KAMPALA, October 3, 2012 - Chinese, the renowned ‘investors’ in Africa have shifted positions, turning to small retail trade in massive numbers. This is especially true in Uganda’s capital Kampala, where they are suffocating the local traders who are calling for government intervention through regulation of trade to foreigners.
Taking advantage of favorable terms of trade and reduced costs of imports, Chinese traders who are widely present in Kampala’s arcades sharply cut prices for their products, undercutting the prices charged by local traders.
The loathed Chinese cheaply import from their home country to the detriment of Ugandan traders who import the same products at much higher prices from China. The local sellers lament that the practice is completely unfair, and that they need government support to even the playing field.
Ugandan traders bitterly complain that they are on the verge of losing their businesses, thanks to price slashing by their Chinese competitors. In July, the traders staged a demonstration against the increasing Chinese suffocation, calling for the government to intervene before local traders are forced from business.
Directing their ire to the trade ministry, local traders complain that the government has not done enough to protect them. They are also calling for the government to restrict Chinese traders to the wholesale and investment sectors.
Experts, however, say the Chinese government must also take action to prohibit its nationals from venturing into small retail businesses in foreign countries. They note that without a change, the global perception of Chinese businesses will reverse, significantly hurting Chinese trade and business relations.
Chinese entrepreneurs have deeply entrenched themselves into Uganda’s trade and investment areas, making the Ugandan government hesitant to push them out of business. Kampala worries that such a move could hinder the economy in a country that runs a $4.4 billion budget with some of its portion financed by rich outsiders.
Chinese investments in Uganda for the past two decades have grown to $596 million with over 250 companies operating in the country, and bilateral trade generates $400 million, as affirmed by Chinese ambassador to Uganda Zhao Yali.
China also significantly consumes Uganda’s coffee, and trade statistics show that china imported coffee beans worth $7.6 million in the first half of 2010.
Favorable investment policies in Uganda have also significantly attracted the Chinese into the construction and manufacturing industry, accelerating the pace of growth in the sectors.
With the discovery of oil in Uganda, which now stands at 3.5 billion barrels following the successful appraisals in the fields of Gunya, the country expects to see more Chinese investment. The China National Offshore Oil Corporation already is significantly participating in the oil sector after buying a third of an oil stake from UK oil giant Tullow Oil for $2.9 billion. Experts predict large amounts of Uganda’s oil will eventually go to China.
After dislodging Britain as the number one economic partner for Uganda, China also launched a plan to build infrastructure and donate scholastic materials. China is currently planning a school to teach Ugandans the Chinese language, and will begin construction of the Kampala Entebbe international Airport highway at the end of this year.
The strong ties to China combined with the difficulty of establishing and enforcing prohibitions against Chinese participation in the retail industry, make such regulation unlikely. Instead, Chinese participation in the retail sector appears set to continue, despite good intentions by the government of Uganda.
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