Import substitution drive to end donor dependency - URA

Uganda's recent move to pursue the import substitution route will help the country break the grip of donor dependency and borrowing to fund its development priorities, revenue experts have said.

The Uganda Revenue Authority (URA) commissioner customs, Abel Kagumire, said the import substitution drive will enable Uganda, which heavily depends on imports, retain enough money within the economy.

The drive, he added, will also grow the manufacturing sector to increase the country's taxable base.

"Most countries which have developed collect adequate domestic revenue; they do not rely more on imports. That is why our government has come up with the domestic revenue mobilisation strategy. Here, every Ugandan who is earning an income makes a small contribution in taxation instead of leaving it to big businesses only. If everyone contributed something, however small it could be, we shall be able to lift Uganda from the dependence syndrome to self-reliance," Kagumire said.

He noted that at 13.5%, Uganda's tax-to-GDP ratio remains one of the lowest compared to the 16% sub- Saharan average.

In the current financial year, URA is expected to collect about sh21.81 trillion of the sh45.49 trillion 2020/21 financial year budget. This means that the balance has to be got from other sources, including borrowing and donor support.

Over-dependence on borrowing has seen Uganda's debt burden surge by 20.5% from June 2019 to $15.33b (sh56.4 trillion) in June 2020, according to Bank of Uganda.

Also, the country's imports were estimated at $7.4b (sh27 trillion) in the 2019/20 financial year, against $3.8b (sh13.9 trillion) worth of exports. This saw the country's trade deficit widen to $3.6b (sh13.2 trillion).

A big debt burden and a trade deficit are both bad for the economy. Kagumire, however, said import substitution would help the country boost exports to narrow the trade deficit.

Protective gear

Kagumire was speaking at an event where the Danish Embassy, through TradeMark East Africa (TMEA), handed over personal protective equipment (PPEs) to border authorities at the Elegu one-stop border post, Uganda's border with South Sudan, last week. The PPEs included sanitisers, temperature guns, gumboots, re-usable masks and face shields.

The TMEA acting country director, Damali Ssali, said the PPEs are aimed at ensuring that trade continues to flow safely despite the COVID-19 pandemic. 

Ssali said the PPEs are part of the wider Safe Trade Emergency Facility, a $23m emergency programme rolled out by TMEA in the East African region, with support from development partners, in the aftermath of COVID-19. The intervention is aimed at enabling regional economies continue to trade in a safe way while curbing cross-border infections.

As part of the Safe Trade Emergency Facility, TMEA will also roll out the Safe Trade Zones project in key border markets at Elegu, Busia and Mutukula to help them open and operate safely.

Ssali, however, said while the safe trade protocols have already been developed, they are still in negotiations with the various agencies to establish what is exactly is required to implement the safe zones.

Protocol

The safe trade zone protocol, which seeks to facilitate safe opening of border markets following their closure in the wake of the COVID-19 outbreak proposes several guidelines that need to be followed.

Ssali said Elegu would be given priority in the implementation of the safe trade zones project.

South Sudan is a key market for Uganda's exports, accounting for about sh1.5 trillion of exports.

TMEA and the Danish embassy have also previously donated PPEs at other border posts, including Mutukula, Busia and Malaba.

The chancellor team leader growth team at the Embassy of Denmark, Kampala, Ulrik Jorgensen, alluded to how the Safe Trade Facility has helped to let business continue flowing over the last 10 months, despite COVID-19.

He pledged continued support to Uganda towards boosting trade, especially for the informal cross-border traders and in agriculture, where he said the country has huge potential.

Kagumire also alluded to the need to boost agricultural value addition so as to boost exports to neighbouring countries.