The recent decision by the Biden administration to remove Uganda from the African Growth and Opportunity Act (Agoa) program is expected to have significant consequences for the investment climate not only in Uganda but also across the East African region. Trade experts suggest that Kenya and Tanzania could potentially benefit from the situation, attracting US corporations relocating from Uganda due to the Agoa exclusion.
Nelson Ndirangu, an international trade expert and former Chief Negotiator for Kenya at the World Trade Organization, emphasized the importance of Uganda strategizing properly to mitigate the impact. He suggested that some companies might relocate to Tanzania and Kenya, which are considered low-cost countries, and find niche markets.
Uganda’s exclusion from Agoa, effective January 1, could also impact the East African Community’s Rules of Origin, as goods produced using raw materials from Uganda may face restrictions in the US market. The move by Washington affects Uganda, Central African Republic, Gabon, and Niger.
Susan Muhwezi, President Museveni’s senior adviser on Agoa and other trade-related matters, expressed concerns about the potential violation of human rights and damage to the livelihoods of producers and traders in Uganda. In the last financial year, Uganda’s exports to the US under Agoa amounted to $8.2 million out of total exports totaling $70.7 million.
Trade experts like Ndirangu suggest that Uganda could explore opportunities in its pharmaceutical industry, where the US government has invested heavily. By sourcing ingredients from the rest of Africa, Uganda could scale up its pharmaceuticals under the African Continental Free Trade Area (AfCFTA).
The decision to remove Uganda from Agoa has stirred discussions about the political nature of the move, with critics pointing out that Agoa has not effectively alleviated poverty in the country. The private sector highlights challenges in critical infrastructure, logistics, and machinery, hindering Uganda’s ability to meet US market standards.
Uganda’s Trade Minister Francis Mwebesa remains optimistic, stating that the country will emerge stronger and could explore alternatives such as the recently signed Kenya-EAC-European Union Economic Partnership Agreement. Despite being eligible under Agoa, Uganda had not fully utilized the opportunity due to low capacity.
Simon Kaheru, Vice-Chair of the East African Business Council in Uganda, noted that Agoa’s impact on the country had been limited, and the decision to remove Uganda from the program might have more political motivations than economic reasons.
