imports from Uganda to the province increased by 17.6% compared to 2011 and this could be attributed to the promotional efforts being undertaken by the Uganda government in addressing the huge challenge of the prevailing trade deficit?

On the whole, when compared to the total trade volume of US$538 million realized in 2012, Guangdong province accounted for 17% of the trade however this figure is estimated to be more than 40% if the Special Administrative Regions of Hong Kong and Macao are taken into consideration. It should also be noted that over 90% of Ugandan traders and entrepreneurs purchase their goods from Guangdong and other neighboring southern provinces.

The Table 1 below illustrates the trade volume between Guangdong province and Uganda from January to December 2012 while Table 2. Shows a comparative analysis for the two periods.

Table. 1 : Uganda–Guangdong Total Trade Volume (US$ Million)

2012	Total Trade Volume(Million USD)	Export to Uganda(Million USD)		Import from Uganda(Million USD)
January	4.66	4.28		0.38
February	7.33	7.05		0.28
March	6.15	5.8		0.35
April	7.15	6.62		0.53
May	7.38	7.02		0.37
June	7.75	7.59		0.16
July	7.74	7.08		0.67
August	6.83	5.73		1.1
September	8.2	7.4		0.8
October	6.55	5.78		0.76
November	7.45	6.68		0.77
December	14.61	12.7		1.91
Total	91.80	83.73		8.08
Source: BOFTEC
Table.2	Comparative Analysis
	Uganda–Guangdong Total Trade Volume (US$ Million)
	For the period 2011 & 2012
	Month	2011	2012
	January	8.08	4.66
	February	3.44	7.33
	March	10.6	6.15
	April	6.58	7.15
	May	10.06	7.38
	June	8.97	7.75
	July	12.6	7.74
	August	13.53	6.83
	September	7.31	8.2
	October	7.4	6.55
	November	6.04	7.45
	December	6.15	14.61
	Total	100.76	91.80

                     Source: BOFTEC

Meanwhile, according to market research conducted by the consulate, most of the Ugandan entrepreneurs purchase their furniture, building and construction materials from Foshan and Tsunde districts which are located 60 km from Guangzhou the (Capital). These two districts contribute approximately 50% of Uganda’s imports from Guangdong province. In addition, according to a report from the Standard Bank Group, electrical equipment accounted for 26.5% of Uganda’s imports from China, while clothing, footwear and machinery accounted for 14.2% and 12.7% respectively.

The following is a list of the main import and export items between China and Uganda:

Uganda’s  Imports from China	Uganda’s  Exports to China
Building/Construction materialsFootwear Telecommunications Equipment Textiles Electronic Equipment/machinery Medical Equipment Batteries Bags and cases Motorcycles and parts Fabric, clothing and textiles Pharmaceuticals Bicycles Rubber items Furniture Blankets Padlocks and keys Stationery	CottonCobalt Oil seeds Animal products and leather Chemical products Coffee Copper ores and concentrates Cotton yarn Timber Cocoa Niobium, tantalum, vanadium, and zirconium Lead ore and concentrate Tortoise shell and horns Fish (Fresh and dried) Tea

*Source: Ministry of Commerce, PRC

According to a report released by the Chinese Embassy in Uganda, China’s cumulative investment in Uganda from 1993 to 2011 totaled US$596 million together with 265 Chinese firms that opened business in Uganda, creating 28,000 job opportunities for Ugandans. During the period 2011/ 2012, over 90% of the infrastructure and energy projects were undertaken by Chinese companies starting with the petroleum sector receiving investment from the China National Offshore Oil Corporation (CNOOC) exploring for oil in the Albertine Graben in western Uganda.

Chinese companies were also actively involved in boosting Uganda’s road construction sector which is critical in transforming the country’s economy. The most notable project was the launching of the Kampala –Entebbe dual carriageway. The 51.4 Km dual carriageway road will be constructed by the China Communication Construction Company (CCCC) and is estimated to cost around $476 million (Sh1190bn) where $350 million (sh875bn) is from China’s EXIM Bank while the estimated $126 million (315bn) counter funding will be met by the government of Uganda.

As part of the core mission of the Uganda Consulate, several investment seminars were held during the year aimed at targeting companies from the four areas of jurisdiction namely (Guangdong, Hainan, Fujian and Guanxi-Zhang). The sectors targeted were in energy, mining, agro processing and financing. Consequently, one mining company from Guangdong expressed investment interest in iron ore and phosphates and is currently in negotiations with government. In addition, a thermal energy company established a partnership with a Ugandan company and is supplying power. The DFCU Bank also established a partnership with the Bank of China to provide traders with easy access of using the Uganda shilling and RMB exchange mechanism to conduct business in China.

During the year 2012, Uganda coffee continued to be promoted in China both through the wholesale and retail channels. Uganda participated in several promotional events with the key highlight being the 110^th Canton fair which was held between May 1^st to 4^th 2012 and November 1^st -5^th 2012 in Guangzhou city and these events provided a great platform and opportunity to build brand awareness in China. Other promotional events attended during the year included the Opening ceremony of the Uganda Consulate, the SME fair and Sino Uganda Business Forum, Uganda Golden Jubilee day and the Coffee Expo of Guangzhou. A total of 5 tons of roasted coffee were dispatched and sold during the period a slight decline from the previous year during a similar period. The sales projections for the first half of 2013 are expected to remain unchanged as the financial crisis continues to wreak havoc among the developed countries whose citizens consume the bulk of the coffee in China. However on an optimistic note, the opening of the Uganda Consulate in Guangzhou is expected to expand the promotion campaign in Southern China by establishing more contacts and partnerships with Chinese coffee stakeholders. In terms of per capita coffee consumption in China, southern china has the highest number of coffee consumers mainly because of a more developed coffee drinking culture, higher incomes and an influx of foreign companies, residents and returning Overseas Chinese. 

BANKS FACILITATING BILATERAL TRADE

The large trade volumes between China and Uganda corridor have triggered a turf war between Ugandan banks, lowering trade costs and easing access to the tightly controlled Chinese Renminbi (Yuan).

Joint ventures between Ugandan and Chinese banks have enabled Ugandan firms to access cheap financing from China in addition to providing a direct money transfer service for Ugandan-based companies and individuals.

Standard Chartered Bank has hired Mandarin speaking Chinese to tap into the large local Chinese business class while DFCU has just secured a partnership with the Bank of China.

This means Ugandans no longer have to carry huge sums of money with them to China to transact business. All they need is to carry their ATM cards and withdraw the money from Bank of China.

Uganda Investment Authority (UIA) reports indicate that trade volumes between Uganda and China increased from $156m (sh423b) in 2006 to $222m (sh602b) in 2007 an annual growth of rate of 42%.

A consistent growth rate would place trade volumes at over $1b or 6% of Uganda’s Gross Domestic Product (GDP) for the year ended 2012.

The benefits of international and cross-border trade depend a lot on good banking. The banking partnership between Bank of China and DFCU reflects a commitment to ease transactions for both Chinese and Ugandan business. This is expected to not only contribute to the growth of business but also the economies of both countries.

Individuals will be able to send dollars directly from China to Uganda through their accounts, however, there are tight government controls on the Renminbi and for now only businesses can access it.

DFCU bosses said the bank will utilize the collaboration to offer offshore investment propositions in China, trade finance facilities and co-financing of viable investment projects.

It means customers can pay for goods imported from china directly to avoid exchange rate losses for the third currency.

Jeremy Stevens, a Beijing based Standard Bank Group economist notes that China accounts for 20% of Africa’s trade and that China’s trade with Africa has grown nearly twice as fast as its trade with Latin America an indication of brighter prospects for China-Africa trade.

Chinese firms, faced with subdued activity in mature markets and tasked with shifting up the value chain, are recognizing the importance of selling goods to the large emerging economies, especially the highly populated and increasingly wealthy ones in Africa.

CHINA-UGANDA FRIENSHIP ASSOCIATION

Uganda’s Vice President Edward Kiwanuka Ssekandi recently launched the China-Uganda Frienship Association and urged the Ugandan business community, academicians and cultural entities to take advantage of.

China was among the first countries to recognize Uganda as a sovereign State just three days after attaining her independence from the British becoming Uganda’s friend and ally. Friendship between the two countries has since grown into a successful and fruitful relationship in the 50 years of interaction as nations and peoples.

This has become a source of motivation and trust in strengthening relations between the two countries at the Government level and contributing to stronger socio-economic ties between the two peoples.

There are over 7,000 Chinese living and operating over 100 businesses in Kampala alone and a reasonable number of Ugandans living and trading in various cities of China.

The Vice President described the launch as a significant block which has been added to the 50-year old bilateral relations between Uganda and China

It is now the Government’s wish to ensure that the coming years are characterized by increased balance of trade between China and Uganda as well as technological and scientific transfer from China to Uganda and cultural exchanges to contribute to Uganda’s development.

The Vice President challenged the China-Africa Association to attract investment by presenting Uganda’s potential regarding available business opportunities describing the launch as another milestone in Uganda’s 50 years and commended members of the association for their noble vision of cementing the social, cultural and economic ties between the two peoples.

The Chinese Ambassador to Uganda Zhao Ya Li assured Ugandans of continued socio economic, cultural and bilateral relations between the two countries saying China holds Uganda in high esteem for her contribution to the peace and security on the continent.