Uganda is among the fastest-growing economies, not just in East Africa, but in the continent as a whole. The East African Community member state’s real gross domestic product is expected to grow by 5.6% this year, 6.5% next year and hit 7% in 2029 according to projections by the International Monetary Fund (IMF).
While local industries are experiencing a boom that has helped narrow the balance of trade, the country is still a net importer with a variety of import products for sectors such as pharmaceutical, oil and gas, manufacturing, real estate and trade and commerce.
Statistics from the Uganda Bureau of Standards (UBS) indicate that in a year to September last year, while exports rose by 114.4% to USD 583.9 million, imports also increased by 40.7%, from USD 798.6 million in 2022 to USD 1.12 billion.
And with the potential for further growth, how can businesses crack Uganda’s highly competitive importation market?
Beware of global and local market risks
Business Partners International (BPI) Uganda Country Manager Vincent Kiyingi says importers need to be aware of both local and global markets and the risks that come with venturing into the trade. The ongoing geopolitical tension between the world’s two largest economies, the United States and China has seen the two engage in tariff wars which continue to impact the global supply chain.
China for instance is Uganda’s largest import market with goods worth USD 227.8 million imported in twelve months to September 2023 compared to USD 17.1 million imports from the US.
Kiyingi says importers also need to be aware of trade agreements Uganda has with other markets besides other tariff changes.
“Business owners ought to stay updated on tariff changes and trade barriers that can affect import costs and competitive pricing and monitor new and evolving trade agreements, such as the African Continental Free Trade Area (AFCFTA), which aim to ease trade restrictions and tariffs within the continent,” says Kiyingi.
In the local scene, importers also need to track the performance of the local currency against major currencies such as the US dollar, sterling pound and euro.
“Entrepreneurs need to be knowledgeable of the Ugandan Shilling’s performance against major currencies such as the dollar as this affects the cost of imports,” he says.
Others include regulatory changes affecting taxes, tariffs, import licensing and standards, trade financing options available for the business and consumer preferences which are influenced by global trends and local cultural factors.
Beating the competition
As an importer operating in Uganda’s cut-throat import market, one must adopt strategies that keep them ahead of the pack. Among them is ensuring they have the capability to import high-quality products that meet or exceed local standards and explore online platforms to source these products from genuine manufacturers.
Similarly, a strong online presence on social media platforms like X (formerly Twitter), Facebook, Instagram and WhatsApp Business, user-friendly websites and active participation/sign-up on popular e-commerce platforms such as Amazon, and Jumia can help boost sales and product awareness among customers.
Business owners also need to ensure they have relevant certifications from recognized bodies like the Uganda National Bureau of Standards (UNBS) in order to build credibility and trust among buyers as well as provide tailored products and services to meet customer needs and preferences.
Kiyingi also advises importers to consider using effective cost-cutting measures when shipping in products as well as leverage technology to improve service quality.
“Shipments should be consolidated to cut down on transportation expenses and to take advantage of discounts offered for bulk purchases. The use of technological solutions such as enterprise resource planning (ERP) to integrate and streamline business processes ranging from order processing to inventory management,” he points out.
Securing funding and mastering cash flow
Statistics indicate that lack of funding has been a major constraint for businesses especially the Micro, Small and Medium Enterprises (MSMEs) in various sectors and those in the importation business in Uganda are no exception.
A report by the International Finance Corporation (IFC) found that in 2023, 56% of MSMEs in Uganda could not access loans from banks due to insufficient collateral while 13% of loan requests were rejected due to their large size.
That notwithstanding, importers in Uganda can still position themselves to attract funding from potential financiers. As Kiyingi elaborates, an importer needs to ensure they have accurate financial statements and realistic projections that show potential profitability and sustainability of the business. “They must also have a good credit record which demonstrates reliability in meeting financial obligations and have a good asset base and security which provides assurances to investors,” he adds.
Access to credit is one hurdle, but maintaining the financial health of the business as well as ensuring proper cash flow management is another. So how can business owners navigate these challenges?
“It is possible for business owners to correctly estimate demand by using past data and industry insights. This will allow them to prevent overstocking during off-peak times. To maintain sales momentum, entrepreneurs may also organize focused marketing efforts during off-peak seasons to drive demand. Additionally, they may develop loyalty programs for returning consumers,” says Kiyingi.
Entrepreneurs can also conduct ongoing reviews of operating procedures to cut down on waste, minimize overhead costs, and build precise budgets to constantly monitor spending and maximize cost efficiency.
Importers can also effectively manage accounts receivables and accounts payable while managing expenses as well as explore financing options to bridge temporary cash flow gaps.
Revenue and profitability forecasts can also be done by analysing market trends, expense projections and sales to guide financial management.
Building a profitable import trade business Navigating market risks
Though the importation business in Uganda continues to post a positive growth trajectory, Kiyingi says regulatory and compliance risks such as import taxes are impacting costs for businesses.
To navigate such risks, businesses should stay informed of the changes in regulations and ensure compliance to avoid penalties and diversify their products and services to reduce dependence on a single market segment triggered by demand fluctuations influenced by changes in customer preferences.
Kiyingi further advises importers to build sufficient cash buffers to support the business when crises strike and hire qualified experts to keep track of expenses and importation taxes.
“Maintain adequate cash reserves such as an emergency fund to cover unexpected expenses and mitigate short-term financial difficulties. Develop a budget and cash flow projections for your business that are tracked per month and build in an allowance for miscellaneous expenditures,” he points out.
Entrepreneurs in the importation business in Uganda also ought to ensure they conduct a cost-benefit analysis to assess the financial feasibility of infrastructure improvements and consider employees’ adaptability to the new infrastructure through training programs to ensure smooth utilisation of infrastructure.
However, to control operational expenses and guarantee high service standards in the Ugandan importation business, Kiyingi says, “Business owners should consider streamlining processes to eliminate non-essential activities to reduce labour costs and improve productivity.”
This can be achieved through automation of processes to enhance service delivery and customer satisfaction.
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