Sudan conflict will affect us all

By Samuel Sanya

Wanyama had taken to using lemon juice in the place of sugar for his family of 10 when commodity prices soared about six months back, the economy has gotten better since.

Just how long the positive economic trend will continue is hard to predict now that Uganda's biggest trade partner- South Sudan is involved in an oil battle with Sudan. 

 Without the oil dollars, South Sudan cannot buy Ugandan commodities. This is sure to affect the value of the shilling through lower dollar inflows,  says Anthony Kituuka, the KBC bank head of corporate banking.

The shilling has already started to take a hit, losing 1% at the start of the week to trade at sh2520/30 buying and selling respectively from the sh2495/05 the previous week largely due to high company demand for dollars.

Uganda imports an average $400m (sh1trillion) and exports $200m (sh504b) each month according to Bank of Uganda (BoU) data leading to a negative balance of trade and a weaker shilling.

A large portion of Uganda's export revenues have been on account of the South Sudan market that now seems to be slowing under the armed conflict currently centered on the oil-rich Heglig region.

Exports to South Sudan averaged $389m (sh980b) in the year 2008 alone according to World Bank data, and this is money the country could potentially lose should the conflict continue for the next part of the year.

Hillary Hussein, the Alam Group of companies legal and human resources manager says the speculation of an all-out war between South Sudan and Sudan is just as bad as a possible war since order sizes are currently declining. 

 Our newly established factory in Arua is currently operating below capacity because of reduced orders from South Sudan. We have had to halt expansion plans into the country,  he said.

Kituuka notes that the local unit is likely to continue trading in the sh2,400 - sh2,700 range in the coming months as Uganda's key trading partners get back on their feet.

He however says that the production of limited amounts of crude oil in the later part of the year may strengthen the shilling.