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East Africa: Events in Kenya, DRC and South Sudan Threaten Uganda’s Growth

Uganda’s growth projections for 2016/17 are already looking bleak as events playing out in the region, the country’s biggest export market, seem unfavorable. Kenya, where most of Uganda’s imports pass through the port of Mombasa, and takes the biggest chunk of our exports, will go to the polls next year.


Running battles between the opposition and Kenyan authorities on the streets of Nairobi, which is sort of a rehearsal for what could happen before the country goes to the polls next year, a panicky government in Kinshasa that continues to jail dissidents ahead of the general elections in the Democratic Republic of Congo, and a fragile coalition government in South Sudan that has still kept many traders on tenterhooks, could all hurt Uganda’s economic prospects.

Already, skirmishes between the opposition and police in the last two months over the impartiality of the electoral commission have raised concerns in the region over whether the country will have peaceful elections or not. If the events in the 2008 post-election violence in Kenya are anything to go by, there are fears there could be major disruptions for Uganda next year.

"These events are already sending shivers in the [Ugandan] economy," said Dr Adam Mugume, the executive director for research at Bank of Uganda.

He was speaking at the Stanbic bank post-budget breakfast held at Serena hotel last week. Trade with Kenya is heavily tilted in favour of East Africa’s largest economy, but Uganda exported there goods worth $427m in 2015, although it imported goods worth $610m, according to Bank of Uganda. The same events are happening in the Democratic Republic of Congo (DRC), which goes to the polls later this year.

There have been demonstrations by opposition leaders who say President Joseph Kabila is not supposed to run for the third term. South Sudan has not yet fully stabilized. Uganda earned $265m from South Sudan last year, a drop from $280m in 2014.

Countries in the region, Mugume said, take up to 60 per cent of Uganda’s exports. Some of these events have already impacted on the economy. Justine Bagyenda, the executive director for supervision at BOU, said most businesses which borrowed money to supply South Sudan and DRC defaulted because they were not paid.

In the 2015/16 financial year, the country grew by 4.6 per cent, lower than the five per cent projection. This has been attributed to low global demand and fall in commodity prices. Uganda’s cash crops such as coffee and tea fetched less money than they usually do. However, there was also uncertainty that came with Ugandan presidential polls.

Jimirasire

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