Uganda has delayed in its implementation of the proposed ban despite past attempts, largely due to push back from SHC traders and diplomatic pressure from the US. However, in early 2024, the President re-asserted his commitment to implementing this ban, to grow the domestic textile subsector.
The Economic Policy Research Centre (EPRC), a widely respected think tank, has recently published a Policy Note on the implications of phasing out imports of used clothing. This is something President Yoweri Museveni has frequently expressed the need for if the domestic textiles industry has any chance of becoming viable.
Titled Phasing out Second-Hand Clothes: Opportunities and Challenges for Uganda’s Textile Industry, the authors are Aida Kibirige Nattabi, Philemon Okillong, Isaac Shinyekwa and Emmanuel Ogenrwoth.
In spite of the 2016 stated intentions by the East African Community (EAC) Heads of State Summit to ban second-hand clothing (SHC) and footwear imports to allow the development of integrated textile and leather industries, Uganda continues to import these items.
Of the EAC members at the time, only Rwanda implemented the ban and as a consequence, was subsequently delisted from the African Growth and Opportunity Act (AGOA), a US preferential trade agreement.
The authors draw on various sources to point out, among other things, that while the proposed ban was designed to strengthen the regional textile sector, it may also cause short term job losses, and reduced import tax revenues.
Furthermore, since women and youth dominate the SHC trade, banning it will significantly impact Sustainable Development Goal Five, which seeks to achieve gender equality by promoting inclusivity and empowering women and girls.
As tariffs on SHC imports have increased and calls for the ban’s effective implementation more insistent, concerns have arisen that the domestic textile sector might struggle to meet local demand.
The ban could potentially create a larger market for cheaper clothing imports from Asia. This necessitates an understanding of Uganda’s market for SHC, in terms of imports, tax contribution and demand.
Findings show that China is now the largest source of SHC, followed by the United States and Canada. However, not all SHC imports are sold locally; some imports are re-exported to neighbouring countries.
Uganda largely re-exports SHC to East Africa Community markets. Total export values from 2014 to 2023 show that DRC was the leading destination ($6.1 million), followed by Kenya ($2.7 million), South Sudan ($2.3 million).
Rwanda was the fifth top destination, with a total of $1.1 million over the ten-year period. Although imports of worn clothing and clothing accessories to Rwanda dropped significantly after 2017, they grew in 2023, reaching $664,000 despite the ban. The re-export of second-hand garments to Rwanda is likely because EAC is governed by a single Customs Union, which implies that goods imported to the regional bloc can move freely cross the partner state’s borders.
While SHC tax revenue has increased, its contribution to total tax revenue has declined. Despite a rise in revenue generated from SHC taxes, from $47 million in FY2014/15 to $87 million in FY2022/23, its proportion of total revenue has decreased, falling from 1.56 percent to 1.27 percent during the same period.
Poor households’ expenditure on SHC has increased, but their budget share for clothes has decreased. In contrast, non-poor households spend more on both SHC and new clothes.
Urban households and those in Central and Western regions of Uganda spend more on new clothes. The significant expenditure on new clothes indicates a market for new clothes that the Uganda textile sector can tap into. However, given that Uganda’s textile subsector comprises 30 garment and footwear producers, the sector might not have the capacity to meet local demand.
Uganda has delayed in its implementation of the proposed ban despite past attempts, largely due to push back from SHC traders and diplomatic pressure from the US. However, in early 2024, the President re-asserted his commitment to implementing this ban, to grow the domestic textile subsector.
Although people have blamed the decline of Uganda’s textile subsector on the importation of SHC, others suggest that while the African textile industry declined at the time when SHC imports grew, but they could not determine a causal relationship between the two incidents.
Rather Structural Adjustment Programmes (SAPs), economic liberalization and de-industrialisation are the likely culprits. Similarly, other suggestions put forward pinpoint the dumping of counterfeits and smuggling of commodities, rising competition on the global market, failure of governments to promote domestic garment manufacturing, declining productivity of firms, and dominance of global value chains as the debilitating factors.
Consequently, the population prefers to procure clothing from the informal sector within which SHC traders operate, which challenges the reinvigoration of the textile sector.
Even though a 35 pc or 40 US cents/kg, whichever is higher, import duty rate was imposed on textile fabrics starting October 2020, the way to phase out SHC is still unclear. While the 2017 EAC Joint Communique suggested a three-year phase-out period, some have suggested that it is too short to allow the population to adjust. For example, the period doesn’t give sufficient time for industrial development, leaves limited options for substitution by the consumers, and no compensation for traders.
Uganda’s imports of worn clothing have been growing for the past years and surpassed the import of new clothes in 2010. As of 2023, Uganda imported worn clothing worth $95.9 million, compared to $79.1 million worth of new clothes.
In 2023, China exported SHC worth $58.7 million to Uganda, followed by the US ($13.2 million), Canada ($12.2 million) and India ($6.0 million). China has remained Uganda’s biggest supplier of SHC since 2014, after its exports grew exponentially between 2012 to 2014, to surpass both the US and UAE, who at the time were the top exporters.
The emergence of China as well as the UAE, India and Pakistan as major exporters to Uganda is due to the evolution of the global trade networks of SHC. Trading networks have grown beyond the direct market between the US and Africa. For example, direct export of SHC from the US to EAC as the final market accounted for a total 19.5 pc. Processing hubs have also emerged in China, Pakistan, and India, where they sort, treat, and bundle SHC from the US into bales for re-export to Africa.
The Sino-Uganda Relations, particularly an economic cooperation that commits to bilateral trade between the two countries guarantees China’s trade with Uganda, facilitating its exports of SHC to Uganda.
In addition, China’s dominance is rooted in its position as a global leader in the manufacturing of garments and textiles, but it is also a large consumer, discarding 26 million tons of clothing annually. This is because fast fashion, which is the low-cost manufacture of high volumes of garments, dominates China’s textile industry.
