Uganda ranks sixth in Standard Bank Group trade barometer index

July 4, 2023 in Business, Financial Services, Infrastructure, Policy, Trade & Industry by Editor

Uganda’s improving import and export growth prospects together with the relative ease of access to credit and the government’s support of trading activities are the key positives in the latest edition of the Standard Bank Group Africa Trade Barometer report.

Covering 10 countries, the ATB showcases trends and opportunities for trade in Angola, Ghana, Kenya, Namibia, Nigeria, Mozambique, South Africa, Tanzania, Uganda and Zambia.

Standard Bank Group has a footprint in 20 African countries, with its presence in Uganda overseen by Stanbic Uganda Holdings Limited and Stanbic Bank as the anchor subsidiary.

The report findings are based on seven criteria, macroeconomic stability, governance and economy, infrastructure, trade openness, foreign trade, traders’ financial behaviour and access to finance. The report relies on combining on-the-ground research with third party data to deliver insights and analyses.

Countries are ranked against each other relative to the derived from the criteria. This is pegged on a scale of 0-100. When indexed between this range, South Africa has the highest Tradability Index while Angola has the lowest. However, this does not imply that one cannot trade in Angola or that South Africa is perfect, it only means that at a common starting point of 0 and a maximum point of 100, this is how the two markets faired. Uganda came in sixth behind Ghana, Mozambique, Kenya and Tanzania, but ahead of Namibia, Nigeria and Zambia.

The ATB is aimed at providing a source of reliable data and insights on African markets and economies for businesses and entrepreneurs as well as business people, students, governments, NGOs and investors considering the continent.

Qualitative and quantitative intelligence was gathered from 2,554 firms during August and September 2022 for the second issue, representing small, big and corporate businesses across all 10 economies. This intelligence is further enriched by third-party sources including the World Bank, International Trade Center, and the central banks of the 10 focus markets. The aim is to have the ATB become an important tool that enables businesses to identify, unlock opportunity and drive growth across the continent.

Highlights include the view that businesses feel their governments could be doing more to support them in trade. However, significantly more businesses in Tanzania, (up from 53% to 63%), and Uganda (up from 45% to 52%), feel that the government is supportive of cross-border trading activities.

Survey respondents have noted quicker access to flexible credit as a major concern. The perception that obtaining credit is becoming more difficult is particularly pronounced in Mozambique (down from 45% to 31%) and Ghana (down from 50% to 35%) where the high cost of credit inhibits access.

Conversely, more businesses in South Africa (up from 34% to 50%) and Uganda (up from 38% to 49%) believe it’s easier to access credit. In Uganda, while the cost of credit is relatively high, access has been extended through mobile money accounts and loans.

A major benefit of credit lies in the ability to smooth out cash flow peaks and valleys. This is particularly important in cross-border trade, where there is often an extended lag in the time it takes to manufacture, transport and sell goods before sales revenue can be generated. This makes credit a vital tool for unlocking working capital.

Unsurprisingly, the top ask of governments in the 10 countries, is the reduction of business taxes. While this is largely unfeasible due to the fiscal cost, the view is there are easier and more cost-effective wins for governments if more focus is placed on to improving trade in their regions. One measure that is expected to ease up this congestion, is the African Continental Free Trade Area (AfCFTA) agreement which seeks to not only lift tariffs but also reduce friction at borders for the movement of people and goods.

The quality of infrastructure and the impact on operations has worsened, particularly in Ghana, Mozambique and Nigeria. Power supply/outages remain the most severe infrastructural obstacle, especially in Nigeria, South Africa and Mozambique. Road infrastructure and telecommunications have worsened significantly in terms of being more of an obstacle for doing business when compared to data from our first issue.

Angola, Ghana, Nigeria, Mozambique and Uganda suffer the most from impaired roads, ports, airports, telecommunications, water supply/outages, customs and trade regulations. Surprisingly, there appears to be no correlation between traders’ sentiment on growth prospects for export and imports, and business confidence.

For instance, while businesses in Ghana and Mozambique reported a significant dip in business confidence, they are more optimistic about the prospects of import and growth (despite some slight declines). Nigeria, South Africa and Uganda have increased their optimism concerning future prospects for importing, while Angola, Tanzania and Uganda lead the pack in optimism over future prospects for exporting.

In terms of traders’ financial behaviour, cash is definitely still king, dominating the method and proportion of payments for both sales and purchases. The use of EFT / electronic payments has dropped somewhat, while mobile money has remained largely unchanged.

The use of Transactional accounts is particularly prevalent in Uganda and Zambia. While South Africa has the biggest variety of financial services that are being used at above-average levels, however, the total score (all countries combined) for Transactional Account usage has dropped from 58% to 39%.