3-5-10
Announcing that business Uganda could be summed up in those three numbers, a member of the State Department spent about two hours with us at the formidable US embassy in Kampala.
The 3% referred to the population growth in Uganda. I said it’s about 40 million; that would make it 80 million in 24 years. Furthermore, it’s a young population; the median age is 15.7; only 2% of the population is 65 or over.
The 5% alluded to the urban growth. Though the country is still 80% involved in agriculture, urbanization is growing quickly. (take it from me, the sprawling distance from Entebbe, where the airport is located, to Kampala certainly indicates urbanization in this area; it’s almost solid construction. It took us about 1 1//2 hours from the airport, though the Chinese are building a highway that will cut it to half an hour)
The 10% was the number of new cars purchased each year, which is both a strength (an indicator that despite the average income of $700 a year, there is an emerging middle class) and a weakness (sketchy infrastructure and traffic jams). I was struck as we came in at night by the number of trucks alongside the highway, waiting to carry goods during the day.
He then dissected the economy’s opportunities and weaknesses.
On the plus side, he singled out a good climate, and fertile soil. This is an important agricultural area, and, in fact, the main export crop is coffee. 4.5 million bags were shipped last year, making Uganda the largest exporter of coffee in Africa; Ethiopia and Kenya grow more, but also drink more. The crop here is sold to Starbucks (arabica) and to the European Union (robusta). He emphasized, however, that coffee is also something of a minus. It’s shipped out as a commodity, without any value added (e.g., roasting?). I saw somewhere that the difference in cost between the raw beans and the roasted beans was over 50%. If you sell commodities, you’re at the mercy of lowest cost providers, and what money can be made, goes to the folks who add value.
Another agricultural product with potential is milk, but not as milk. Milk is cheap here (20 cents a liter), but turned into casein, it commands premium prices. Another way to add value.
The same scenario holds for oil. Ugandans recently discovered oil, and an American consortium recently landed a $3 billion contract to build a refinery. That’s the first refinery in the country (I believe), and another opportunity for value added activities, and a chance to earn more on the supply chain.
The other big opportunity is to participate more in the world’s biggest business—tourism.
He touched, too, on many of the same drawbacks we’d heard about earlier: infrastructure (or lack thereof); corruption (a relatively stable government, but an underpaid civil service). He said the goal of the US government is to insist on a level playing field, but some bids are rigged, and while there are laws and regulations, sometimes the laws are contradictory—allowing the official to make his choice of which one to follow—and sometimes ignored, for a price.
He, too, emphasized the need to be “on the ground” for a while to learn the rules of the game and how it’s played. He thought that was one difference between the Americans and Chinese. While the Chinese presence in Uganda is not as prominent as it is in Ethiopia (where there were 1 million Chinese reportedly when I was there two years ago), there are 15,000 working on infrastructure projects. The Chinese, he pointed out, come in prepared with the whole package, will have someone on site to make sure it happens, with financing, and as he noted with not a sign of irony, the Chinese are used to dealing with authoritarian governments.
American strengths were in “good will” established by previous presidents from Bush through Obama. There’s a Young African leaders program that sends 1000 Africans to the States for 6 weeks, spent mostly at universities that’s been a real positive; assistance in fighting AIDS and other health epidemics was also a plus. And the US government does assist businesses who want to come to Uganda, or do business with companies in Uganda.
In fact, we just had a reception hosted by the American Chamber of Commerce where the Ambassador spoke, just having returned from a trip to the States which included 20 coffee producers shepherded to a conference. She noted that only 3% of Ugandan coffee is exported to the United States.
Among the other members of the chamber, I chatted with the vice president, a woman who came here (via Silicon Valley) to work in agriculture, at the time pioneering organically grown fruits and vegetables. She told me that over 40% of the crop rotted because it could not get to market. She’s developed a supply chain of farmers, working with a certifying organization, to buy and dehydrate the crops, which she sells to distributors in the United States. When asked about changes in five years, she gave me two: the exchange rate has gone up (her dollars buy more shillings), and the business has gotten more competitive. Not only has “organic” become more mainstream, but neighboring countries have developed processing and are able to buy here and process across the border. I talked her into some treats for the long ride to the source of the Nile tomorrow—and I’m eager to taste dried Jackfruit! Another tidbit—she said she was invited to come here by one of the queens (yes, the five kingdoms still live!)
I’m about to pack for our early departure, and I’ve realized the title is 3/5/10, and there’s some nice symmetry that today is 5/10. Heading to the area north of the Nile. Soon we’ll be in de Nile.