Uganda mer­chants say for­eign re­tail­ers un­der­cut them

The Washington Times Weekly - - Geopolitics - BY IOAN­NIS GATSIOUNIS

KAM­PALA, Uganda | Ugan­dan re­tail­ers are press­ing the gov­ern­ment to crack down on for­eign com­peti­tors, es­pe­cially the Chinese, who il­le­gally sup­ply lo­cal mar­kets and un­der­cut their fledg­ling busi­nesses.

The sit­u­a­tion touches on the ten­der is­sues of free trade, pro­tec­tion­ism and im­mi­gra­tion in one of East Africa’s largest economies and high­lights Ugan­dans’ am­biva­lence to­ward Chinese mer­chants, a grow­ing pres­ence in lo­cal mar­kets.

In late March, four re­tail­ers from Kam­pala with signed en­dorse­ments from nearly 1,000 other Ugan­dan traders filed a law­suit seek­ing dam­ages from the gov­ern­ment for fail­ing to en­force laws gov­ern­ing for­eign busi­nesses.

Un­der the coun­try’s In­vest­ment Code Act, a for­eign mer­chant is re­quired to de­posit $100,000 in the Bank of Uganda, which then re­leases the funds for buy­ing trade goods. The law­suit ac­cuses the Im­mi­gra­tion Depart­ment and the City Coun­cil of Kam­pala of al­low­ing for­eign traders to do busi­ness with­out meet­ing the in­vest­ment re­quire­ment.

“Let this serve as a wake-up call to the gov­ern­ment,” said at­tor­ney Fred Muwema, who is rep­re­sent­ing the lo­cal traders. The first hear­ing in the case was on April 20.

Chinese whole­salers and re­tail­ers have be­come more con­spic­u­ous in the main busi­ness district of this over­crowded cap­i­tal, plagued by high un­em­ploy­ment.

Jeff Lim, vice chair­man of the Uganda Over­seas Chinese As­so­ci­a­tion, es­ti­mates that the num­ber of Chinese mer­chants in the coun­try has grown from 200 to 2,000 over the last decade.

An owner of one of the com­pa­nies rep­re­sented in the suit, Edi- son Muban­giza said some Chinese traders have bribed cus­toms of­fi­cials and lever­aged in­su­lar net­works to ac­cess lines of credit that are un­avail­able to most Ugan­dans.

Mr. Muban­giza said he makes about five trips a year to China to buy fab­rics but still fails to im­port them as cheaply as his Chinese com­peti­tors.

“It’s not about money. It’s not about pro­tec­tion­ism. It’s about lev­el­ing the play­ing field,” he said of the law­suit.

“We’re not against for­eign­ers. We just want them to do what is legal,” he added.

Ugan­dan traders have be­gun to ques­tion Chinese com­peti­tors’ con­tri­bu­tions to the lo­cal econ­omy be­yond pay­ing rent, ac­cus­ing them of em­ploy­ing fel­low Chinese, avoid­ing taxes and not bank­ing lo­cally, thereby stunt­ing the coun­try’s ail­ing man­u­fac­tur­ing sec­tor.

Chen Xiao Lu, 25, de­fies that de­pic­tion. She fol­lowed her hus­band to Kam­pala from Zhe­joang, China, four years ago. 25, em­ploys at his re­tail ap­parel shop in Kam­pala are Chinese. He sends his earn­ings di­rectly to China, has no ties to lo­cal man­u­fac­tur­ing and says he might soon re­turn home for good, cit­ing the Ugan­dan shilling’s value against the dol­lar as a main rea­son.

“No money,” he says, shak­ing his head. “What to do?”

Maggie Kigozi, ex­ec­u­tive di­rec­tor of the Ugan­dan In­vest­ment Au­thor­ity, said fears of Chinese im­pact in the re­gion are overblown. “Ev­ery re­porter from

The sit­u­a­tion touches on the ten­der is­sues of free trade, pro­tec­tion­ism and im­mi­gra­tion in one of East Africa’s largest economies and high­lights Ugan­dans’ am­biva­lence to­ward Chinese mer­chants, a grow­ing pres­ence in lo­cal mar­kets.

With­out de­posit­ing $100,000, the cou­ple set up a suit­case fac­tory and have since opened a down­town su­per­mar­ket. They chose Kam­pala for its cen­tral­ity and be­cause there were fewer strong com­peti­tors here than in China, Europe and the U.S.

Be­tween the su­per­mar­ket and the fac­tory, the cou­ple em­ploy 45 peo­ple, 37 of whom are lo­cals. And they plan to set­tle in Kam­pala, prais­ing the weather and friend­li­ness of Ugan­dans.

By con­trast, all but one of the six peo­ple whom Ding Lia Shi, your part of the world asks about China,” she said. “You think we are lit­tle chil­dren that the Chinese are go­ing to walk all over.”

China has made in­roads through in­fra­struc­ture projects, re­source deals and soft loans, all of which could help the con­ti­nent shake its pro­longed un­der­de­vel­op­ment.

But global me­dia have tended to down­play or over­look that Africans’ cul­tural affin­ity to­ward the Chinese among gen­er­ally re­mains low.

China ac­counts for about 15 per­cent of the con­ti­nent’s to­tal trade, and China’s for­eign di­rect in­vest­ment in Africa to­taled $7.8 bil­lion, com­pared to the $69 bil­lion for the U.S., ac­cord­ing to Busi­ness Daily Africa.

Europe, mean­while, re­mains Uganda’s as well as sub-Sa­ha­ran Africa’s big­gest in­vestor, and Uganda In­vest­ment Au­thor­ity sta­tis­tics show that even In­dia out­per­formed Chinese com­pa­nies last year, with 47 in­vest­ments vs. 33 from China.

Ms. Kigozi dis­putes Mr. Lim’s es­ti­mate of thou­sands of Chinese traders in Uganda, adding that those in the coun­try are good for busi­ness.

“Competition will force lo­cal traders to up their game,” she said. “They have to learn to be more cus­tomer-ori­ented.”

And a case could be made that Uganda can­not af­ford to get tough on for­eign­ers, who ac­counted for more than half of the li­censed projects in the coun­try last year and 41 per­cent of to­tal in­vest­ment, or around $1.7 bil­lion.

The last time the Ugan­dan gov­ern­ment ag­gres­sively tar­geted for­eign traders was in 1972, when dic­ta­tor Idi Amin gave the coun­try’s Asian, mostly In­dian com­mu­nity, 90 days to leave the coun­try.

That gam­bit ended in fi­nan­cial disas­ter, with most na­tive Ugan­dans lack­ing the ex­per­tise to run the busi­nesses the In­di­ans were forced to aban­don.

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