Monday, April 24, 2017

UGANDA CITY TRADERS: LOOK TO YOURSELVES RATHER THAN TO FOREIGNERS

In the 1990s city traders threatened to protest against Uganda Revenue Authority’s (URA) unfair treatment of them compared to foreign traders.

That time they were protesting the preferential treatment that supermarket chain Metro Cash & Carry was getting. According to them URA had licensed the South African firm’s warehouse as a bonded warehouse – meaning that goods were landed directly into their warehouses and taxes assessed and cleared there. This is opposed to what was happening to the average trader who had to first clear his goods from URA before taking physical possession of them.

The advantages of the former over the latter are quite obvious in terms of saving on time and other conveniences.

URA officials at the time argued that it was like comparing oranges and mandazis. That the volumes Metro imported were much higher than any single trader around and therefore it made sense to register their warehouses as bonded warehouses. Our local traders who could not as individuals even fill one container and therefore was not practical to do the same for them.

"I couldn’t help feeling a sense of déjà vu this week when I heard that our local traders were again up in arms against foreigners who were squeezing them out of the retail space...

Our traders argue that these foreigners were getting tax incentives and were therefore able to undercut them and were steadily driving them out of business. They have no proof of the tax incentives but assume that is how the foreigners are managing such low prices.

The spectre of the foreign businessman seems to loom large over our local businessman. And for good reason.

Many of these foreign businessmen may be front runners coming ahead of much bigger players. Prospecting so to speak for the big boys.

The advantages that come with this may include goods offered on credit, lower borrowing costs and the importation of large volumes of product, allowing them to benefit from economies of scale.

"Economies of scale, the principle that by spreading your costs – transport, labour and fixed costs over more units or volume, you can then sell a product for less than if costs had been spread over fewer units, is where our traders challenge is, rather than the assumed evil intentions of foreign competition....

We see it all around us. In a single mall on a single floor there can be a dozen shops selling clothes. 

Each trader not only has a small stock but also has rent, freight, labour, utility and tax charges to factor into their price. In more cases than are useful, they also have to factor in their air ticket – more than $2000 round trip to Guangzhou including accommodation, as an additional cost.

A “foreigner” on the other hand will cut out his air ticket. For the cost of a few megabites he can place an order to his supplier (probably the same one as our hapless traders) and have it shipped to Kampala. A 100 MBs go for about sh2,000.

We haven’t even begun to consider the reduction in rentals on price of a unit of floor space when considering a 30 meter square shop compared to 300 meter square shop floor.

Blaming foreigners is an easy thing to do. It is easy to mobilise against foreigners. The harder thing for our traders and their leadership to do is to look at themselves , re-examine their business practices, cut out their inefficiencies.

A major inefficiency of our business community is that too many businesses are sole proprietorships. 

The obvious implication of this is that they remain small for lack of adequate capital. This has implications on their ability to bargain with their suppliers and clients, borrowing terms or any number of issues that can lower the costs of doing business.

"There is an irreversible trend in world commerce that is beyond our power to turn back or resist. Barriers to trade are coming down and with it will come better competition...

Our business community has a choice either to continue as they are and hope to hide behind the government’s skirts whenever they are threatened by “foreign” competition or get smart, improve their business practices and become better competitors able to resist or at least collaborate with foreign businessmen.

In the first instance its only a matter of time before government hungry for more and more taxes hangs them out to dry. Or as in the second scenario they be able to hold their own in a rapidly changing world.


There is no plan C

1 comment:

  1. Quantum Binary Signals

    Professional trading signals sent to your mobile phone every day.

    Start following our signals right now and gain up to 270% per day.

    ReplyDelete