UG decision to encroach on Kenya has been given a lot of publicity among leading news agencies of the world. But everyone familiar with the case knows that UG’s encroachment onto Kenya is illegal and uncalled for. All indications are that UG was actually spoiling to get into actual war with Kenya for no good reason. All their actions point to this direction. Kenya on the other hand has acted very mature.

But within the last 3 months,UG has seen its Shilling depreciate in comparison to the Kenya Shilling by not less than 25%. Why? My take is that foreign investors and tourists are now shunning UG due to its seemingly confrontational and rebellious nature. The interview Kaguta had with BBC the other day was the final straw on the camel’s back. Which investor of means would go all out to invest in a country with unpredictable foreign policy? UG is digging own grave,but this maybe is a blessing in disguise for competitor Kenya. Why? Looking at the unfolding situation,Kenya is undoubtedly the more stable,objective and reasonable country where you can put your investment and sleep in peace

@ BAAK,

Another way of looking at the situation,though i stand to be corrected...I think this could be an economic ploy by Kampala to unofficially and deliberately devalue the Ush against the hard currency and hence the ksh to shun or limit the Kenyan imports into Uganda..... just a thought.


NEVER TALK OF A RHINO IF THERE IS NO TREE NEAREBY - ZULU PROVERB

@ kanobi,

i am not a financial expert but i think we are more or less talking about the same thing (the effect),but dont forget that any devaluation of a currency ends up favouring the exporter and the weaker the currency the better for a net exporter....

Probably M7 would now have a genuine excuse of sourcing his commodities elsewhere but Nairobi.


NEVER TALK OF A RHINO IF THERE IS NO TREE NEAREBY - ZULU PROVERB

@BAAK,

You sound to me like Alfred Mutua,that man from Dubai when you say the following: 'Looking at the unfolding situation,Kenya is undoubtedly the more stable,objective and reasonable country where you can put your investment and sleep in peace'

The last time I checked this country was not even at peace with itself! What with the unhealed wounds of PEV (these are rotting from within),Mungiki menace,uprooting of the railway line. A slight provocation today can spark off widespread violence!

Against the backdrop of all these,we have a concoction of bitter herbs in water and kerosene in the name of a Coalition govt. Endless bickering,infighting,corruption,lack of leadership,and you want to convince me that we are stable,objective and reasoble!!!! Puliizz.

There is something called a Country's sovereignty and pride. This must be defended,the same way you would jealously defend your house and family members. You aren't going to tell me that someone can break into your house,sleep with your wife as you watch joyfully and claim it is because you are peace-loving!!

Let's not legitimise our ills by living in self denial. Let's accept that they are there and deal with them.


Chief

Baak,I concur with Bareta - there is no way you can say Kenya is more stable. Even with the LRA problem,Uganda is much more stable in terms of the population. M7 might be a dictator and expansionist but the triggers for distabilisation do not exists like they do here - they have barely noticeable tribalism,generally good food security,lower prices of basics (owing to abundance in rain,etc). Here we are skating on thin ice near the end of winter...PEV,corruption,near total break down in law and order,human rights issues,famine,elec/water shortages (tell me which investor would come to a country where the workforce alone is held hostage by so many variables - which business will thrive in an unjust business environment - after Triton....after Track It....who has any doubts about the levelness of this playing field.....there are more things behind the scenes and thanks to international political expediency,they may not see the light of the day......your argument is flawed...the premises fallacious....

The problem with equality is that we desire that it be with those that have more than us rather that those that have less

@Kaigangio.... Ur arguments and facts cannot be disputed but again UG's exports for 2008 were about $2 Billion and imports amounted to $3.5 Billion... the so called oil deposits are of poor quality useful only for making paraffin... Assuming that the Paraffin exports will be adequate to make up the Exports/import differential,why would m7 then go ahead and increase his import (and export) costs by going through a different more expensive port rather than Mombasa?

What we are saying is that Uganda Shilling has depreciated by 30% in the last 4 months. Read the Business Daily of 18 May 09 to understand. Though some are saying this is as a result of global crises,why hasn’t Kenya & TZ been affected the same way yet they are in the same zone? Let’s agree…the aggressiveness of Uganda has scared many potential investors and tourists…..and this has had an effect on foreign direct investment.. hence contributing to some negative effect on their shilling.

@Kaigangio

Which specific goods does Uganda stand to benefit were it to devalue its currency. And in any way,how exactly do you suppose they are devaluing their currency.

Remember currency valuation will only work if you can control the prices,e.g UG exports coffee,should they devalue their currency agaiinst the $,the International prices will remain constant while UG will be getting artificially higher local prices but which they will still spend importing petrol. On top of this,they will have to spend more money since they import more than they export.

Secondly,the southern route will always be a dream,I honestly have no idea what TZdians do,the port is so clogged that vessel surcharge is practically double what is chargeable at Kilindini. Secondly because of the amount of cargo traffic at Mombasa,its easier to get vessels landing than Dar .

My take is that at this point,UG needs its currency to strengthen up,the main reason is that they will need to import very expensive oil extraction and related equipment. This sought of capital expenditure will put added strain on the countries import bill. Secondly a weak/unstable currency will attract higher interest payments and additional hedging costs from the foreign loans that they will need to borrow to develop its oil fields.

My guess is that the reason for the UG currency decline has to do with the oil,the countries currency had already factored in the oil discoveries,now with the low cost of oil,the sustained development of alternative fuels and the lack of credit and the quality of the oil plus its under a lake. This find is becoming less and less atractive to prospective investors. If I was M7,I would be boarding a plane for china,they seem to have an endless supply of cash.



I guess if you can't win with facts,you can always pen bile-laced,xenophobic rants to distract everyone.

Indeed Kaigangio... Maybe Tz may end up being the cheaper route... but this being Africa,I would exercise caution before burning my bridges with Kenya... (we know the history of white elephants that stalks our continent)... From Obi's post,the Dar port appears to be doing much worse than we are (didn't think that was possible)... However,now I ask myself,why haven't Rwanda and Burundi followed suit...