{UAH} RWANDESE ARE STOCK PILLING UP BEFORE UGANDA ELECTION

Uncertain Rwandan traders stockpile ahead of elections

Business World News of Sat, 24 Oct 20150

Photo: Cyril Ndegeya / Nation Media Group

Rwandan importers are buying goods in bulk and expanding their storage capacities ahead of the General Election in Uganda early next year, which is causing uncertainty and leading to inflation. 

Richard Kabonero, Ugandan High Commissioner to Rwanda, however sought to allay the fears, telling traders to carry on with their business with Uganda as usual. 

Rwanda heavily relies on Uganda for most of its imports as well as acting as a passage for other cargo from beyond the region. 

Importers are stocking up for at least a month, depending on their financial ability, in order to avoid costlier purchases in Uganda, whose inflation is rising as a result of a depreciating shilling as well as political uncertainty. 

Increased inflation in countries from which Rwanda imports goods means more risk of inflation for the country. In this scenario, Rwandan consumers are likely to spend more on imported goods, especially those from Uganda, through imported inflation as prices in that country increase. 

As a net importer, Rwanda is at risk of imported inflation as well as political tensions with its neighbours, with whom it trades. Rwanda imports through the Northern and Central Corridors, both of which are now experiencing election fever — in Tanzania this week and Uganda in February. 

Although Tanzania is known for holding peaceful elections and therefore no major political disruptions expected in trade with its neighbours, that is not the case with other countries. Rwandan importers have lost a lot of their cargo after previous elections in the region, especially in Kenya in 2007, due to post-election violence. 

But the envoy reassured traders, saying: “I want to assure Rwandan importers that the elections in Uganda will be fair and peaceful and it will not disrupt trade in this region. 

“This confidence was also reiterated last week by our head of state, President Yoweri Museveni.” 

Mr Kabonero also said that the inflation fears are more than just about the forthcoming elections in Uganda since most local currencies in the region and beyond have depreciated against the dollar and this should not cause short- or long-term fears. 

“This time we are prepared through expanding storage facilities such as warehouses that can accommodate imports covering a long period of time, for example more than a month, as we observe the situation,” said Fred Seka, the chairperson of Rwanda Clearing and Forwarding Association.

Mr Seka also said that Rwandan traders have grown in capacity, giving them many options to import from as many places as possible and avoid countries which might pose the threat of losses. 

However, importing in bulk to cover for future uncertainties is not common in Rwanda because most importers lack enough space to store the imports for a long time and sufficient cashflow for imports covering even two months. 

Imports from the East African Community represent 22.2 per cent of the total and these increased by 1.4 per cent during the first half of this year from $248 million in the first half of 2014 to $252 million in the same period this year. 

But trade experts say although inflation has started to increase due to political reasons, it is too early to predict a full-blown trade effect. And even where imported inflation occurred, it is natural that the burden is passed on to the final consumer, leaving the importer with less chances of incurring losses. 

“Traders are very smart; even when they incur such inflationary pressures, they will transfer it to consumers, and in this case Rwandans will suffer the brunt in this scenario,” said John Bosco Kanyangago, a regional and international trade expert. 

Although the situation can get worse depending on the rate at which political tensions in Uganda escalate, experts believe it will be contained. In such uncertain times, traders also have a tendency of importing in bulk and hoarding goods so as to sell them at a higher price. 

Rwandan importers would have benefitted from the depreciating Ugandan shilling had the franc not depreciated against the dollar. The franc has in the past months depreciated against the dollar by 5.1 per cent and the euro by 3.2 per cent. 

According to the Bank of Uganda, headline inflation rate is currently at 7.2 per cent while the core inflation rate, which the central bank uses to control inflation at 5 per cent, is 6.7 per cent. In the next six months, the BoU projects that inflation will rise in the range of 8 to 10 per cent. 

However, despite the economic circumstances the Rwandan economy faces, the real GDP grew by 7.6 per cent in the first quarter of this year from 6.5 per cent in the fourth quarter of last year.

 

 

EM

On the 49^th Parallel          

                 Thé Mulindwas Communication Group
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                    Kuungana Mulindwa Mawasiliano Kikundi
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