By Lucy James
The Ugandan Trade, Industry and Cooperatives Committee has given foreign retail outlets until early December to either invest in larger businesses or return to their home countries. The September 5 announcement came after the Kampala City Traders Association (Kacita) petitioned parliament to regulate the influx of foreign nationals into the retail business, accusing them of undercutting prices and selling inferior goods. The committee’s comments are thought to be directed at Chinese and Indian traders in Uganda.
The announcement is likely to be a politically motivated attempt to divert public attention away from a growing controversy over a proposed government bailout for several indebted companies. The government is facing criticism from the public and the opposition for proposing public bailouts for private companies with links to the administration. It is therefore likely to be using the ban to divert public attention and gain support, particularly among Ugandan traders, unions and politicians in areas such as the capital Kampala, where there is more competition between small businesses.
Regulations against non-Ugandans in retail likely to cause growing social unrest
In July 2011, traders operating in Kampala’s markets went on a two day strike in protest against the influx of Chinese traders and the rising price of imports due to a weakened currency. Hardening rhetoric around the issue will stoke tensions further, resulting in increased targeting of foreign traders and their businesses for extortion and attack.
Larger commercial businesses are unlikely to be targeted, either by protesters or the government. The ultimatum and preceding statements have been specifically directed at foreign nationals involved in small-scale trade and retail, with President Yoweri Museveni explicitly encouraging foreign investment in Uganda’s manufacturing and construction sectors. However, larger businesses are likely to face operational disruption and greater incidental security threats.
At the end of June, local media sources reported a list of 65 private companies seeking bailouts amounting to $300 million from the government, having failed to meet debt obligations on the loans they had acquired. The list included steel and construction companies and banks, which have blamed losses on the weak economy and the continuing conflict in neighboring South Sudan, where they have investments. However, the political opposition has argued that bailouts are politically motivated, given that many of the listing companies have close links to Museveni and the ruling National Resistance Movement (NRM).
Lucy James is a researcher covering Uganda for Control Risks, the world’s leading political, integrity, and security risk consultancy.