What diversion of goods from Katuna, Cyanika means

Following the unrest in eastern DR Congo where towns including Goma and Bukavu have fallen to the M23 rebels, the Uganda Revenue Authority (URA) issued a trade advisory on exported goods.

This was after it emerged that the lack of control of Goma and Bukavu by the DR Congo government had led to significant revenue losses on the side of traders accruing from goods destined for the two towns. URA advised traders to look for alternative DR Congo entry points.

Effects of closure

However, the diversion of Ugandan cargo destined for DR Congo, through Katuna and Cyanika, has trade implications. According to experts, disruptions in the trade flow are likely to affect export earnings.

Although URA said the diversion of goods will not affect Uganda’s revenue collections, since they do not levy taxes on goods exiting the country, the traders who had orders to supply goods in Goma and Bukavu are counting losses.

Several traders revealed that the conflict has brought trade to a halt with merchandise trucks destined for Goma and Bukavu parked either in Kampala or in other border towns.

“Being that this conflict is in eastern DR Congo, which is the epicentre of Uganda’s trade hub, it has brought pain to traders. Those that had running orders are adversely affected,” Dr Thadeus Musoke Nagenda, the Kampala City Traders Association (KACITA) chairperson, said.

Nagenda said diverting the trucks from Katuna and Cyanika border posts has increased the distance Ugandan traders have to cover to make their way into DR Congo.

“This cost of transport is affecting our profitability. We had advised our members to hold on as we analyse the political situation in DR Congo. However, the end of the conflict seems to be in the distant future. It’s finally good that URA has advised us to take the longer route, which is safer than the shorter one,” Nagenda said.

Associate Prof. David Katamba, a senior corporate social responsibility advisor and lecturer at Makerere University Business School, said Uganda’s top importers, which have been the European Union (EU) and DR Congo, have enabled the country to increase its import revenue in the recent past.

However, Katamba pointed out that the EU market has been more restricted due to strict trade policies.

“That state of affairs means that Uganda has to leverage regional markets, such as the East African Community (EAC), Southern African Development Community and Common Market for eastern and southern Africa,” he said.

Katamba added that the war in eastern DR Congo, which is Uganda’s gateway to the market of over 100 million consumers, is bad news for the country.

“It is likely to constrain our local production capacity now that the Buy Uganda Build Uganda initiative has not taken hold,” he said Stephen Asiimwe, the executive director of Private Sector Foundation Uganda, said DR Congo, which is now part of the EAC, is one of Uganda’s most lucrative and virgin markets.

“This populous country provides Uganda with one of the most feasible keys to industrialise. It has given our local manufacturers a chance to diversify exports beyond food commodities and informal cross-border trade. The current war in DR Congo is not good for trade and is depriving us of that opportunity,” Asiimwe observed.

KACITA spokesperson Isa Ssekitto noted that forcing traders to divert from the original route to access a certain market is one of the non-tariff barriers that they have been de-campaigning.

“This war, which has eaten into Uganda’s trade prospects is not a DR Congo war per se, but a regional war that is supposed to be resolved at the EAC level. If it is not managed at that level at this material time, it will result in denting of regional trade prospects,” advised Ssekitto.

URA memo details

As a result of the conflict, URA in a memo dated March 3, this year, advised Ugandan traders to divert goods destined for DR Congo towns of Goma and Bukavu through the Uganda-Rwanda border posts of Cyanika and Katuna, respectively.

The memo signed by Asadu Kisitu Kigozi, URA’s commissioner of the customs department, said: “It is internationally recognised that Goma (final destination to Cyanika) and Bukavu (final destination to Katuna) are no longer under the control of the central government of DR Congo.”

Kigozi, who said they were acting on the request by the DR Congo government, added that to mitigate significant revenue losses, all goods bound for the DR Congo must be declared for exit through designated border posts, excluding Katuna, Bunagana, Cyanika, Ishasha River, Busanza and Kyeshero.

Uganda, DR Congo trade grows

Uganda’s trade with the DR Congo has been growing over the years, increasing by an average of 10% annually, according to figures from Bank of Uganda.

Data from the UN Comtrade, a platform that provides comprehensive global trade data, including detailed annual and monthly trade statistics by product and trading partner, shows that Uganda’s exports to DR Congo have been growing over the years.

The data shows that Uganda’s trade with DR Congo rose to $433.2m (sh2 trillion) between December 2023 and November last year, which is a growth of 40% from the $258.3m (sh955b) earned in the same period between 2019 and 2020.

According to Comtrade, the main products that Uganda exported to DR Congo included palm oil ($49.9m), cement ($32.1m), motorcycles and bicycles ($19.2m), scrap Iron ($6.97m), gold ($3.5m) and refined copper ($1.88m).

Over the past five years, Uganda’s exports to DR Congo have increased at an annual rate of 18.3%, from $177m (sh648.7b) in 2018 to $411m (sh1.5 trillion) in 2023.

Besides being an export market for Uganda’s goods and services, DR Congo is one of Uganda’s sources of raw materials, such as gold, timber and African fabrics.