Sunday, October 19, 2008

Competition toughens amidst EAC integration

Nakaweesi, Dorothy; The Monitor (Kampala) 2008-07-02

In the midst of an impending head-on competition as the East Africa Community (EAC) takes shape, players in the Ugandan private sector are negotiating a tough juncture for a full blown war. While several businesses in the region are beginning to cross borders to establish satellite offices or branches, a number of Ugandan firms have equally set foot in neighbouring countries to make firm their positions. Casements Africa (steel manufacturing), Mukwano Group of Companies (consumables), and Simba Telecom have led the way.

Spokesperson of the Mukwano Group, Ms Grace Nyamhunge, said: "With the advent of the EAC we made a decision to have a manufacturing presence in a port city and Dar-es-salaam offered us the best alternative." The company opened operations in Tanzania in 2003, establishing a plant which manufactures oil, soaps, and plastics with a total annual sales volume ranging from US$5 to 10 million.

Businesses based in Kenya have already taken a greater leap in establishing a regional presence to underscore their readiness for the competition with firms like Uchumi (retail trader), Bidco, Sameer Agriculture, and Livestock Ltd. Several service-based firms in Uganda have done similarly.

Mukwano‘s expansion into Tanzania opened the group’s finished products to markets beyond the country’s borders, including Burundi, DR Congo, Kenya, Madagascar, Malawi, and Rwanda. The Simba Group of Companies - Uganda’s pioneer distributor of Nokia phones and accessories - is based in Kenya and Tanzania.

Although Simba Telecom was launched in Kenya over eight years ago, the company boosts US$1.7 million (Shs2.9 billion) worth of investment in Kenya and is currently in control of 8 percent of the market. The company has, however, had to weather the storm against the mammoth Safaricom dealers. "This has led to unstable prices in the market as undercutting of prices can sometimes occur", said Ms Jacqui Mwangi, Simba’s Retail and Marketing Manager. Other challenges faced by Ugandan businesses in Kenya are Value Added Tax (VAT), travel documentation, and movement of people.

"It’s a good initiative if we do market EAC as an investment destination and success of these companies into these markets means more revenue will be repatriated back into the Uganda and brand the country within the region and beyond", said Executive Director of Uganda Manufacturers Association (UMA) Mr Gideon Badagawa. It is not a rosy move, he said, but some Ugandan companies are attracted to Kenya and Tanzania to reduce their costs on transport.

According to Ms Nyamhuge from Mukwano Group, founder member states still have major challenges in regional integration, particularly when it comes to the link between national and regional policies on economic integration. "The absence of a harmonised standards policy has affected especially manufacturers from accessing different markets", she said.

All too often, regional policies are not followed through at national level and as a result, important deadlines of regional programmes are missed. Moreover, the disparity and multiple memberships overlap the trading. Tanzania is a member of the Southern African Development Community (SADC) and EAC, and Kenya is a member of the EAC and Common Market for Eastern and Southern Africa (COMESA) - this has impeded businesses from enjoying privileges especially in the tax cuts.