Trade between Uganda and Rwanda has totally evaporated due to the conflict between the two neighbouring East African countries.
When the border between the two countries was closed exports from Uganda dropped from about $200m to $2m, registering a 99 percent fall, according to data from Uganda’s Ministry of Trade.
In 2018, Uganda’s exports to Rwanda fetched $211,550,000 but by 2020 those exports had dwindled to a mere $2,312,000. Uganda mainly exports to Rwanda cement, soap and maize.
Uganda’s informal exports to Rwanda also fell by 77.8 percent to $11.0 million in 2019 from US$49.5 million in 2018, and comprised of shoes, clothes, maize flour and sorghum.
Uganda’s imports from Rwanda in 2018 were $13,076,000 but also dropped to $3,458,000, which is about a 74% fall. Uganda’s informal imports from Rwanda declined by 65.1 percent to $1.7 million in 2019, from $4.8 million in 2018.
President Kagame closed the border between Rwanda and Uganda in March 2019 accusing President Yoweri Museveni of hosting hostile elements that want to destabilize Rwanda and harassing, arbitrarily detaining and torturing Rwandan nationals in Uganda.
Despite numerous summits and meetings between leaders of the two countries, the border crossings remain closed.
The trigger to the rapidly escalating tensions between the two countries was a December 2018 Report of the United Nations Group of Experts on the Democratic Republic of the Congo (DRC) that found that the military wing of a coalition of Rwandan opposition groups calling itself the “Platform Five,” or P5, was being armed and trained by Uganda, Burundi, and the DRC.
The P5 military forces are led by General Kayumba Nyamwasa—formerly a Ugandan senior army officer and also a former Rwandan Army Chief of Staff. The P5 has been in existence since at least 2014 and seeks to overthrow the ruling Rwanda Patriotic Front (RPF). Unlike other Rwandan rebel outfits such as the Interahamwe, the P5 is dominated by former high-ranking RPF government, intelligence, and military officials, the vast majority of whom once served in the Uganda military and government.
In July and December 2018 as well as April 2019, P5 elements and their allies launched attacks into Rwanda that left two Rwandan soldiers and an unknown number of rebels dead. Two civilians were killed and eight were seriously wounded in the April assault. Rwanda pursued and captured three senior Rwandan rebel commanders accused of leading the attacks.
General Nyamwasa added fuel to the fire in May 2019 during an interview with Uganda’s state media in which he accused Rwanda of sponsoring a coup attempt in Burundi and backing former Burundi army officers that joined the Resistance for Rule of Law (Red Tabara) and other rebels fighting President Pierre Nkurunziza, such as the Republican Forces of Burundi (FOREBU).
Now, this conflict between Uganda and Rwanda has decimated trade between the two and has also antagonized regional trade because the two landlocked countries form a transit route to other markets like the DR Congo and Burundi.
The standoff triggered Rwanda to divert her import trade from Uganda to Kenya and Tanzania. In 2019, Rwanda’s imports grew by 7.3 percent to US$589.3 million although Kigali imported mainly from Kenya and Tanzania, according to the 2019 EAC Trade and Investment Report. Rwanda’s imports were dominated by goods from Kenya, which accounted for 47.1 percent, and Tanzania with 45.6 percent.
The main imports from Kenya included gold, soap, salt, footwear and sugar and the main imports from Tanzania were gold, cement, maize, foodstuff, rice and cashew nuts.
Yet, in 2019 when relations between Kampala and Kigali were turbulent Rwanda’s exports to Uganda somehow increased by 22.2 percent to $61.3 million from $50.3 million in 2018.
Rwanda’s exports to Burundi also registered an increase of 84.8 percent to $41.6 million in 2019 from $22.5 million in 2018.
Overall, Rwanda’s trade deficit with the EAC countries declined by 2.3 percent to $448.7 million in 2019 from $459.4 million in 2018. The decline was mainly due to increased exports to the partner states compared to imports.
The same period, 2018-2019, Uganda’s intra-regional exports fell by 23.8 percent to $956 million in 2019 from $1,254.5 million in 2018. However, Kampala argues that it was because the country had embarked on exporting finished manufactured goods because of growing industrial base and the growing agro-processing sector.
Implying that the change in Uganda’s exports from raw materials to finished products is the cause of a trade war between Uganda and Kenya.
This culminated into Kenya’s restriction of Uganda’s milk products, sugar, maize and poultry products into her market.
Uganda lost Ush1.7trillion as a result of Kenya’s blockade on the former’s milk exports. Kenya banned maize from Uganda over safety issues. Further, Kenya keeps regulating Uganda’s sugar exports by issuance of quotas to Ugandan made sugar, regularly decreasing the amount of sugar from Uganda onto the Kenyan market.
In addition, there is a structured and institutionalized harassment of Kenyan traders and dealers dealing in Uganda made goods with the view to discourage dealing in Ugandan products. There are impromptu stopovers and rampant raids on Ugandan warehouses or warehouses with Ugandan goods.
For sugar, Uganda has embarked on processing industrial sugar as a secondary input for other products. This will put Uganda’s surplus sugar to full use.
Uganda has also secured Comesa market for her milk. Pearl Dairy Farms Limited (PDFL), the manufacturers of Lato Milk products, are now exporting their product portfolio to Ethiopia, Malawi and South Sudan underpinned by the Africa Continental Free Trade Area (AfCFTA) ratification agreement. Uganda is further expanding its market for milk to Algeria.
Uganda’s earnings on exports to Kenya fell by 23.4 percent to $442.4 million in 2019 from $580.2 in 2018, with the key exports including tea at $75.8 million, electricity at $37.8 million, maize at $35.5 million, and milk and milk products at $41.4 million.
Uganda is also having problems with the South Sudan market.
South Sudan was Uganda’s leading export destination in 2008 following the signing of the Comprehensive Peace Agreement (CPA) in 2005. Total exports (formal + informal) peaked at USD$ 1.18 bn in 2008.
However, the fighting that broke out in December 2013 sparking off a civil war in South Sudan caused a steady decrease in Uganda’s exports from $ 414m in 2013, to $ 385m in 2014 and $ 353m in 2015.
Uganda’s informal trade export earnings to South Sudan decreased from $ 119 million in 2014 to $ 47 million in 2017 whereas the formal trade export earnings increased from $ 160 million in 2014 to $ 252 million in 2017.
Uganda’s exports to South Sudan further fell by 80.2 percent to $41.9 million in 2019 from $211.6 million in 2018, with the key commodities being sorghum, maize flour and beans.
This means, Uganda had trouble with Kenya, South Sudan and Rwanda markets, and was salvaged by Burundi and Tanzania.
Uganda’s exports to Burundi grew by 26.4 percent to US$51.4 million in 2019 from US$40.7 million in 2018, and the key commodities exported were iron and steel, plastics and tobacco.
While Uganda’s exports to Tanzania grew by 3.8 percent to $68.8 million in 2019 from $66.3 million in 2018, with the key export commodities being iron and steel, tobacco and electricity.
However, both Uganda and Rwanda are looking at tapping more into the DR Congo market once the vast central African country gets admitted into the East African Community.
The DRC in 2019 expressed interest in joining the East African Community and the verification process is ongoing.
The Economic Policy Research Center, Makerere University estimates that DRC’s membership to the EAC increases exports of Rwanda by $81 million and Uganda by $60 million. In terms of trade growth shares, it is estimated that free trade with DRC increases the current trade with Uganda by 30 percent and 24 percent for Rwanda.
This is why Kampala has moved fast to construct three roads connecting Uganda and DR Congo to smoothen business between the two countries.
One road will run from Kasindi to Beni (80km) and another will integrate the Beni-Butebo axis (54km). The third will stretch for 89 kilometres from the border town of Bunagana, through Rutshuru to the strategic city of Goma, the capital of the North Kivu Province in DRC.
Rwanda, is not sleeping either. President Paul Kagame has secured a deal with his DRC colleague Felix Tshisekedi to boost his security by reinforcing his intelligence services.
Unsurprisingly, given the debate which swirls around Rwandan military engagement in the eastern DRC, Uganda has also sought agreements which will permit overt military cooperation between Ugandan Defence Forces and the DRC’s troops – the main priority being the security of the territories through which the new roads will run.
In the race for regional influence between Kigali and Kampala, Uganda is unquestionably lagging behind. Whilst these infrastructure agreements are significant declarations of intent, they will require time and commitment of resources to bring to fruition, whereas Rwanda may already be enjoying the fruits of its labours in the CAR and DRC.
In June this year, President Tshisekedi hosted President Kagame to sign further agreements, including a “memorandum on gold mining cooperation” which could prove highly lucrative.
But despite efforts by the two countries to win over DRC it is unlikely that their deals will come to fruition unless they work together. This means they have to sit down again and completely iron out their differences.
Despite the bad blood between Uganda and Rwanda the two countries have signed a Memorandum of Understanding to eliminate non-tariff barriers and promote cross border trade.
They have also established trade information desks at Mirama Hills, Cyanika, Gatuna/Katuna,