‘Empowering Uganda's export surge: UFZEPA's role and strategies for AfCFTA-led diversification’

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OPINION

By Rodgers Manishimwe

Uganda Free Zones and Export Promotion Agency (UFZEPA) was created from the merger of the Uganda Free Zones and Export Promotions Authority (UFZEPA) is one of the major bodies in Uganda’s strategic plan for transforming the national economy through export diversification and the advancement of industrial capacity.

As the major tool in the implementation of Uganda’s aspirational vision of attaining a GDP of $500 billion in the year 2040, the authority has shown remarkable achievements in the promotion of export opportunities.

Among the major achievements include facilitating multimillion-dollar SME export deals in the Intra-African Trade Fair, creating a strategic investment memorandum with the Osaka Chamber of Commerce in Japan during Expo 2025 Osaka, and leading in the creation of a strategic plan for the establishment of a 109-acre free zone in Buwaya, set to generate thousands of jobs in the manufacturing sector.

In order to further enhance export growth in Uganda, the authority could focus on improvements in export marketing strategies through enhanced online marketing campaigns and trade fairs, market intelligence, decentralization of export services in rural areas, and the creation of innovative financial instruments for SMEs.

Uganda’s non-oil exports are noted to have shown continued growth over the last 10 years. Based on Trade Map–ITC data, non-oil exports stood at $3.1b in 2015 but grew to $6.3b in 2023, indicating a Compound Annual Growth Rate (CAGR) of 9.3%. Yet since 2020, there was accelerated growth to an estimated $8 billion in 2024, backed by a year-on-year increase of 76% to $6.6b in 2023 due to advances in non-traditional exports like cocoa (up 116.9%) and sugar (up 95%). These trends are backed by WTO data that indicated a 20.4% increase between 2022 and 2023 due to agricultural and mining products.

The export composition shows primary products as its main export component, with gold leading the exports at 44.4% for 2023, followed by coffee at 13.9%, refined petroleum at 1.9%, fish at 1.4%, and cement at 1.3%. The current structure of the Ugandan economy makes the country vulnerable to fluctuations in global market prices.

Uganda's earnings from gold and coffee dropped in 2021 due to low volumes. Basically, Uganda's trade deficit has continued to widen to $5.8 billion in 2024 from $5.5b in 2023. On the side of imports, Uganda is led by refined petroleum at 16.8%, followed by packaged medicaments at 2.9%.

Although there are these increases in exports, the export to GDP ratio remains at 4.7% in 2024, which is lower than the average in sub-Saharan Africa of 18.5% according to WTO benchmarks.

Small- to medium-sized enterprises (SMEs), which represent 90% of Uganda’s private sector and account for 80% of GDP, are systemically hindered in export participation efforts, which contributes to the trade deficit. These issues include lack of affordable access to finance attributable to information asymmetry or collateral requirements, geographic-related logistics costs, non-alignments with global norms, or market intelligence.

In a 2020 survey conducted by the ITC of 1,193 entrepreneurs in Uganda, access to finance attributable to costs or requirements for guarantees was named a major impediment to participation in trade mainstreams for 78% of them. Individual sectors like climate-sensitive agro-SMEs are largely affected due to supply chain troubles influenced by COVID.

For dealing with these difficulties, UFZEPA has to come up with targeted measures.

In the first place, make the export marketing campaigns better by using online resources and trade fairs, connecting to ITC's Export Potential Map so as to exploit the unexploited EAC markets worth $207.2m.

Second, improve market intelligence access to WTO Trade Facilitation Agreement resources to empower SMEs to manage non-tariff barriers.

Third, assist regional and small enterprise development by decentralising UFZEPA’s services to district areas like Mbale and Arua, which show promise in agro-clusters involving maize and vanilla. Capacity-building efforts like those made possible through the ‘Enhanced Integrated Framework’ (EIF) are efficient.

In Togo, for example, similar EIF assistance increased soybean exports’ value to $60 million in 2023 from $0.7m in 2015 after linking farmers to finance and meeting international standards.

But financial innovations are equally important. Blending finance involving EU's EDFI AgriFI (Will contribute $2m to Uganda’s agri-SMEs in 2024), which uses concessional grants to leverage commercial borrowing, could thus fill the $500,000 hole started by exporters.

Inspired by export enhancement schemes like that in Vietnam, which utilised credit guarantees provided or supported by state guarantees and clusters to raise light manufacturing exports steadily by 15 percent between 2010 and 2020, Uganda’s Uganda Development Bank could achieve similar schemes.

Also applicable would be schemes like those of Ethiopia’s EPzcid to date successfully integrating small manufacturers into global garments. The project helped establish 200,000 jobs since 2015. Other pioneering schemes like Kenya’s Horticulture Marketing & Information Services Co., which enabled data access to boost flower exports steadily yearly by 12 percent since inception.

"The AfCFTA, which Uganda ratified in 2018, is a transformative enabler to diversify Uganda’s exports within Africa because trade within the continent today contributes to only 16% of the continent’s trade." According to World Bank estimates, implementing AfCFTA fully would increase Uganda's exports to $2.55b by 2035 to create 438,461 jobs. Prioritised products—focusing on Uganda’s proven comparative advantage—include coffee (valued $261.5 million in East Africa), maize, sugar, tea, palm oil, dairy products, or iron & steel. These are identified based on Uganda’s Revealed Comparative Advantage (RCA), using International Trade Centre's (ITC).

Case studies prove its feasibility. Uganda's coffee, which was already one of AfCFTA’s top contenders, has market access in West Africa’s Nigeria market alone with demand over 1.5 million tons per year. Pilot consignments using EAC trade corridors are earning small enterprise groups 20% net margins in 2024.

In dairy products, Uganda’s vanilla-flavored product market in South Africa stands to benefit $50 million due to AfCFTA tariffs cutting costs to zero to 20% compared to before. Other schemes both in AfCFTA—avocados and chili peppers to China to market $100m in 2026—ramp up to participation in Uganda’s UAE markets using its new Uganda Business Center that leads to certification or networking. Services are another component—that Uganda’s incoming 2025 $1.52b in tourism—markedly 11.8% growth over 2024— due to AfCFTA’s easing visa requirements for visit business visas.

The development trajectory of UFZEPA puts it in a strategic position to spearhead Uganda’s export revival, but to achieve success, there needs to be proactive improvement.

Through strident promotion campaigns, improvement in intelligence networks, and reaching out to SMEs and rural areas, UFZEPA can absorb the trade deficit challenge to unlock AfCFTA benefits. Both credit ecosystems found in Vietnam and park models in Ethiopia make strategic interventions in collaboration between public and private sectors evident.

As Uganda’s economy grows to $61.3b in FY2024/25 with real GDP growth of 6.3% per year, these efforts are crucial to improve trading trends and create a fair trade environment.  

The writer is a trade expert

ishrodgers@gmail.com X: @ishimwe_rodgers