Uganda’s increase in coffee exports will benefit its economy

Uganda located in the central-eastern part of Africa remains one of the poorest countries in the world. With the GDP per capita (per purchasing power parity) of just over $2.5 thousand, the country home to over 42 million people still struggles to overcome some basic challenges and poverty at a nationwide scale. The vast majority of the population still lives under the poverty level, both national and the set UN poverty bar of $1.90 per day. The situation is not much different from the rest of the African continent where nations still live in unbearable conditions. However, African countries are starting to rapidly develop their economies through fostering relations with overseas companies and increasing exports.

As a result of quickly increasing economic activity across the continent, nations all around the region are engaged in fierce competition. Trade is becoming more and more important for national economies and countries are starting to purchase and sell goods and services from each other. To address the problems of poverty and social exclusion, the government of Uganda has set out a vision for 2040. The Green plan that is to be achieved in 20 decades aims to deliver tangible results for the entire population of Uganda. It focuses on the increase in trade both within the African continent and beyond. In an effort to foster trade, the country is planning on building major transport infrastructure projects whilst adapting the taxation laws to manufacturers and producers.

Coffee export is soaring, resulting in stronger national currency

The economy of Uganda is still highly dependent on peasant workers, agriculture, and hard manufacturing. However, the country now needs to open up more markets for exports. This is exactly what is happening thanks to the Uganda 2040 vision that aims to skyrocket the country’s export capabilities.

The soaring export rates are not beneficial only for GDP growth. Rather, it strengthens the country’s national currency. Ugandan shilling has experienced some steady growth over the past few months following the reports about increased exports of different goods, particularly coffee. The latter is one of the main assets of the Ugandan economy as the nation holds the status of the second largest coffee producer in Africa.

The growth in exports has resulted in stronger Shilling and the popularity of forex trading within the nation. There were barely any forex brokers for Ugandan traders just a few years ago. However, with the growing value of Shilling, both locals and internationals have started trading in Uganda. Besides forex brokers opening up for Ugandans, the country is also seeing local brokerage firms being set up amidst the high expectations for the national currency in the years to come.

The results can now be seen in the amount of coffee exported from Uganda. According to the latest report in June 2020, the coffee exports out of Uganda accounted for 5.06 million 60kg bags, an 84% increase throughout the very first decade of the 2040 vision. This amazing performance once again highlights the importance of economic liberalization and business incentivization in Uganda and Africa in general.

The export incomes reached an all-time high of USD 494 million, a whopping increase of 88%. There also is a year-on-year increase in the export volume and value of 21% and 18% respectively for the periods of 2018/2019 and 2019/2020. The figures from the Uganda Coffee Development Authority (UCDA) suggest that the country’s coffee production more than doubled from 3.5 million bags in 2014 to over 7 million in the financial year 2018-2019.

The trend continues this year as Uganda is expected to export a record amount of coffee bags. The country already is Africa’s largest coffee exporter with the vast majority of production being sent abroad. However, it comes only second after Ethiopia in terms of the total volume of production. Ethiopia is expected to produce roughly 7.35 million 60 kilogram bags of coffee throughout this year. Yet, if Uganda’s production potential is fully exploited this year regardless of the pandemic, we might see it overtake Ethiopia, effectively becoming the largest coffee producer on the continent.

Source: Africa Business