OPINION: Ethiopia's crisis could revive Uganda's AGOA dreams

As the English saying goes, there is a silver lining on every dark cloud in the sky. This proverb is indeed coming to be true even with what is currently happening in the Horn of Africa. With the unfortunate events of a war raging on in Ethiopia, the US Government has slapped trade sanctions against Ethiopia. The AGOA arrangements that gave the Ethiopian products preferential treatment in the US markets has been temporarily halted.

Ethiopia has been the second largest Eastern African exporter to the US via the AGOA arrangement with an annual export value of $572mn. Ethiopia has been only second to Kenya which exported the value of $667mn as per 2019 trade data by the Office of the US Trade Representative (USTR).

Ethiopian exports to the US have ranged from coffee, apparel, footwear and art crafts, most of which are produced in the 5 industrial parks that the Government set up in the various parts of the country.

Since now, there is this apparently unexpected opportunity that has availed itself, the big question is what can Uganda as a country do in the immediate to be able to jump and seize this opportunity to leverage the silver lining to her advantage?

Uganda is among the 38 countries eligible for tariff-free and quota-free access to the US market and AGAO allows over 6,000 products to be exported to America.

It must be noted that the AGOA arrangement has been in place since 2000, that is 21 years and now extended to 2025, however there continues to be growing concern that Uganda has not fully exploited this preferential trade opportunity.

South Africa, Nigeria, Angola, Equatorial Guinea, Republic of Congo, Gabon and Chad are the top countries said to be utilizing the AGOA opportunity properly.

A 2015 study by the Economic Policy Research Centre (EPRC) blamed the failure by Uganda to tap into AGOA on what it called a home-grown problem. The study lead led by Dr. Alex Ijjo, a senior EPRC Research Fellow, pointed out lack of competitiveness and unsupported environment.

The researchers said Uganda’s production is characterized by the use of basic technologies, little control over production conditions, high costs of electricity, high cost of finance and infrastructural deficiencies among others.

They also said that there was no clear strategy on AGOA, adding that even after the government had set up the Export-Led Growth Strategy Unit (ELGSU) to expedite export related issues, a number of challenges continue to haunt the initiative.

We have talked about this AGOA for ages starting with when our American friend Madam Rosa Whittaker was in the State Department and helped to get Uganda on this preferential status list as way back as in year 2000. Consequently, there was a buzz of AGOA in the country almost on a daily basis.

We saw the former Coffee Marketing Board premises at Bugolobi turned into an AGOA apparels center operated under the Tri-Star Garment Company incorporated in 2002 and owned by Uganda's ever present long-time friend in the names of Mr. Velupillai Kananathan former CEO/Executive Director of Imperial  Hotels (currently serving as  Sri-Lankan Ambassador to Kenya and Honorary Consul Uganda).

Tri-Star Company was given direct government funding and borrowing guarantees to commercial banks by the Bank of Uganda.

Young girls were collected from different parts of the country to come and learn tailoring and later work on textile for AGOA export. There was a buzz of activities at the Bugolobi premises and all Ugandans hoped that this could be the real game changer in the country’s drive for export through value addition to our raw materials like cotton and hides and skins.

However, it wasn’t to be so long before issues of lack of sufficient supplies of raw materials coupled with poor management and abuse of workers’ rights started emerging. The bad situation was climaxed when a group of striking workers stormed Parliament complaining of mistreatment by the management of Tri-Star Company.

Although, Mr. Kananathan tried to fend off this bad publicity, the company continued to sink in loss making and logistical problems which led to its eventual closers in 2006.

By the time Tri-Star Company closed and sending hundreds of girls home, the Government of Uganda had already given it Shs. 24bn in loans and subsidies.

 

Later in a bid to resuscitate the country’s appetite to partake of the preferential trade opportunities through the AGOA arrangement, the Government opted for a Libyan company (Lap Textiles) takeover of 60% shareholding of Tri-Star Apparel while Government of Uganda and Tri-Star remained minority shareholders. Under this arrangement, the government of Uganda was to inject in the company another Shs. 20bn while the Libyan company was to put in $33mn.

It is reported that a team of Libyans were in the country to assess the factory and that is when they decided to inject in the $33mn in spinning and weaving plants to boost the company’s production and competitiveness.

It is however also reported that the injection of Shs. 20bn by the government didn’t materialize.

That is where we stopped knowing or hearing anything about the Tri-Star-Lap Textiles operations in Uganda. This is how the textile production for the preferential tax-free and quota-free story for Uganda might have miserably ended.

Here below is a look at how the countries of East Africa have been utilizing the preferential arrangement under AGOA.

• US agricultural from Uganda totaled to $61mn in 2019 and the top category was unroasted coffee which amounted to $40mn.

 

• US agricultural from Kenya totaled to $126mn in 2019 and the top category was tree nuts which amounted to $55mn, unroasted coffee which was $34mn and tea which amounted to $11mn.

 

• US agricultural from Tanzania totaled to $24mn in 2019 and the top category was unroasted coffee which amounted to $9mn, cocoa beans, tree nuts and spices. Knit Apparel amounted to $29mn while woven apparel amounted to $23mn.

 

• US agricultural from Rwanda totaled to $27mn in 2019 and the top category was unroasted coffee which amounted to $24mn, tea was $531 thousand and roasted coffee was $71 thousand.

 

• US agricultural imports from Egypt totaled to $138mn in 2019 and the top category was processed fruits and vegetables which amounted to $60m.

 

• US agricultural from Ethiopia amounted to $151mn in 2019. The Leading category of agricultural imports from Ethiopia was unroasted coffee.

 

 

Comparison of exports to the US in 2019

Country	Exports to US in $	Agricultural Products in $
Uganda	80mn	61mn
Ethiopia	572mn	151mn
Egypt	3.2bn	138mn
Kenya	667mn	126mn
Tanzania	130mn	24mn
Rwanda	46mn	27mn

Source: Office of the US Trade Representative (USTR – www.ustr.gov)

 

Those are the number as far as American AGOA is concerned, but as a country we shouldn’t behave as if all is lost.

The good news and the exciting opportunities that are being reported coming out of Uganda’s participation in the Dubai Expo and the investment interest dividends that are coming out as a result of the visit of H.E the President to Dubai, should be encouraging and need to serve as an eye opener to our policy makers and the private sector alike.

 

We have numerous instructive examples to refer to in order to underscore the existing opportunities available elsewhere other than America.

• Apart from exporting to the US, Egypt is exporting hundreds of tonnes of both Sweet and Irish potatoes to Europe every week.

 

• War-torn Somalia is exporting hundreds of tonnes of bananas to Middle East.

 

• Kenya is exporting hundreds of tonnes of Tea, Pineapples, Avocados, Mangoes, Chilies and Coffee globally every week.

 

• Rwanda is exporting hundreds of tonnes of Irish potatoes and tea to Qatar every week.

The above revelation should consequently bring us to ask the inevitable and probably uncomforting question; What aren't we in Uganda doing right?

It is my submission that it is now the time for us as a country to do some real soul searching.

Gone are the days of rhetoric, chest thumping, excuses and blame games. There is no option for tomorrow because today is already even too late. There are certainly so much that we as a country ought to have achieved by now.

We need to decide on what we want as our pathway to building this economy to be and we must work on removing all impediments in that pathway. Uganda is an agricultural country with undoubtedly fertile soils, numerous all year round water bodies and a hard working people, there should not be any excuse any more as to why we can’t harness all the endowment that we have in order to bring out our best for our own generation but also for the generations to come.

The Emiratis of UAE that we are drawlingly admiring each time we go to their capitals were simply fishermen who lived in soggy fishing villages for ages. But once they discovered their vision and what they wanted to be, they exploited the desert relentlessly and with focus not only on improving their own livelihoods but also for their future generations. Thanks to the visionary and unselfish, disciplined and pragmatic leaders of the UAE who have turned the desert into an oasis of not only affluence and luxury but also of prosperity and stability.

It is time to reflect on the beautiful and sweet words of the famous British former Prime Minister Sir. Winston Churchill used to describe Uganda as the Pearl of Africa. We should stop sloganeering those words but instead we should work to see that we make Uganda the real Pearl of Africa in every sense.

Written by Edward Baliddawa – November 2021