As the saying goes, when Kenya sneezes, Uganda catches a cold. So what happens to Uganda when Kenya has a fever? That frightening scenario is now playing out before the eyes of Uganda’s business community.
Mr Godfrey Hategyeka, Transport Manager for Katraco Uganda Ltd, was beeped by a mysterious number at 12:30pm on January 31. When he returned the call a stranger answered, a Kenyan who informed him that the Katraco drivers had abandoned three of their trucks in Kericho, just outside of Kisumu, and were running to safety. The trucks were bound for Nakuru to load petrol, but they never made it to their destination. A group of over 200 rioters used petrol bombs to burn the trucks, one of which had a Ugandan licence plate. Right before the trucks were burned, one of the rioters himself called Mr. Hategyeka from the driver’s phone. “Why would you want to burn the trucks?” Hategyeka asked the rioter.
“We are aware Museveni supports Kibaki,” the rioter explained, “We have heard that he is sending in troops. For that matter we are going to burn…for us we have to burn the trucks.” Most insurance companies will not cover the losses of Katraco and dozens of other affected companies, since they categorize the damage as the result of war or civil disorder.
Transport companies such as Katraco may not even be the hardest hit. Hategyeka estimated his losses to be USh 200-250 million per burnt truck, but Ugandan importers and exporters are facing even greater costs the lack of secure transportation has caused a backlog of containers at the Port of Mombasa. According to Mr Dennis Rukundo, the Operations Manager for a transport company based in Mombasa, traders are allowed 14 days to remove their goods from the port. On the fifteenth day they begin paying demurrage fees — $40 per day for a 20 foot container and $80 per day for a 40 foot container. Rukundo says the Kenyan government waived demurrage fees from December 25, 2007, to January 3, 2008, but if containers were not cleared by the 3rd, traders were required to pay the fee for the days included in the waiver and any additional days.
Many traders were unable to remove their goods from the port in January due to the lack of safe transport. While Rukundo says the congestion at the port is improving, as of last week no Ugandan registered vehicles were moving on the road for fear of being attacked and burned. The shortage of transport has also increased the cost. Previously, traders paid $3000 per truck travelling from Mombasa to Kampala. They now pay $3900 per truck and Rukundo says the cost may rise even higher. In addition, some transporters are charging up to $480 per truck in extra surcharges to cover the risk of transport.
But if traders think their costs are high now, wait until March comes. Rukundo says the Kenya Revenue Authority is increasing their port fees from $200 to $600 per truck. And that’s not all – traders will have to pay an application fee of $1000 and buy a bond of $3000 before they are even allowed to pay the $600 fee. These fees, however, only apply to trucks carrying transit cargo, not to local trucks, which means Ugandan traders are at a disadvantage.
With Kenya’s future uncertain and with rising costs at the Port of Mombasa, will Ugandans take their business to the Port of Dar es Salaam? “We tried,” explained Ssekiito, Chairman of the Kampala City Traders Association (KACITA), “The minimum cost there per container was $4000. It was not practical.” The road from the Port of Dar es Salaam to Kampala is also much longer than from Kenya’s coast, nearly 2000km compared to about 1250km from Mombasa, and can be nearly impassable at times according to Hategyeka.
As traders face high costs and risks, Ugandans will no doubt be feeling the pain in their pocketbooks, if they are lucky enough to find the goods they are looking for at all. “If you go to Nakasero market,” says Ssekiito, “you find that some of the stores are empty.” Grain, consumables, and construction materials are all harder to come by and increasing in price. Ssekiito cannot say whether the situation will get better before it gets worse. “All this will depend on the involved stakeholders, the involved politicians. If they are promising good news, the prices will automatically start coming down. Most of the problems we suffer are a result of perception…In a market structure where the forces of demand and supply are dictating the price it is hard for us to say whether they are coming down or up. It all depends on the perception.”
In the meantime, traders like Hategyeka and others are growing impatient and seeking the assistance of the government of Uganda. Katraco has appealed to the Ministry of Foreign Affairs for assistance in retrieving its trucks. Yet as of last week, ministry official and Head of East African Affairs, Julius Kagamba, could not guarantee the safe retrieval of the trucks. Hategyeka and others feel the government should be taking more decisive steps to protect Ugandan businesses.
As a landlocked country, Uganda is necessarily dependent on its neighbours for the import and export of goods. Unfortunately, the current crisis Ugandan businesses now face appears to be a case of placing too many eggs in one basket – the Northern Corridor. “For some time government has not minded about putting in place infrastructure for the Central Corridor,” says Ssekiito. “We even had a place provided for us at the Port of Dar es Salaam for Uganda particularly, but we didn’t use it because this [Northern Corridor] was shorter…We only forgot that you can’t take things for granted. You need to have options…Every avenue must be developed ahead of time such that we are prepared.”
A large part of this abovementioned necessary infrastructure is the road network. According to the Road Agency Formation Unit (RAFU), there are a number of projects underway to widen and improve roads throughout Uganda. Unfortunately, current funding does not allow for roads to be widened to double carriage capacity. In addition, according to Dan Alinange of RAFU, there is no coordinating body orchestrating road construction across countries in the East African community.
Kenya’s fever may have subsided in recent weeks, but Ugandan businesses will likely be in their sick beds for some time longer. Perhaps this should be a lesson in the value of preventative care. Immunization – that is, investing now in alternative routes and working together with the larger East African Community to improve infrastructure in the region — may prove far less costly than the inevitable treatment that will be required after the next outbreak of political upheaval.