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Ignorance Costing Uganda’s Importers

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For most Ugandan importers, the major factor of conducting business is capital. As long as one has paid for the goods and paid the shippers, all is well. But importing is more than paying for and transporting merchandise. It is actually more about applying knowledge to ensure that the various processes through which goods have to pass – from the factory (warehouse) to the shop or outlet – are observed and in good time.

This is the biggest area of weakness Ugandan importers face says Mr. Khassim Omar, the Chairman of the Uganda Clearing and Forwarding Association (UCIFA).

“There’s a lot of ignorance among Ugandan traders and they have suffered consequences because of this and as a result some of their cargo is auctioned so they end up incurring a lot of expenses and losses, “ Omar told East African Digest in an exclusive interview in Kampala, recently.  “ They know little about both the import and export procedures so they end up gambling around.”

He says despite efforts by UCIFA,  organizations like The Private sector Foundation, Kampala City traders Association, The Uganda Shippers Council, The Uganda Export Promotion Council  and The Ministry of Trade and industry, many importers have refused to master the basic requirements of operating an import business.

Omar , with 25 years in the clearing and forwarding business, says it is this ignorance that is costing many Ugandan traders. “They forget that one must understand the market, what it takes after purchasing the goods and transporting them, the tax liabilities and the International Contract Terms (Incoterms) – language of business transaction..

Omar gave an example of common terms like CIF (Cost, Insurance and Freight) Kampala saying many importers ignore the value of insurance once they have paid for the goods and hence risk loss in case of loss or damage.

“It is common for a trader to find someone in a revenue office agree with him/her verbally pay up some fee and comfortably wait for the goods, which in some cases do not arrive. In situations like this it is difficult to trace the person since the only contact may be a telephone number or email which are unreliable,“  says Omar.

Omar says efforts to sensitise Ugandan importers have not fully succeeded because the traders don’t want to commit time and effort to gain this knowledge.

“You get surprised when they ask you for allowances whereas you are providing a free service to equip them with knowledge to succeed in business,” Omar says.

His sentiments are confirmed by Mr William Kidima, Uganda’s representative to the Kenya Ports Authority (KPA).

Says Kidima, “ A trader goes to Shanghai in the hope of buying one container of goods but finds that he/she can actually purchase five containers. After paying for shipping, they wait until the goods arrive at Mombasa and then start the long process of clearance. Meanwhile demurrage charge pile up and by the time goods arrive on the market the price could have fluctuated. A trader then realizes that he/she has to pay heavily and get little or no profits.”

The other problem Kidima mentions is integrity. “ Ugandans don’t know that if they can maintain an honest relationship  with the supplier, they can get goods on credit and pay later,” says Kidima. But many suppliers have stopped this because most Ugandan traders have failed the integrity test.

Omar said that in some instances traders think that after they have paid for goods CIF Kampala, they don’t need a clearing agent at Mombasa or at the border. “ This is wrong,” says Omar. “An importer needs someone to ensure that goods are offloaded, cleared at Mombasa, loaded onto a truck  or train and transported to Uganda.” He adds, “ If you don’t have any one to oversee this, you may never see your goods and may end up paying highly in demurrage charges.”

Omar asserts that apart from sensitization, it is high time the government incorporated trade information into our education system.

“A child will learn at an early stage simple things like transacting business. He/she will know that one needs to register a business, open a bank account, get a tax Identification Number, acquire a licence and other basics.”

Omar says the Incoterms can be mastered to minimize delays and resultant costs which will all help a trader to maximize profits.

Below are extracts of the Interview

Question: What procedures should traders follow when importing goods?

Omar: I would recommend the following steps to be taken by business personnel before importing or exporting:

  • One needs to first understand his/her market. If the target market is the country of import then the issue is what it takes to transport cargo from the particular country to one’s final destination.
  • They need to know what the tax liabilities would be in terms of the particular commodity imported.
  • There is also need to understand the Incoterms (International Commercial Terms). This means that is a trader must understand the language used along the trade logistics value chain. There’s standard vocabulary that is used worldwide in terms of trade for instance you may load your goods at the port of shipment and you are instructed that these goods are CIF (Cost, Insurance, Freight) Kampala. Most traders’ don’t understand these terms and they end up making blunders.
  • Insurance of goods. The business communities in developing economies have failed to understand the value of insurance. They take it for granted that the goods will arrive safe.  People lost a lot of goods to pirates but if they had insured against such risks this wouldn’t have happened. We all know that insurance in acts of piracy and acts of war do not apply but when there is  danger that the ship is being you are still insured.
  • The agencies responsible should be known to the importer prior to bringing one’s goods. Things to note include what shipping company to use, who will be the clearing agent, what are the cost implications among others.  People think that if their goods are CIF Kampala, there are no charges to be met. This is wrong. Traders forget that there are always additional charges to pay. For instance they have to pay both the clearance agents in Mombasa and in Uganda.

Q: Do we have a one stop centre where one can clear at once and doesn’t have to clear at the various ports?

Omar: These services are provided by big companies such as Transami but they are very expensive and clearly exploitative. You simply hand over the goods to them and they process everything. These agencies are quite expensive but very effective.

The only problem is that one may end up making losses because the product will be priced highly on the market. This is why importers resort to small clearing companies that are cheaper but sometimes ineffective and unreliable. This is what the y call consolidation cargo centers whereby the agent handles cargo from door to door meaning that the agent will handle goods from the shipping center to the nearest point where goods will be handed to the trader. With big companies the combined bill of lading needs to be signed with the shipping company so that it will be the shipping company responsible for whatever happens with the goods until they reach the port.

Q: Doesn’t Electronic cargo tracking help in these instances?

Omar: Electronic Cargo tracking is different from the combined bill of lading. This is simply an attachment of an electronic device to monitor cargo along the way to avoid dumping where traders reach along the way and start offloading illegally.

Q: Has the Single Customs Territory (SCT) changed anything about how we import and clear goods?

Omar: To a certain extent yes, when the three countries come together and decided to impose other charges seeming that they are compensating for the major losses that accrued from the elimination of check points along the way.  Road blocks were reduced to three or four in Uganda and nine in Kenya. They have now mobile bridges.  Kenya, Uganda and Rwanda agreed on certain modalities, the simple concept of the SCT is built on three main pillars they are institutional management, Revenue management and Information Communication Technology (ICT). There has to be an interface of the different networks. Revenue management is about how money will be handled from one party to another, Institutional management is about how institutions will work alongside each other for instance the banks and insurance companies.

The most fundamental desire of the SCT is to make sure that the cost of doing business and the movement of goods should not be higher than the cost of doing business as and when the SCT was not in place but the situation is the opposite today for instance institutions are taking advantage of the situation like KPA is overcharging people without consulting the stakeholders. The charges have since increased; they are now charging a lot of fees including container fees and in-transit fees.

Even without the SCT, the ports were operating as they are now so I think the initiative is not helping that much.

Q: Who is the regulator now to make sure that the rules are followed?

Omar: In Kenya, the freight forwarders and the business community decided to raise this matter with the Kenyan Maritime Authority but because of the power of the shipping lines they didn’t change anything about the previous nature of what happens along the port. This is the power of multinationals, it’s estimated that if shipping lines like Maersk stop working for just a day, the whole world would go in a recession. In developing countries, we’ll continue paying the price.

Q: Is it right to say that the Single Customs Territory was rushed?

Omar: It wasn’t rushed. Actually it was more than timely only that the implementation of the process is what is being done wrongly. At the moment, there’s no holistic approach which outlines the basics within this. We needed the SCT earlier than it was brought in place.

Q: What can be done to correct what has gone wrong with the SCT?

Omar: There’s need for mass sensitization by the government and stakeholder consultations and I know they are already doing this though people of this country have a wrong mindset.

The Ministry of Trade, UNBS and Private Sector Foundation, UCIFA and others haves always organized workshops and seminars to sensitize the business community but people are not responding to this.

Ugandans do not even want to learn; they keep running away from the law and end up incurring more than they would with the right procedures.

Q: Have you involved the media?

Omar: The cost of operating with the media is very expensive. When people listen to you talking about several documents they’ll just change the channel. Beside the literacy levels in Uganda are very low. A high percentage of traders in the country are illiterate so choosing the print media wouldn’t make us achieve results. The print media can work best for the elite.

Q: How is the Single Customs Territory supposed to work?

Omar: Uganda doesn’t have the same economic growth with the other countries. Goods arrive at the port of Mombasa, you will want to pay taxes yet you wouldn’t want to pay before they arrive in Uganda. You will end up saving charges of ICD but I want my goods to be released from Mombasa straight. There’s a manifest that will be generated.

The common market protocol didn’t attain is there’s no free circulation yet the common market protocol provides for this.

Clearing agents in Uganda are still losers because we will need personnel to do for us all the clearing. Ugandans are continuing to pay taxes for the goods that they have not yet received.

Q: In your opinion, what must be done to improve this?

There should be mass sensitization by the government. Business ethics and Inco terms should be a a subject of its own. Engaging institutions further and encourage the members to participate further.

Q: How have you using the knowledge you attained to benefit others?

I do some free lectures at Makerere University Business School and other institutions. Some of us are beyond the level of being paid for a service.  Even my staff here, I train them on several issues. We need to get away from this issue that they know it all

Kassim Omar An accomplished trader and academic

Mr Khassim Omar has tried his hand on many ventures. After inheriting responsibility at a young age, he went on to pursue courses in business operations. He has worked in Dubai, the United Kingdom and several other areas. He told his story during an interview with The East African Digest.

“After attaining a degree, I decided to venture into business other than looking for jobs as many graduates do. I believed people who apply for jobs in the public service have no option or they are not innovative because with such jobs, the salary is most times little and in most cases one cannot be certain on the time they’ll get their salaries”, says Mr. Khassim Omar, the president, Uganda Clearing Industry and Forwarding Association (UCIFA) who doubles as the vice Chairman of the Uganda Shippers Council.

He graduated with a Bachelors Degree in sciences and is a student of political thought in business. He is also an activist in many ways for instance in promoting trade and trade initiatives. He also holdsa  Masters in Business Administration together with various certificates.

 Venturing in business

Though his father was a wealthy man, Khassim and his siblings didn’t live an admirable life for they lived in a period of regime changes from Obote, Amin, Lutwa and others.

“We experienced a lot of hardships and had interruptions in our education but we still made it. I came out knowing that life is not about looking for a job but one can earn through making personal initiatives. So I started a number of businesses of my own,” he affirms.

His first business started in 1981 in Soroti in eastern Uganda. It was called Crested Trade Supplies. This business was about buying and selling because there was a lot of demand for basic goods at that time.

Khassim affirms that he married at around the same time he started a business and because of this he was supposed to work very hard to cater for the young family and relatives.

He recalls that he started this business when the mother had just gotten a cancer of the uterus and was removed.

“The medical systems were not good in Soroti. I had also lost a sister just because accessing medical services was hard at the time. Such experiences made me carry on even in hardest of conditions.”

Returning to Zero

In 1986, Khassim and his relatives became victims of political persecution. He was pursued by the government in power for they thought he had links with then rebel National Resistance Army.

“The reason they suspected me is because I was buying a lot of cassava, paraffin and cassava flour taking it to West Nile so they thought we were channeling support to rebels in parts of Masindi.”

The 1986 war found when he had just graduated from commodity business to selling cars a thing that raised more suspicion in government as they wondered why he was frequently changing cars.

Khassim narrates that one day while he was on the way coming from Mbale, he was ambushed as he reached Pallisa.

“My car was taken, shot at and all my colleagues were killed; it was after then that I abandoned my businesses in Soroti since it was a transit point for retiring soldiers. I left all my businesses there and since I had no solid investment, I returned to zero”.  It’s on this note that Khassim encourages people to make solid investments.

Starting from scratch

After all he went through, Khassim headed to the border town of Busia where he stayed for a year but later shifted to Jinja as Busia became a center of chaos as a result of conflicts between Uganda and Kenya.  In Jinja he started small, but managed to start a clearing company being motivated by two men who had ventured into the same business earlier.

Later, he  undertook a course in shipping and thereafter  started serious business in shipping being motivated by the fact that there were only a few individuals dealing in clearing and forwarding at that time.

He says he tapped this unique idea because at the time, Uganda had a few big clearing agencies like Transami and Transocean  that were unaffordable to most traders.

“I got an opportunity to work at the port of Mombasa and while there, I got a chance to go places. I worked in Durban, with Pepsi Cola International in the Middle East and in the UK where I worked as a manager at Food house, Dubai and other places”, he says.

When he moved to Kampala, he started a clearing and forwarding business called Quick Container Services where he used to import goods a thing most people were not willing to engage in despite the insurgencies because the channels of transport were not operational for instance all the air lines were down. Considering the juicy nature of the business, Khassim Omar has since gotten stake in the clearing and forwarding industry.

He sits on several boards including the East African Business Council, he is the Executive director of the Nordic Freight International Ltd, a trustee on the Uganda National Chamber of Commerce and Industry and a member of the Institute of Corporate Governance.

By Jerome Mukasa and Flavia Nassaka

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