Uganda exports to Rwanda hit hard by border closure

Presidents Yoweri Museveni and Paul Kagame at State House, Entebbe, in March 2018.
Presidents Yoweri Museveni and Paul Kagame at State House, Entebbe, in March 2018. The Rwandan leader was in Uganda on a one-day working visit. Credit: State House Uganda on Facebook.

The ongoing standoff between Uganda and Rwanda, which saw the latter closing its borders in late February, has hit Ugandan exports to its south-western neighbour, recent data show.

Uganda’s formal goods exports to Rwanda dropped sharply in March, plummeting 83.2% from a year ago, according to recent figures from the Bank of Uganda. In monetary terms, exports dropped from $15.7m in March 2018 to $2.6m.

Formal goods exports to Rwanda accounted for 0.4% of total exports, down from 4.8% in February and 5.6% in both January and December. In 2018, formal exports to Rwanda comprised 5.8% of Uganda’s merchandise exports.

Imports from Rwanda seem to have been barely affected by the border closure, growing 2.1% year on year in March to $1.67m. On a quarterly basis, imports from Rwanda rose 0.4% to $3.9m in the quarter that ended in March compared to a decline of 52.9% in the last quarter of 2018.

Related: Private sector bucks Rwanda border crisis with strongest growth in three months

March’s drop follows an escalation in hostilities between the two countries that saw Rwanda advising its citizens against travelling to Uganda and closing its borders.

Both countries accuse each other of violating protocols of the East African Community, especially the common market and customs union protocols.

In his latest comments on the stand-off, Uganda’s President Yoweri Museveni seemed to downplay its effects on trade.

“Even if the border is closed, trade will go on, only that it will be through smuggling. You can’t stop trade through border administration. People resort to smuggling. Others have resorted to export a lot of things to South Sudan, DR Congo, Kenya and Tanzania,” Mr Museveni said on Wednesday.

Indeed, informal cross-border trade between Uganda and Rwanda does not appear to have been affected much by the standoff. Uganda’s informal goods exports to Rwanda in March came in at $2.9m, unchanged from the previous month. On a yearly basis, informal exports to Rwanda were down 42.2% — but this is in keeping with an eight-month downward trend.

Read More: Trade deficit falls as exports grow at fastest rate since March 1995

Informal cross-border exports to Uganda’s neighbours — and Burundi — fell 16.7% in March to $45.9m and accounted for for 7.6% of total exports. The decline was largely due to a slowdown in informal exports to Kenya and Tanzania.

Uganda’s formal exports to countries in the Common Market for Eastern and Southern Africa trade bloc also declined, mainly as a result of lower shipments to Kenya and Rwanda. Exports to Comesa countries came in at $103.5m, 23.7% less than the same month a year ago. Exports to Kenya fell 52% to 26.4m. Exports to South Sudan, however, increased by 28.6% year on year to $40.6m.

Trade with the Middle East and non-EU European countries was especially robust. Exports to the Middle East ballooned from $31.8m in March 2018 to $262.6m this March, driven by a rapid increase to shipments to the United Arab Emirates from $30m to $259.5m.

The dramatic increase in exports to the United Arab Emirates appears to be driven by gold exports, which jumped from $25m in March last year to $363.4m this March. A recent Reuters investigation found gold exports from Africa to the United Arab Emirates had accelerated to $15.1bn in 2016 from $1.3bn in 2006.

The report identified Uganda as one of the countries that import a lot of gold to the UAE yet produce very little of the mineral. Most of Uganda’s gold exports were from the Democratic Republic of Congo and had been smuggled into the country, the report said.

Until recently, coffee was Uganda’s most valuable export commodity. Gold shipments, however, surpassed coffee for the first time in 2018, bringing in $514.9m to coffees’ $436.4m. As a proportion of total exports, gold exports increased from 12.1% in 2017 to 14.1%, while coffee shipments fell from 16.1% in 2017 to 12% in 2018.