PACEID advises Ugandan exporters on Gulf status amid war

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OPINION

By Odrek Rwabwogo

I want you to imagine a six-lane good tarmac road to the port. Vehicles are moving at a reasonable speed and distance and are keeping time. Suddenly, the six-lane road ends unexpectedly, in a very narrow country road with bumps and potholes, and it begins to rain, and all is slippery around you, the driver! You are carrying fridges or highly perishable food, and this cargo is bumping all around the truck. You cannot go back but must keep moving in spite of the logjam. That is what trade disruption feels and is like. This is the reason we come to you to provide some navigation and care out of the logjam.

The Presidential Advisory Committee on Exports and Industrial Development (PACEID) that I head notes with concern the escalating tensions in the Middle East and the resulting disruptions to global trade and logistics. Uganda’s exports to the Gulf average at 35-37% of all our exports of coffee, gold, tea, fruits and vegetables, along with some tourism receipts, given the role of their airlines with daily flights to Entebbe. The United Arab Emirates (UAE) has invested more than $3.5b in infrastructure and agricultural projects. We, therefore, regret the unfortunate escalation of the conflict and its potential impact on our exporters. Much of our industrial inputs for our factories, including petroleum products — amounting to more than $1b — come from this region.

That is why we worry about actions of external actors that have no consideration of the unintended consequences on countries like Uganda and the African continent; the reason why we keep emphasising unity of Africa and utilisation of the African common market not just as our fallback but primary market. If you are not co-operating as African countries yet you possess $29 trillion (this is equivalent to the size of the US market or 26% of the entire global economy) in cobalt, manganese, graphite, the new energy minerals that power semi-conductors, high precision weapons and cells phones, among others, you become a vendor of what is valuable and a consumer of trinkets. You suffer consequences immediately when there is a conflict.

On March 4, shipping lines like Maersk issued advisories suspending vessel transits through the Strait of Hormuz and the Bab el-Mandeb Strait, two critical maritime corridors for global trade. The Strait of Hormuz alone in Iran carries more than 21 million barrels of oil per day. Because of this, an Emergency Freight Increase, a rare and abrupt cost, now applies to cargo destined for the UAE, Qatar, Saudi Arabia and Kuwait. Freight costs have risen by an additional surcharge $1,800 per 20ft container and $3,800+ for a 40ft container. Some vessels are now re-routing around the Cape of South Africa, adding 10-20 days to transit times. These developments are expected to increase costs, insurance and freight values and this is hard on businesses. They might result in higher value-added tax (VAT) and duty calculations at Uganda’s border posts of Malaba and Busia. We have got to think ahead together about how to deal with this, so we do not lose the export revenues that have significantly been on an upward trend since 2022.

Air cargo operations have also experienced constraints. Capacity through Emirates Cargo and flydubai has faced delays and temporary booking suspensions since March 2, while Qatar Airways is operating with limited cargo capacity. We advise exporters to confirm shipments at least 48 hours in advance and, where possible, consider alternative direct routes such as Flynas flights between Entebbe and Riyadh. We are in touch with Uganda’s missions in the Gulf, and they all report that trade activity in the UAE has had limitations on air and marine transport.

We are in touch with our ambassadors to the UAE and Saudi Arabia, and they assure us about the safety and security of Ugandans.

Flights from Entebbe to Saudi Arabia are operating, and exports continue, although demand is temporarily low during the month of Ramadhan.

Our PACEID team encourages exporters, suppliers and traders to work together, not in silos. We must continue to meet our contractual obligations and preserve market confidence despite the temporary logistical disruptions. Those who have taken export credit from our fund, please remain in close contact with the fund managers to avoid shocks and unplanned-for payments. Keep in touch to ensure your credit position does not worsen arbitrarily and abruptly.

PACEID, therefore, advises our exporters to:

Review cargo schedules and documentation with clearing agents and freight forwarders more closely than we have done before.

Plan for higher freight charges and potential increases in border-related costs, but find a method to deal with this ahead.

Monitor and maintain adequate stock levels to ensure continuity of supply and market confidence in spite of these potential cost surges.

Avoid disruptions that could undermine Uganda’s reliability in key export markets

Our PACEID team will continue to monitor developments very closely. You can email us via info@paceid.org or call Connie on +256392588841 (WhatsApp inclusive). Website is www.paceid.org

The writer is the chairperson of PACEID