Staff at work at the police garments factory. They could make use of the Agoa to export their textiles to the USA market
Uganda will export a number of products to the United States of America without paying any tax after the world’s biggest economy decided to extend the African growth and opportunity Act (Agoa) for another 10 years.
The extension of Agoa, which was signed with little fanfare, will see countries such as Uganda enjoy the right to export more than 6,000 different products duty free. The agreement was signed in June.
There are still questions as to whether Uganda can take advantage of this open market in the United States, considering the previous hurdles the country endured, which saw it fail to make any meaningful gain from the initiative.
When Agoa was first endorsed in 2000, the government celebrated the signing of the agreement. The country was at the brink of transformation, with President Museveni declaring in the US-based New York Times: “We are on the threshold of a strategic breakthrough.”
“We have carried out all the reforms and what is most important for us is market access. Now we have it. In five years’ time, Uganda will be a totally different story once we can take advantage of what is in front of us.”
Last month, the US congress voted overwhelmingly to renew the programme for 10 more years, up to 2025. With the new extension, though, developing countries such as Uganda can expect to export to the US without paying taxes and no quotas on how much they are supposed to take there.
Uganda’s advantage was thought to be in exporting apparel. However, as the programme was being renewed last month, Nytil Jinja laid off about 300 of its staff. The general manager, Vin Kumar, told the local media that many more workers would continue to lose jobs.
“The deals to make fabrics have tremendously reduced,” he said.
For long, Nytil pegged its hopes on demand from government institutions such as police, prisons, and army for uniforms. The demand has waned and according to Kumar, this has made “many workers redundant.”
In the budget speech in June, Finance Minister Matia Kasaija decried the imbalance between the increase in imports and the decline in the growth of exports.
Kasaija, however, said not all hope was lost.
“Government will enhance export performance by encouraging export diversification through, among others, adding value to agricultural products. For example, we have now got investors to add value to our coffee and cotton. This should significantly increase our export earnings,” he said.
This hope was, however, not expressed in the allocation to the agricultural sector; it received a paltry 2.5 per cent of the 2015/16 budget. John Mutenyo, an academic at the Makerere University’s school of business, told The Observer early this year that Uganda’s biggest mistake was “its failure to empower farmers.”
Ugandan producers are bogged down by inadequacy funding, poor infrastructure, and poor quality products. In 2013, Uganda’s exports to the US were worth $47m, up from $34.8m in 2003. Of this, only $1.5m was earned through the Agoa programme.
Some of Uganda’s exports – including coffee center the US duty-free under the Most Favored Nation (MFN) programme, thus not counted as Agoa products. Meanwhile, US goods exported to Uganda had reached $125m in 2013. Last year, Uganda’s top exports to the US included spices, tea, freshwater fish, crafts, and live trees.
On the contrary, Kenya has benefited more than any other state in East Africa. Last year, the country earned $423m from majorly textiles. Tanzania earned $18.3m from Agoa last year.
Asked how they are preparing for the Agoa extension, Elly Twineyo Kamugisha, the executive director of the Uganda Export Promotion Board, said he was in a meeting, adding: “Ask Suzan Muhwezi, [the director for Agoa secretariat]. She is the one responsible for your question.”
We could not reach Muhwezi as her known contacts were off.
But Grace Namara, the vice chairperson of the committee of Parliament on trade, told The Observer on Friday that while they were aware of the extension, they had not sat to talk about anything to do with the strategy.
She sounded pessimistic about Uganda’s chances to benefit from the initiative.
“If we don’t have appropriate products to put on the market, I don’t think we will achieve much,” Namara said. “Not until we add value to our products shall we gain something. As a committee, we haven’t convened or sat to chart a way forward.”
Last week, a UN Economic Commission for Africa (Uneca) report showed that the “East and southern African countries such as Uganda, Malawi and Ethiopia export the bulk of agriculture intermediaries, in most cases with little domestic processing and value addition.” This certainly reduces the country’s competitiveness on the global market.
The World Bank’s Doing Business report 2015 ranks Uganda 150th out of 189 nations. The report cited red tape and high transport costs as big turn-offs to investors, making it hard for the country to attract investments to tap the Agoa opportunity.
Some analysts, however, have radically argued that Uganda has never been ready for the US market and it should aim to maximize the benefits from the closer markets of South Sudan and the DRC.