Prioritising Fintech should be our key lesson from Covid-19 crisis

The COVID19 pandemic is literally changing the way we live our daily lives. Several countries have imposed stringent lockdown measures as ways of combating the dreaded disease.

These Stay at Home restrictions have resulted into the slowing down of the social and economic life, with most activities coming to a near standstill and haunting images of empty streets from Lagos to Kampala, to Cape Town to Addis Ababa becoming part of the ‘new normal’.

Unlike other global crises, such as the 2008 financial crisis, or the 2014 commodities crisis, which put stress on capital markets and the macro and formal economies, the COVID19 pandemic has impacted both the formal and informal economies.

These lockdowns and curfews have had a disproportionate impact on the most vulnerable people of our societies; particularly the women and the urban poor, who are mostly engaged in informal activities with a daily income, and do not have the luxury of working from home.

Majority of the daily income earners, as well as micro and small entrepreneurs will not be able to meet their loans obligations because their sources of income have literally dried up due to the lockdowns. Also, the collection of microfinance loans, which usually happens on a cash basis during weekly groups’ meetings, has come to a halt as authorities have put in place strong social distancing guidelines.

Most of these people have not only lost their livelihoods, in this COVID19 lockdown, but have also lost the capital that they had for their informal activities. Such capital normally ranges from between USD30 to USD100. Therefore, because of this pandemic, a large section of the population is likely to fall further into poverty.

The silver lining is that if there ever was a time for FinTech to innovatively save the poor, it is now.

FinTech refers to the integration of technology to develop financial services with limited operational costs and with the capacity to bridge the financial inclusion gap.

The tenets of financial inclusion strive to remove the barriers that exclude the poorest of the poor from participating in financial activities. Therefore, FinTech can also help mitigate the economic cost of lockdowns and avoid irreversible damage to the social economic fabric of our societies.

The World Bank notes that financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs, including transactions, payments, savings, credit, and insurance, delivered responsibly and sustainably.

The access to a transaction account is the first step towards financial inclusion because it allows the most vulnerable, including women and people with disabilities (PWDs), in society to save money, send and receive payments.

Therefore, it is the low cost fintech solutions that hold the key to reaching out to the over 1.7billion people worldwide who are still excluded from formal financial services.

FinTech solutions can be developed to serve the most vulnerable individuals in society through salient features such as mobile money wallet to wallet, products and services payments, saving and credit facilities plus cross border remittances among others.

So far, the mobile money developments seem to be the most utilised feature of FinTech worldwide. According to Statista Data, the global mobile money payment market had surpassed USD1trilion by the end of 2019.

The wide embrace of FinTech across the African continent is significant and various reports indicate that mobile money has been one of the most revolutionary technologies launched in Africa in recent years.

It is a fact that digital financial services are the leading drivers of financial inclusion for the unbanked in Africa. As of 2018, Nigeria had approximately 172million phone subscribers, which provided over 90 percent of its citizen’s access to digital transactions on mobile phones.

Also, in Uganda, the 2018 FINSCOPE report indicated a 78 percent (14million people) surge in the country’s financial inclusion rate majorly supported by mobile money services.

Indeed, a lot of progress has been made towards financial inclusion, and 1.2billion adults worldwide have got access to an account since 2011. However, according to data from Findex 1.7billion people are still unbanked.

Therefore, despite the commendable strides made by fintech, a wide gap remains for women, PWDs, rural populations, as well as the young and urban poor.

Women are particularly disadvantaged because of the digital gender divide. A recent study, conducted in 86 percent of low-income countries, found that more men own mobile phones than women. The study also found that 58 percent of these same countries have a gender gap of more than 5 percent.

Unfortunately, this gender gap prevents women from fully and gainfully participating in the economic activities. The fact is that even when women own a mobile phone, which can enable them to access FinTech services, they are generally less likely than men to connect to the internet. This detrimentally curtails the transformational impact that fintech can provide.

Based on the foregoing, financial inclusion will only be attained if FinTech operators focus their services and developments to solutions that can help women, PWDs, the low-income earners, the urban poor, the unbanked, the underbanked, as well as the small and medium-sized enterprises.

This Coronavirus crisis provides an opportunity for FinTech players to adapt and innovate financial inclusion solutions that support the most vulnerable and limit the long-term negative impact, as well as provide buffer against future similar crises.

It also gives the rest of us a chance to back and, where possible, present a case for prioritizing FinTech as the silver bullet for acing the financial inclusion challenge.

By prioritizing FinTech, we will have ensured that the most vulnerable people of our societies do not only survive the COVID19 pandemic, but also, that they are given a fair chance to thrive after the pandemic.

https://www.monitor.co.ug/OpEd/Commentary/Prioritising-Fintech-should-be-key-lesson-Covid-19-crisis/689364-5531432-kx8wx7z/index.html

While combating the COVID19 Pandemic, we should not create a Hungry Population

Damali Ssali.

The Coronavirus pandemic – COVID-19 has become a fully-fledged global economic crisis with governments now issuing Level 4 – DO NOT TRAVEL advisories, instituting curfews, partial and full lockdowns.

These lockdowns that started from Wuhan, China - the epicentre of coronavirus outbreak, are fast turning in to the safest way of life with Italy, Spain, India, South Africa, Uganda, Kenya, and Rwanda among countries administering shutdown doses.

The lockdowns mean that factories and private companies cease most economic activities. Therefore, disposal incomes for both people and companies is reduced in sectors of the economy including the heath, manufacturing, retail, trade, transport, tourism, entertainment, education and many others. 

Conservative estimates indicate that the global economic aftermath of COVID-19 pandemic could last at a minimum for one year. The Organisation for Economic Co-operation and Development (OECD) estimates annual global GDP growth is expected to drop to 2.4% in 2020, from an already weak 2.9% in 2019. World exports are forecast to decline by more than 5% to US$1.28 trillion in 2020.

Further, the United Nations Conference on Trade and Development (UNCTAD) reports that the number of container cargo ships from China, reduced by 30 percent, in January 2020 alone from 540 ships to 370 ships per day.

A March 10, 2020 Baker-McKenzie report highlights that many African countries face a “twin supply-demand shock,” due to a decrease in imports of manufacturing inputs and supplies from China and reduced demand from exports in key sectors in various export markets. Reports from the Uganda Ministry of Trade, Industry and Cooperatives indicate that China is our leading import market, accounting for at-least 16 per cent or US$5.5 billion of Uganda’s total imports bill.

The continued persistence of the corona crisis will certainly curtail the sourcing of raw materials and capital goods, such as machinery, for Uganda’s domestic manufacturing sector.

The European Union (EU) market, which is also in various stages of lockdown, is a strategic market for Uganda’s exports and imports.

Uganda exported US$515 million worth of goods, over the past three years, whilst it imports totalled to US$ 561 million over the same period. The main exports to the EU market have been coffee, fish, flowers and hides and skins. Uganda mainly imports medical equipment, pharmaceutical products, petroleum and oils from the EU. 

Generally, Africa is a net importer of medical equipment and pharmaceuticals, which are mainly supplied by Europe and India. Studies from United Nations Economic Commission for Africa (UNECA) indicate that Africa imports over 94 percent, or on average US$ 16 billion per annum, of its medical and pharmaceutical products. The current government lockdown in Europe and India are likely to increase the risk of drug shortages on the continent and specifically in Uganda.

Even more worrying for Africa is the fact that only 15 African countries are net exporters of food, with Uganda being one of them. If the COVID-19 pandemic results in to an economic crisis lasting for over a year, there will be serious food shortages in over 39 countries on the continent and this may unfortunately fuel civil unrest.

Huge blow to cross border trade.

In 2019 alone, Uganda's formal exports to the Common Market for Eastern and Southern Africa (COMESA) amounted to US$ 1.23 billion. Whilst total exports to East African Community (EAC) amounted to US$ 1.15 billion, out of which US$ 537 million went to Kenya, US$ 409 million to South Sudan, US$ 95 million to Tanzania, US$ 54 million to Rwanda, and US$ 51 million to Burundi. Exports to the Democratic Republic of Congo were US$ 567 million.

The restriction of movement of people across borders, due to new health protocols that must be adhered to is also going to greatly impact Uganda’s trade volumes with neighbouring countries.

As a result, the Ministry of Finance, Planning and Economic Development (MoFPED) reported that Uganda’s growth projection for the financial year ending June 2020 had been revised downwards from 6% to 5%.  Also, imports are expected to decline by 44% over the next four months to June 2020.

In respect to the banking sector, the ministry reports that non-performing loans may increase by 50% due to the COVID-19 pandemic. Given that domestic taxes contribute over 70% of government revenue, this means that the funds that will be available to government for public service are going to be significantly reduced.

The reduction in global travel, due to travel bans, will significantly affect the tourism industry. A report from International Air Transport Association (IATA) indicates that 75% of the world airlines have cash to cover 3 months of the fixed expenses and risk becoming insolvent thereafter.

According to UNECA, in the 2008 global financial crisis, Africa’s tourism experienced losses of up to US$ 7.2 billion, which mostly impacted Egypt, Ethiopia, Kenya and Mauritius. The COVID-19 pandemic is likely to have a similar or even higher impact.

Crude oil prices have seen a dramatic reduction of 32% from US$ 51 to US$34 per barrel in anticipation of the global slowdown of economic activity. This poses a significant risk to the development of Uganda’s oil sector, and most urgently, the final investment decision for the oil pipeline as foreign direct investment is channelled to safe assets such as gold.

The MoFPED estimates that this on-going COVID-19 pandemic will lead to an increase in the number of Ugandans pushed below the poverty line by 780,000 in the best-case scenario or 2.5million, in the worst-case scenario.

Way Forward.

Faced with unprecedented hard times, the banter on the streets is that we should all condense our 2020 resolutions in to just one. You should all repeat after me, our 2020 resolution is surviving. 

From a trade and business perspective, here is how we are going to stay alive. 

There is urgent need for coordination of cross border trade between Uganda and its neighbouring countries. The EAC had issued a joint communique on movement of people and goods with key guidelines that should always be adhered to by all countries. Bi-lateral modalities on the movement of goods and people in light of the COVID19 crisis should also be worked out with DR Congo.

The private sector should engage the government to come up with mitigation measures against non-performing loans so that companies do not become insolvent. This will ensure that risk of unemployment of large numbers of Ugandans is limited as the private sector accounts for over 70% of total employment.

The government working with telecoms, banks and other financial service players should accelerate the implementation of a cashless economy.

The government should conduct a risk assessment on the critical medical equipment and pharmaceuticals that are imported mostly from Europe and India. This should be in-terms of current stock levels and Uganda’s capacity to produce the same in case of supply constraints over the next 6 months.

Finally, the government should put measures in place to ensure that the supply of basic food, across the whole country, is guaranteed. A hungry population is an ungovernable population.

Damali Ssali is a Trade Development Expert at TradeMark East Africa.

damali.ssali@trademarkea.com

New Vision URL - https://www.newvision.co.ug/new_vision/news/1517570/coronavirus-fight-create-hungry-population

Daily Monitor URL - https://www.monitor.co.ug/OpEd/Commentary/-economy-survive-COVID19-pandemic-Uganda-employment-Kenya-/689364-5515906-mdkjssz/index.html

Women in Trade should prioritize Standards, Collaborations and Proper Use of Technology.

My dear friends, I am so happy to see you today as we commemorate International Women’s Day.

I want to thank URA Commissioner General Madam Doris Akol and Kampala City Traders Association (KACITA) for organizing the 2020 Women in Trade Conference. At this event, we are discussing how we can collaborate and support each other to achieve Trade Prosperity.

I have been invited here to share with you the new trade opportunities, benefits and challenges for women in East Africa and the rest of the World plus how best we can exploit these opportunities to our betterment.

But before I give my submission, allow me tell you that Uganda has the highest number of women entrepreneurs in the world, standing at about 30 per cent across the country. This surely requires a huge round of applause.

 As Ugandan women, we must celebrate each other for the great work we are doing. Even amidst a lot of challenges that we continue to face, we must always remember that as women, we are giving our country a great global rating.

Further, different studies indicate that whenever a woman gets money, she uses about 60 per cent of that money on feeding her children, paying school fees, and improving her families in general. This means that whenever a woman earns money; her family, community and entire country benefits.

It is thus great to see the Government of Uganda through Uganda Revenue Authority organizing such gatherings that pass on important information to women in business and women in trade because women will develop our Country.

My presentation highlights three major elements that are crucial if women are to prosper in Uganda, East Africa and the rest of the World.

The first issue is quality standards for products. The goods that we intend to export must meet quality standards. The body charged with standards here is Uganda National Bureau of Standards (UNBS). If you have any product that you want to sell in Uganda, Kenya and the rest of the region, you must make sure that this product has a UNBS certification.

The previous speakers have talked about collaborations. I want to emphasize the same. We need to create associations, cooperatives and SACCOs. For example, if you are a honey producer and you go alone to UNBS to acquire a certification, you will pay about UGX 800,000. Yet if you go as a group with a minimum of at least 20 members all dealing in Honey, UNBS will charge you about UGX 350,000 not UGX 800,000 for the first year.

Even still, because you are one organized association of 20 women, you can collectively raise the money required for the certification. With a UNBS certificate you are able to put your product on the shelves of Uganda, Kenya, Tanzania and South Sudan among others. And after July 2020, when the implementation of the Africa Continental Free Trade Area kicks off, you will be able to sell your products in supermarkets in places as far as Nigeria. 

It is very important that every value-added product is certified.  We must know what is required to get that certification because if a product doesn’t have a standards certificate, it will not be exported anywhere.

The other issue is the simplified trade regime. Whenever you are selling goods below UGX6 million (about USD2,000) across the border in East African countries, you are not supposed to pay any taxes. But to be able to do this, there is a certificate you need. The certificate or origin is online and you must file it before you take the goods. For the case of Democratic Republic of Congo, for goods below UGX 1.5 million (about USD500), you still don’t pay taxes. But you must have downloaded and filled the certificate.

All these relate to technology. Different speakers have noted that if we are not using technology (internet, laptops and phones), we shall continue to lag behind.

Research studies indicate that only 15 per cent of women use technology in their business or trade, compared to about 80 per cent men that use technology in trade and business.

This is a serious problem that makes women less competitive. Everything you need to do is on the internet. You won’t be able to do international business and trade without the Internet.

With the coming Africa Continental Free Trade Area, you can’t single-handedly sell goods in Senegal, Kenya, South Sudan and Tanzania on the same day. Yet you can be based here in Kampala and sell your goods to all those countries using technology and e-commerce.   We need to make good use of ICTs.

As women, we have children that we have educated. Some are in their vacation and ask you to buy for them smart phones. Buying for them phones is okay, but we should also make good use of these students when they are still studying. Let them (students) teach you how to use technology for business and trade. Tell them that you what to use internet to grow your business and let them get you started by taking you through the different steps. Our children are well equipped when it comes to ICTs and Internet because these are innovations of their times.

It is very important that as women we use the internet to grow our businesses. As women, we are lagging behind because we are not using internet and ICTs in our businesses. Like you have been told by the earlier speakers, trade and tax related information is freely available on URA web portal.

But because you don’t use the internet, you end up going to a broker who will not only charge you highly but also give you wrong information. This is free information. If we can close this gap, we shall further grow our businesses.

The other issue challenging us women in trade and business is limited access to finance and capital. Most of us women don’t own land, buildings or any other serious property that can be used as collateral to secure loan facilities. As such, because we lack collateral, we end up not getting loans required to boost our businesses, yet men have this collateral and easily get credit facilities. I request you to continue working together in groups because some financial services are comfortable when dealing with organized associations not individuals. It will be easy for a group of 20 women dealing in a similar product, with proper certification and booking keeping to get a credit facility from a financial institution compared to an individual. Like I said earlier, working together as women is a must.

As I conclude, allow me tell you that TradeMark East Africa – the organisation that I work for, signed an agreement with URA to empower women under the URA Women Traders’ Facilitation Framework. Among the key issues that this program will address is certification, sensitization, training on internet use and training on e-commerce among others. I strongly believe that this project will help women traders a lot. It is my hope that KACITA will also join URA and TradeMark East Africa on this journey of helping women grow their businesses, earn more profits, transform their families, and further develop Uganda.

Thank YOU for listening to me.

NOTE: This is the English translation of my Luganda speech that I delivered at the 3^rd Annual URA Women’s Conference 2020 at Hotel Africanna on 04/03/2020.

High Tariffs Not Good For The African Continental Free Trade Area.

Kampala.

The coming into effect of the African Continental Free Trade Area (AfCFTA) creates a single domestic market for goods and services of 1.2billion people. 

This will have a big impact on manufacturing, tourism, intra-African cooperation, and economic transformation.

However, the immense potential of the AfCFTA will only be realized if tariffs are significantly reduced or totally eliminated. Damali Ssali, Trade Development Expert – Trademark East Africa gives her take on this.

Non-Tariff Barriers (NTBs) must also be firmly addressed. 

Watch Damali Ssali's interview with NTV Money and Markets crew below.

Nimule One Stop Border Post to boost Uganda, South Sudan trade ties.

Nimule. Uganda is hoping to increase the volume of trade with South Sudan following the completion and handover of the first phase of Nimule one stop border post (OSBP) to the Juba government.

The Nimule OSPB will be managed by South Sudan customs officials and if operated as it should, there is no reason as to why regional trade shouldn’t flourish.

While Elegu, the Ugandan side of the border has for a while now been operating as OSBP, Nimule, the South Sudan custom point has been going about its business in the most frustrating manner, rendering cross border trade often times a nightmare.

Speaking in an interview after witnessing the handover of the OSBP infrastructure in Numule, South Sudan recently, the Minister of Trade, Industry and Cooperatives, Ms Amelia Anne Kyambadde described the $5million (about Shs 18.3billion) facility funded by UK government through TradeMark East Africa (TMEA) as “a very important development” for not just South Sudan and Uganda but the entire EAC regional trade.

She said: “With opening of the Nimule OSBP, I expect exponential rise in trade. We expect to grow our trade with South Sudan by close of the year by even $500million (slightly more than Shs1.8trillion).”

She continued: “We would like to see our traders form orderly associations so as to manage cross border trade well. This is important because the experience garnered here could act as a launch pad for the continental market—AfCFTA.”

Ms Kyambadde indicated that South Sudan is a key market for Uganda’s exports, considering that it accounted for $239.2 million in 2016, $299.3 million in 2017 and $355.9 million in 2018. It further emerged that between 80-90 per cent of South Sudan merchandise pass through Elegu-Nimule border points.

Further benefits.

With Nimule OSBP up and running, quick clearance of goods and professional services to the custom point users should be able to be rendered without difficulties. Unlike previously, market access shouldn’t be out of reach.

The apex body of the private sector foundation in the country and some key trade associations, including the Kampala City Traders Association described the development of Nimule OSBP as long overdue. However, they remained cautious, saying not until peace and stability is guaranteed in the neighbouring country, the situation there remains a risky affair.

Conditions. 

For further investment to be injected into the phase two of the trade facilitation at Nimule, TMEA expects peace and stability to prevail in South Sudan as a matter of urgency.

Currently, peace negotiations between President Salva Kiir and his long-term rival Riek Machar aimed at forming a unity government is underway.

In his speech, Dr James Wani Igga, the Vice President of South Sudan noted that the importance of trade among African states is a catalysts for peace and the much anticipated regional and continental integration agenda.

He said Nimule OSBP will play its role of easing trade but noted that the challenge to attain that goal will become evident in the transition phase.

Ms Damali Ssali, a trade analyst and also the acting country director of TMEA-Uganda noted that the Nimule OSBP was designed not just for enhancing formal trade, but has also been set up to facilitate informal cross border trade where women make up the biggest number. 

Additionally, Ssali said, the facility will cut down on the red tape and bureaucracies, which she said are the two major challenges to cross border trade.

She committed that TMEA, in partnership with the East African Community (EAC) secretariat will train the border official at the Nimule-Elegu border in the OSBP controls to ensure efficiency and reduce the time it takes to cross borders to at least 50%.

Daily Monitor URL - https://www.monitor.co.ug/News/National/Nimule-one-stop-border-post-boost-Uganda-South-Sudan-trade-ties/688334-5454078-do9vg1/index.html

The New Vision URL - https://www.newvision.co.ug/new_vision/news/1515090/nimule-osbp-stimulate-uganda-south-sudan-trade 

Uganda Electronic Single Window offers seamless clearance of goods.

Kampala - The implementation of the Uganda Electronic Single Window (UESW) system has saved traders about $85,000 (sh308.4m) annually, that was being wasted as a result of submitting the required trade documents manually.

Speaking during the launch of the second phase progress report on the UESW in Kampala last week, the Uganda Revenue Authority (URA) acting commissioner customs, Abel Kagumire, said the introduction of the system simplified trade procedures and processes, cutting delays caused by human contact, resulting in substantial cost savings.

The UESW is a system that leverages technology to allow traders submit all the required regulatory documents, including permits and customs declarations, to all approving agencies electronically using a single access point.

Previously, agencies were working in silos, requiring traders to move with physical documents from one office to another to get the necessary trade certificates. This caused delays and increased the cost of doing business.

According to Kagumire, the UESW system reduced the clearance time of goods from 21 days to 14 days, before falling further to four days for imports and two days for exports.

“Getting certificates was a big issue, but now all that is done under the single window following the automation of the certificates. So, no more moving up and down going to the different agencies,” Kagumire added.

Figures from Bank of Uganda also show that the value of Uganda’s trade to other East African Community countries rose from $1.4b (sh5.1 trillion) in 2017 to $1.52b (sh5.5 trillion) in 2018, attributed to the ease in clearance of goods through the UESW.

Kagumire also noted that as a result of the UESW, the country has improved its ‘doing business’ ranking in the aspect of trading across borders from 150th to 127th position, currently.

Relatedly, he said the country’s ranking in the ‘ease of doing business’ has improved from 161st to 119th position.

Easing cross-border trade

The acting country director TMEA Uganda, Damali Ssali, alluded to how the UESW has simplified cross-border trade, facilitating the private sector to trade in an easy, transparent and predictable environment.

“By the time we are done, may be in the next two years, we want Uganda to be more recognized for its compliance with the World Trade Organisation Trade Facilitation Agreement because the single window supports us to do that,” she said.

Ssali also noted that the project has become a benchmark system to other countries seeking to improve trade facilitation.

Ssali, however, expressed concern that while Uganda has improved in doing business indicators in trading across EAC borders, there is need to work on improving the overall ranking.

Ssali implored the ministries of finance, trade and URA to come up with a plan targeting agencies that are low ranking in the World Bank doing business ranking due to inefficiencies emanating from manual process to onboard the onto the single window. This will improve their overall ranking, competitiveness index and the logistics performance index.

Agencies on the system

Ministries, departments and agencies on the system include Posta Uganda, Uganda Communications Commission, Interpol Uganda, National Environmental Management Authority and the Atomic Energy Council.

The others are the Cotton Development Organization, Ministry of Water and Environment, Warehouse Receipt Authority, Uganda National Roads Authority, Uganda Registration Services Bureau, Ministry of Works and Transport, Ministry of Finance, Ministry of Foreign Affairs and Uganda Wildlife Authority.

Kagumire, however, said the target is to have all the 30 agencies involved in trade facilitation on the system by 2021.

The project is funded by the Danish International Development Agency (DANIDA) through Trade Mark East Africa to a tune of $9m (sh32.6m). It is a five-year project expected to end in 2020.

More funding

Ssali said DANIDA has released another $10m (sh36.3b) to be spent over the next four years, targeting the elimination of non- tariff barriers (NTBs), address standards, e-commerce and informal trade, among others.

Margaret Magera, a senior advisor with DANIDA, urged ministries and agencies that are not yet on the system to move faster before the funding closes.

“For those of you who want to be pushed, you may fall out. You need to jump onto the bus while you still can,” she said.

Magera noted that an improved business environment is central to the operations of markets and fosters innovation, productivity and growth.

She challenged the stakeholders to devise sustainability mechanisms of the project, even after the project comes to an end, saying the long processes discourage imports and exports.

The acting permanent secretary in the trade ministry, Grace Adong Choda, however, noted that the ministry is working with the National Information Technology Authority, Uganda (NITA-U) to devise a sustainability plan for the system.

This will allow for continuity even after termination of support.

She added that the trade ministry will convene and co-ordinate technical meetings for URA, TMEA, UNCTAD and NITA-U to map out modalities for a partnership, focusing on sustainability of the UESW system.

“The system offers you an opportunity to have real time transactions online to clear goods; for the private sector, time lost is money lost,” she said.

To further enhance efficiency, URA, in partnership with the Uganda National Bureau of Standards, launched the Pre-Export Verification of Conformity (PVoC) Auto Clearance Process recently.

     

The process allows for interrogation of trade information on the issued Certificate of Conformity (CoC) or Certificates of Road worthiness (CRW) using the interconnected systems to enable faster clearance of goods.

It is expected to offer seamless clearance of goods and shorten clearance time from the current 12 hours to less than two hours as validation and approvals are done by systems.

Prior to the launch of the auto system, traders had to have hard copies of the CoC, which they would present to the Uganda National Bureau of Standards inspectors for interrogation before it can be cleared by URA.

It could take a minimum of a day to complete the process.

The numbers

The UESW system project manager at URA, James Bob Barungi, said there has been a cumulative increase in the use of UESW system for phytosanitary certificates issuance to 20,000 and 40,000 for coffee permits as of September 2019.

He noted that the EAC region accounted for 90% of electronic certificates of origin processed between July 2018 and September 2019, followed by COMESA and GSP at 3%, each. China came in with 2%, Morocco and India at 1% each and South Korea at 0%.

Barungi, however, expressed concern over some EAC countries that are still rejecting the preferential certificates issued from the UESW system, forcing exporters to use the printed copies, which results in delays and unnecessary costs.

He noted that there is need for more engagement with partners to have the issue resolved. At the meeting, two modules, including the Cotton Development Organisation (CDO) and the Uganda Communications Commission (UCC) were launched.

CDO will facilitate registration of ginnery, ginning and export certificate, as well as Lint Quality certificate online, while UCC will offer certificate to radio communication and telecommunication equipment that meets the set regulatory, technical, and safety standards.

The market information and monitoring officer at CDO, Fredrick Lugojja, said the electronic single window will lessen the time the various stakeholders in the cottons sub-sector have been spending to get the required certificate for export.

Single transaction portal

During the second phase of the UESW project, the Asycuda World, the platform on which the electronic single window operates, was also upgraded to further facilitate seamless trade facilitation.

According to Barungi, 80% of the processes are complete and the rest is expected to be completed next year.

Once complete, it will facilitate a single transaction portal where the different agencies can log on to launch applications for approval and also receive feedback.

The single transaction portal will also allow for tracking of an application in case of any delays.

Story by The New Vision.

https://www.newvision.co.ug/new_vision/news/1513314/electronic-single-window-offers-seamless-clearance-ura 

Reduction of tariffs could increase intra-continental trade

By Damali Ssali as published by New Vision. 

Even though several factors influence trade value and volumes globally, tariffs on tradable goods and services rank highly.

For the benefit of all, tariffs are taxes imposed on imports and exports between countries with the aim of generating government revenues and protecting domestic industries.

Sometimes, depending on the tax policy of a given country, a tariff could be set as high as 60%. This is usually to protect a young, somewhat vulnerable yet very important industry to that state.

Other times tariffs are imposed by states, against products and services of another state, to settle scores. For example, the ongoing trade war between the United States and China is one such tariff war waged between countries.

In 2017, the United Nations Conference on Trade and Development (UNCTAD) reported that tariffs, on tradable goods and services, between the developed states averaged at 1.2%.

This is very low compared to the average tariffs, on tradable goods and services, between African countries, which stand at 8%.  Moreover, tariffs remain relatively high in important sectors, including agriculture, apparel, textiles and leather products.

Unfortunately, these high tariffs make it easier for African countries to trade with Europe and the United States, at the expense of each other. As such, intra-Africa trade is just 15%.

Meanwhile, over 60% of total African trade is with countries that are oceans away from the continent. Compared to the rest of the world, this is unfortunate to say the least. For instance, intra-Asia and intra-Europe trade stands at 58% and 67% respectively.

A recent United Nations Economic Commission for Africa report indicated that if tariffs are significantly reduced, or totally eliminated, intra-Africa trade would increase to more than 50% of total trade on the continent.

That said, there is a legitimate concern that if tariffs are significantly reduced or totally dealt away with, there will be a reduction in government revenues. This in turn would curtail the governments’ ability to provide public goods and services to the general population.

Nevertheless, the reduction in government revenues, from tariffs, would be made up with an increase in income tax and value added tax. This is because a reduction in tariffs would lead to an increase in the value and volume of trade, profits, investment, productivity, employment and disposable income.

Come in AfCFTA!

With the coming into effect of the African Continental Free Trade Area (AfCFTA), which creates a single domestic market for goods and services of 1.2billion people, this is the opportune time to discuss the elimination of tariffs on continental trade.

The significance of the AfCFTA cannot be overstated. It will be the world’s largest free trade area since the establishment of the World Trade Organization (WTO) and it is estimated that if successfully implemented, Africa will have a combined consumer and business spending of USD6.7trillion by 2030.

The AfCFTA will have a big impact on manufacturing, tourism, intra-African cooperation, and economic transformation. The International Monetary Fund reports that, under the AfCFTA, Africa’s expanded, and more efficient goods and labor markets will increase the continent’s overall ranking on the global competitiveness index.

However, the immense potential of the AfCFTA will only be realized if tariffs are significantly reduced or totally eliminated. This must be prioritised at the very start of the implementation phase in 2020. The schedules of tariff concessions of member states must be submitted to the African Union and the negotiations on the rules of origin for goods completed.

The other main area of tariff elimination is in services, particularly, on investment, competition and intellectual property rights.

This is because services make a significant contribution to the manufacturing value chains and play a key role in logistics. Also, services make a larger contribution to poverty reduction than agriculture or manufacturing.

On the African continent, over 55% of the Gross Domestic Product (GDP) is generated by services. However, African service providers face barriers to export services. As a result, African services exports contribute just 2% of global trade in services.

Therefore, there is a great opportunity for the AfCFTA to expand competitiveness in African trade in services too by liberalizing the service sector through the elimination of tariffs on services.

(Damali Ssali is a Trade Development Expert at TradeMark East Africa)

damali.ssali@trademarkea.com