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
