Southern Sudan, a market to die for - Prices going ga ga!!

The mainstream Ugandan media reported on significant events in 2006, mostly political events. In my view, they missed quite a few glaring events, and very exciting ones at that, especially on the economic front.

For the 6th straight year, trade with the world (mostly the EU and COMESA) continued to grow. Uganda’s exports of goods are estimated at US$ 1.3 billion, up from US$ 1.01 billion (including informal cross border trade). Ugandans in the Diaspora sent back home, US$ 700 million in remittances (… I know, insignificant compared to the Philippines!).

The Southern Sudan market continued to grow in leaps and bounds. Despite the insecurity that cropped up mid-year, in the year 2006, this market is expected to grow by an average of about 60 - 70% in 2007. It has grown from US$ 9,1 million to US$ 50.4 million in 2005. This market, grew by an average of 72% over the period 2001 to 2005.

Today, [the BBC reports] the Government of Southern Sudan may begin the long awaited introduction of the Sudanese pound (incidentally, the main medium of exchange has been the Uganda Shs, Kenya Shs, and the US$.). This is projected to affect our exports negatively in the short term, but after currency stability kicks in, the current rate of export growth is projected to continue in the long term. Southern Sudan still lacks adequate infrastructure and institutions (Cement and building materials will continue to enjoy significant demand in the market)

But the prices are staggering. Food prices in Southern Sudan; a pineapple: US$ 5 - 8, a bottle of mineral water: US$ 3 to 5, a bunch of apple bananas: US$ 3 - 5 etc. The impact of this price differential is being felt back in Uganda. Exporters have shifted focus to the better-priced markets there, creating a scarcity of essential goods in Uganda (goods ranging from Sugar, soap, and even beef have all experienced price hikes of over 50%. The growing inflation currently observed in the Ugandan economy can partly be explained by all this 'new' money coming into the economy. Indeed, the Uganda shilling continues to grow in strength against the dollar. The central bank will continue to struggle to control inflation this year.....)

Well, what should that translate into? Pressure on industry in Uganda to increase production of essential good to meet increased domestic and regional demand (visible signs in pressure to increase area of cultivated sugarcane, also some contract importers in Southern Sudan are paying farmers in Northern Uganda in advance to grow pineapples on order. Incidentally, a pineapple fetches US$ 20 in Djibouti, this suggests that Sudanese middlemen may be taking advantage of the wide price margins this opportunity offers…..) and an increased import bill for products not produced or manufactured in Uganda.

The Democratic Republic of the Congo (DRC) [I will post something on this later!] exhibits the same trends, high growth trends and increasing demand for consumer goods (exports grew from US$ 8.8 million in 2001 to over US$ 60 million in 2005, excluding informal exports) However, the presidential election held in last year led to a slow down in Uganda's exporting activity. Increased activity is expected to resume after stability kicks in again.


All in all, 2007 promises more records in trade between Uganda and her neighbours…..