Large cargo handling deals — health products, heavy machinery and coffee — have boosted Uganda’s clearing and forwarding industry despite a weak economy and rising competition.

Prolonged economic downturn experienced since the beginning of 2017/18 led to a tax revenue shortfall of Ush355.8 billion ($96 million) between June and December 2017, Bank of Uganda data shows.

Uganda’s economy expanded by four per cent against a target of five per cent in 2016/17 financial year.

Figures compiled by Uganda Revenue Authority (URA) revealed the total number of Customs declaration entries registered by URA rose to 500,000 last year, with minimum transaction fees in the industry estimated at Ush500,000 ($135) per transaction or more than Ush250 billion ($67.7 million) in total annual industry revenues.

“We are getting some huge deals from the Chinese contractors but the flow of these orders is fluctuating,” observed Lino Criel Icila, secretary general of the Uganda Clearing Industry and Forwarding Association.

Infrastructure projects

Mr Icila was alluding to the huge infrastructure projects in the energy and transport sectors by the Chinese, which have increased demand for new construction equipment.

The ongoing projects are Karuma and Isimba dams, Mubende-Kakumiro-Kagadi and Soroti-Moroto roads.

In additional to Chinese contracts, the Ministry of Works and Transport was a key player in road construction.

The ministry imported about 1,151 units of equipment — motor graders, vibro rollers, wheel loaders, water bowsers and dump trucks — valued at Ush318 billion ($86 million), last year.

A big chunk of this consignment was cleared and stored by Spedag Interfreight Ltd, industry players say.

“We have seen strong growth in customs transactions linked to Chinese contractors, coffee exporters and some government institutions like Ministry of Health and the Ministry of Works and Transport,” said Abert Mwebembezi, a manager at Spedag Interfreight Ltd.

In 2016, Uganda’s Ministry of Health announced plans to import 25 million mosquito nets valued at Ush331.5 billion ($89.7 million).

Between September 2016 and September 2017, Damco Ltd, a Customs agent, cleared five million mosquito nets. The rest of the nets were cleared by Spedag Interfreight Ltd and Bollore Africa Ltd, according to industry sources.

The average local cargo warehousing cost is estimated at $25 per square metre per day. Growing coffee export volumes attributed to large commodity trading companies have also boosted transactions among Customs agents.

Agents

According to URA, there were 370 clearing and forwarding agents last year while there are 1,200 certified Customs management professionals in the local market.

“The challenges of a weak economy faced by our industry have been complicated by rising competition from regional peers and this trend could pile pressure on some players to consider mergers and takeovers in order to survive over the long term,” observed Mr Icila.

Source: The East African