PUBLISHED ON November 17th, 2014

Region starts realising benefits from single customs territory

A surge in fuel imports and increased Customs revenues are the results of the rollout of the Single Customs Territory in February, reflecting the benefits of reduced trade barriers. However, the depreciation of the Uganda shilling has denied consumers price discounts.

Reduced turnaround times on the movement of fuel, cement and clinker, wheat, used clothes and beverages have spurred significant growth in import volumes.

“This Customs arrangement offers local businesses huge benefits in moving goods and raw materials across borders at a lower cost.

“But some of these cost savings have been eroded by the depreciation of the Uganda shilling against the dollar, and this has constrained local businesses from passing on new cost benefits realised in the Customs value chain,” said Richard Kamajugo Uganda Revenue Authority’s Commissioner for Customs.

The Uganda shilling fell by 2.9 per cent against the dollar during the first quarter of 2014/15.

Results from a survey conducted jointly by the Uganda Revenue Authority and the Rwanda Revenue Authority show that the average time spent clearing and transporting cargo from Mombasa to Kampala dropped from 18 days, two hours and 27 minutes to an average of four days and 15 hours after implementation of the Single Customs Territory system.

Similarly, clearance and transportation of cargo from Mombasa to Kigali dropped from an estimated 21 days to an average of five days and two hours.

The cost of transporting goods from Mombasa to Kigali decreased from an average of $5,200 to $4,200 per trip, and the number of trips made by cargo trucks between Kigali and the Hima border post rose from an average of four to eight per month.

The survey, compiled in August, covered 26 importers, 10 transporters, 25 clearing firms and 40 drivers based in Uganda and Rwanda.

The SCT system includes the use of pre-arrival declaration forms, reduction of multiple Customs declaration requirements by about 90 per cent, single declarations for bulk purchases such as fuel products and cement, payment of certain fees in the country of destination, and the introduction of a single regional bond that offers high cost savings to importers by replacing multiple guarantee bonds.

The latest figures on Uganda’s fuel imports between February and October show a substantial increase in volumes and Customs revenues. Total fuel volumes grew from 1.09 billion litres between February and October 2013, to 1,24 litres recorded in the same period this year, URA statistics show, representing a growth of 13.6 per cent over 12 months.

Petrol imports rose by 19.5 per cent to 503 million litres between February and October 2014, and diesel imports increased by 10.9 per cent to 569 million litres over the same period.

The high growth posted by fuel imports boosted Customs revenues during the first four months of 2014/15. International trade taxes grossed Ush1.38 trillion ($502 million) between July and October 2014, an increase of 19.6 per cent from the same period in 2013.

Whereas increased import volumes are good for revenue collections, observers claim that the smoother trade rules could spell doom for local sectors that are less competitive than their foreign peers.

Through faster inflows of cheap high quality goods, particularly consumer items, Ugandan firms producing similar products at a higher cost could be forced out of the market.

“Huge growth in import volumes tied to the Single Customs Territory has boosted tax revenues, and indirect losses attributed to this regime can be mitigated through strong export numbers in some sectors. For example, local cement producers have increased exports to neighbouring markets like the Democratic Republic of Congo, which could reverse trade-related economic losses over the medium term,” said Stephen Magera, URA’s Assistant Commissioner for Trade.

Other trade experts also say growth in the manufacturing sector could overturn economic losses.

“Fuel consignments take a shorter time because several trucks are consolidated into a single batch instead of clearing them separately. This has directly reduced the number of fuel shortages experienced,” said Moses Sabiiti, programme manager at TradeMark Africa.

Source: The East African

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of TradeMark Africa.