Local businesses struggle amid influx of foreigners

Take a stroll in downtown Kampala, around the area locally known as Kikuubo, and you will notice Uganda’s version of China Town.

If it is not the growing number of Chinese opening up shops along downtown alleys, it is Ugandans filling up their shelves with Chinese products. To the list of Chinese traders raiding downtown Kampala, add Indians, Somalis, Eritreans, Ethiopians and Kenyans, and what you have is a plastic cosmopolitan feel of the city centre.

The influx of different traders, especially the Chinese, has changed the trade dynamics in Uganda’s downtown business – the heart and soul of the country’s local trade industry – creating what many see as an unfair ground. For example, while the Chinese traders can tap into their home country’s cheap labour and low interest rates on credit, Ugandan traders have to grapple with the high business costs, such as the ruthless pursuit of moneylenders, to match their Asian competitors.

The field is not levelled. For landlords, though, the growth of traders is simply music to their ears. Landlords have hiked rent fees in downtown Kampala due to the growth of foreign traders in the market, making it hard for indigenous businesses to survive.

The spirit of raising rent fees has spilled over into the housing sector, too, with apartment owners also hiking the lodging fees for their units. The issue is so critical that it recently found itself up for debate on the floor of parliament.

Allan Ssewanyana, the member of parliament for Makindye West, complained recently that the prices of rent in his constituency had literally shot through the roof.

“Most of these people [foreign traders] have too much money to avail themselves of good housing. This has brought problems as the landlords in these places don’t wish to accommodate the residents of Ugandan origin, preferring the Eritreans because they come with a lot of money,” Ssewanyana was quoted in the media as having said.

Jimmy Mutebi, who operates a boutique in Kansanga, a Kampala surburb, expressed deep concerns about the influence of Somalis and Eritreans on the local trading businesses in the area. He highlighted the escalating rent charges imposed by property owners under the influence of wealthy foreigners.

“As you can see, most shops here are occupied by the Somalis because the landlords prefer renting to them because they can even pay seven months’ rent in advance, making it increasingly difficult for local traders to afford rental spaces in certain buildings,” Mutebi said.

According to local traders in the area, the rent for shops in Kisenyi, which is highly made up of Somali and Eritrean traders, ranges from Shs 300,000 to Shs 500,000 per month, depending on the size of the shop.

Arnold Lubega, a trader working at Cornerstone building opposite USAFI market, states that for the ground floor shops at that building, the rent charges range between Shs 700, 000 and Shs 1 million. On the other hand, the rent for shops located on the top floor of the building is Shs 500,000 per month.

This is considerably low compared to other shops in the city such as Ham Shopping grounds where rent charges range between Shs 1.2 million and Shs 2.5 million per month for the relatively small shops and up to Shs 5 million for the bigger shops.

However, Lubega states that much as the rent prices are high, landlords prefer renting their shops to Chinese and Somali traders because they often come with large amounts of money and have the ability to pay for a shop for one full year in one go.

“Landlords favour Chinese and Somali traders over local Ugandans because of their perceived reliability in rent payment. The willingness of foreign traders to make upfront payments and their perceived financial stability compared to local traders makes us less favoured because sometimes we even fail to pay our monthly rent due to various reasons,” Lubega explained.

Knight Frank, one of the most prominent service companies in Uganda’s property market, in their report for the second half of 2023, noted: “The prime residential market maintained relative stability registering a 4 per cent increase in the average monthly rents for two-bedroom apartment units, while rent for three-bedroom apartment units increased by 1 per cent on a year-on-year comparison with prime occupancy rates surging by 6 per cent.”

According to the spokesperson of Kampala City Traders’ Association (KACITA) Issa Ssekito, the merchandise that local traders used to buy from China is now being brought in by Chinese traders themselves, sometimes even reaching the final consumer directly. He stated that the situation has led to local traders being marginalized in the market as they struggle to find customers for their goods.

The dominance of Chinese traders has resulted in a decrease in business opportunities for local traders, leading to potential unemployment in the long run.

“The government favouritism of China has made Ugandans compete for customers with Chinese who are now selling directly to consumers,” Issa Ssekitto said.