By Njiraini Muchira

Uncertainty surrounding the future of the Kenya-Uganda Railway concession has claimed its first casualty, with a private equity firm pulling out of a deal to acquire the operator Rift Valley Railways from Qalaa Holdings of Egypt.

The decision by Emerging Capital Partners to disown talks that had been confirmed as ongoing by, among others, the Kenyan regulator of the line got a quick response from RVR, which said it would seek answers from its shareholders (Qalaa) on what was going on.

“ECP is not currently in discussions with Rift Valley Railways or its principal stakeholders about an investment in RVR,” said the firm in a statement.

The ECP statement came almost a fortnight after it was reported to have commissioned an audit firm to carry out due diligence on RVR’s financial position. It also came a week after it emerged that Kenya had terminated the RVR contract over non-payment of fees.

Due diligence, the perusing of books to confirm accuracy with third party records like asset registries and bank accounts, usually follows an agreement in principle of interest in acquiring a company. It is done on a strictly confidential basis.

When contacted by The East-African, RVR chief executive officer Isaiah Okoth said he was awaiting communication from Qalaa Holdings on the new developments.

“ECP has been negotiating with shareholders and I am waiting for official communication to know the status of the negotiations,” Mr Okoth said. Later, RVR issued a statement signed by Mr Okoth which just fell short of questioning ECP’s integrity.

“RVR has been in discussion with several potential investors, including ECP, through its shareholders. As far as RVR is concerned ECP has been involved in due diligence of RVR business,” reads the statement signed by Mr Okoth.

Barely a week after Kenya Railways Corporation terminated the Rift Valley Railway concession, ECP has walked out on plans to acquire the majority shareholding in RVR.

ECP, which had reached an agreement with Cairo-based Qalaa Holdings to acquire its 73.76 per cent stake in RVR, has opted out of the deal following the termination of the 25-year concession.

It added that it will continue to explore opportunities to invest capital to support the growth of East Africa’s infrastructure sector.

RVR also said it was pursuing other options in consultation with the Kenyan and Ugandan regulators “with a view to achieving the best possible outcome for all stakeholders in this regard.”

The decision by ECP to opt out of the deal at the eleventh hour makes RVR’s position even more problematic, considering it was mainly banking on the coming on board of the new investors not only to salvage the concession but also to inject capital into the business to ease its survival.

According to observers, ECP must have decided to opt out of the RVR acquisition after the company lost the main asset, which is the concession and which still had another 13 years before it expires.

“The concession agreement is the main asset for RVR. It is the main value for investors,” said Philip Muema, Nexus Business advisory managing partner.

Last week, KRC terminated the 25-year concession citing defaults on various parameters of the concession agreement by RVR.

RVR managed to get a 30-day temporary relief after the High Court put an injunction on the execution of the termination notice, which gave the company a 120-day window to salvage the concession.

In an earlier interview with The EastAfrican, Mr Okoth had exuded confidence that RVR would seal the deal with ECP within the timeframe.

But with ECP pulling the plug, RVR is technically on its deathbed unless Qalaa digs into its coffers to settle the company’s outstanding financial obligations.

In terminating the concession, KRC said that RVR has defaulted on three key terms of the concession agreement — namely standard of maintenance of conceded assets, freight volume targets and payment of concession fees.

Rehabilitate locomotivesOn assets, RVR has failed to maintain the track, resulting in speed restrictions on 187 km of the main line, which is 17.3 per cent of the line.

RVR has also failed to rehabilitate and maintain the locomotives, rolling stock, buildings and structures.

On freight volume, the company has failed to achieve targets as at the end of year nine, recording 1.1862 BNKM against a target of 2.1145.

On fees, RVR has failed to settle concession fees totalling $4.1million as of December 2016, rent amounting to $1.7 million and another $20 million and $10,720 for life expired assets and life expired wagons and assets destroyed in accidents respectively.

Since taking over the concession to operate the 1,300 km metre gauge railway from Mombasa to Kampala in 2006, RVR has remained in the red and has failed to improve railway transport with its annual cargo haulage stagnating at 5 per cent of the total cargo arriving at the port of Mombasa.

In a span of 12 years, RVR has changed hands four times.

The GE Reports Africa blog has launched a series known as “A Day in the Life Of” which profiles GE SSA’s unsung heroes, highlighting their contribution at GE.

Louis Ndesingo, currently a commercial proposal specialist at GE, based in Dar es Salam, was born in  the South-Western part of Tanzania with his family and later moved to the North-Eastern  part of the country to live in Arusha, where he completed his schooling.  Louis was the second of four children and he grew up with a great passion for computers that started from playing video games as a child. He was a big fan of video games and he hoped to one day end up in a profession that involved computers.

His parents had a very strong influence on his life, guiding him into the commercial field he currently works in today. Both Louis’ parents have business backgrounds and based on what the environmental landscape looked like at the time, Louis realised that the commercial space would be very fruitful as a career.

The two things Louis’ parents taught him about business is proper time management and the importance of hard work. These guiding principles encouraged Louis to follow in his parents’ footsteps and to study accounting and obtain a degree from Strathmore University in Nairobi, Kenya. Louis later completed a masters in finance and investment at Coventry University in the United Kingdom.

GE was Louis’ first job after he completed his Masters. He joined GE through a leadership programme, the Early Career Development programme (ECDP), a 12-month programme designed to give recent university/college  graduates challenging work assignments, training and development as well as exposure to leadership. Louis was exposed to a combination of hands-on tasks as well as formal classroom training that equipped him with the tools and knowledge to grow in GE. Upon completion of the programme, Louis graduated into his current role of commercial proposal specialist. It has now been two years since Louis joined GE and he has found the experience invaluable.

“GE helps to build you up as a personal brand and exposes individuals to a variety of opportunities that one needs to develop and grow in their career. These opportunities help build and prepare you for survival in different environments. What GE exposes us to is not something that a lot of people get the opportunity to be exposed to and to top it all, GE also has a lot of good leaders within the organisation who you can learn from so it is a great place to work and grow.”

With Tanzania being one of the emerging countries on the continent in the oil and gas sector, Louis’ primary role is to identify opportunities in the oil and gas industry, and  develop them through the different divisions within GE. His role is a major one because currently, the Tanzania region does not have specific people who look after specific areas within the oil and gas division. Louis’ role covers the entire supply chain of oil and gas, and he has learned that one of the best ways of getting the job done is through networking. He needs to continuously network with stakeholders from different industries because GE offers solutions to customers across many industries.

A typical day for Louis starts with a 30-minute workout followed by preparation for work. His day in the office typically starts at 8am and the activities he engages in range from customer visits to customer calls and following up on leads.

“The first impression counts with customers as this will help seal the deal. The impact of what you can do to improve their operations needs to come across strongly and we have to ensure that the right facts, and details are shared with customers for the solution we are hoping to provide. This can prove to be a challenge at times.”  GE often deals with international customers and this means that follow-ups can prove to be challenging but Louis always finds a way to get the job done.

GE’s East African region is currently in a growth phase and there are frameworks, legally and physically, that have not yet been established, and that makes the job more challenging. Having these frameworks in place would guide opportunities to flow smoothly in the supply chain from start to finish. To counter this  challenge, the GE commercial teams in this region participate in regular internal telephonic conferences that add an immense amount of value and Louis sees this as an opportunity to get ideas about the other prospects one can explore in the region.

Louis’ work day usually ends at 5pm and sometimes, at 8pm, depending on the tasks at hand. And afterwards, he attends school to complete a professional course in his speciality, accounting. Louis wants to become a certified public accountant.

So, what excites him about his job? The exposure to people in different industries, which means that he is always getting an opportunity to learn something new. Another thing that he loves is the prospect of being able to provide solutions and products for customers within GE that are tailored to their needs. The opportunities to expand and grow are endless, empowering one to eventually become an expert.

Louis recalls an experience that he had while attending a training course in the US last year that helped shape his thinking about himself and how he viewed his life. The  training was focused on business and was technical in nature, and he had not had technical training before. It was quite a challenge to understand the technical aspects, but he completed it successfully, overcoming the challenges he had. This is when he realised the importance of stepping out of one’s comfort zone.

“You will only realise your full potential when you are pushed out of your comfort zone and this is very important. We sometimes get too confined within our comfort zones and we do not realise our true potential. This is what I enjoyed about my hands-on experience at GE as it gives you the impactful picture of what you are doing.”

As a result, Louis has been guiding colleagues, sharing advice and imparting knowledge on how to pursue opportunities within oil and gas in their region.

“GE has good leaders that do not hesitate to advise or mentor. Challenge yourself and step out of your comfort zone. This is the beginning of realising your full potential.”

By Alon Mwesigwa

Business mogul Sudhir Ruparelia’s footprint within Uganda’s financial industry has been further cut short after the licenses to four of his forex bureaus expired at the end of last year and were not renewed.

It is not clear whether it was Ruparelia’s decision to relinquish the licenses voluntarily or Bank of Uganda’s decision not to renew them. However, a source within Bank of Uganda has told us that the central bank was suspicious of some laundered money being channeled through the forex bureaus, and was, therefore, reluctant to renew the licenses

In another instance, Ruparelia’s troubles mirror a wider problem that the businessman continues to face in what some sections of the public have defined as a witch-hunt. Ever since Crane bank, where he was the single biggest shareholder, was closed in October 2016, the clampdown on a number of his businesses has been intense, the latest being the forex bureaus.

The central bank announced on Wednesday that Crane Forex Bureau limited (Nile Avenue), Crane forex bureau (Kampala road) Limited, Karibu Forex Bureau Limited, and Redfox bureau limited would not have their licenses renewed.

Benedict Ssekabira, the director for commercial banking at Bank of Uganda, told reporters on Wednesday that they had closed them because owners and board of directors lacked “fitness and probity.”

Stanhope forex bureau, a subsidiary of the Ruparelia group, remains open, though. Ruparelia still manages Crane management services, his holding firm that runs his real estate empire.

“They are not the first ones to be closed and won’t be the last one,” Ssekabira said of the forex bureaus.

However, The Observer has been told that the issue of money laundering played a key role in the central bank’s focus on the forex bureaus.

“They [closed forex bureaus] are linked to money laundering,” the source said. “We are at a time when the world is looking at us… We’re involved in South Sudan, Somalia, refugees are flowing, and [we are close to] DRC. This raises the risks of laundering. Any links or suspicion will get you closed.”

Forex bureaus are expected to renew their licenses annually. BOU reviews their activities and if there are issues it is uncomfortable with, they are denied license.

We asked Sudhir Ruparelia to comment on this story but he declined to reply to out request. We also asked Rajiv Ruparelia, a key staff of the Ruparelia group, about the troubles in the group and he, too, declined to comment.

The closure of the forex bureaus comes three months after Crane bank was sold to Dfcu bank over failure to maintain the required minimum capital. It was later found that the bank had been engaged in prohibited insider lending and that it had conspired with auditors to paint a glowing picture of its performance.

Ruparelia’s troubles were also worsened by a forensic audit that found gross indiscipline in the way he managed his businesses in the financial sector, our source intimated. The forensic audit into Crane bank was completed and the report remains within Bank of Uganda.

“The USA is particularly watching us,” said the source. “They are very hard on anti-money laundering laws and anti-terrorism financing.”

The Uganda Anti-Money Laundering Act was first passed in 2013, following pressure from the Financial Action Task Force (FATF), a global movement fighting dirty money, and bodies such as the International Monetary Fund, World Bank, and the UN.

In that year, the US-based Global Financial Integrity (GFI), which works to expose illegal financial flows, reported that Uganda was the biggest recipient of illicit financial flows in East Africa, reaching $1.1bn in 2008.

In its annual supervision report last year, Bank of Uganda warned there was a high risk that commercial banks, forex bureaus and other money remitters in the country were not doing enough to scrutinize suspicious transactions, raising concerns that ‘dirty’ money could be entering the country.

The Eastern and Southern Anti-Money Laundering Group (ESAAMLG), an organisation composed of states in east and southern Africa, said in a report last year that financial institutions and designated non-financial businesses and professions in Uganda did not “adequately apply anti-money laundering and combating financial terrorism preventive measures commensurate with their risks.”

Last month, Uganda was forced to make amendments to its anti-money laundering laws, with the ESAAMLG report indicating that the supervisory regime in the country was not as strong as it should be.

Uganda is particularly seen as a fluid transit route for drug smugglers and wildlife poachers. Most of the times, these people seek to sanitize their cash through the available institutions, including banks and forex bureaus.

OPINIONBy José Graziano DA Silva

In the two decades before 2015, West Africa made notable strides in reducing hunger, reducing the number of hungry people by more than 60 per cent, well ahead of its Millennium Development Goal pledge.

Yet today in Nigeria–one of the region’s star performers in that period–we now see severe hunger increasingly quickly and widely in north-eastern regions where civil conflict is uprooting people and preventing farmers from growing crops.

There is a growing risk that the impressive gains made recently will be reversed. We cannot let so much effort turn out to have been in vain.

I am visiting the Lake Chad Basin at this particular moment to raise awareness of just how urgently we must strengthen our response to the challenges there. So far, the inadequate attention and inadequate responses have only made those challenges bigger.

The Lake Chad Basin crisis (encompassing parts of Nigeria, Cameroon, Chad and Niger) is currently one of the largest humanitarian crisis in the world, with 11 million people in need of assistance. Among them, 6.9 million people are severely food insecure, as well as 2.5 million displaced, which is second largest displacement crisis in the world.

It is important to keep in mind that this crisis, while catalysed by conflict, is multidimensional and encompasses the security, humanitarian, climate change and economic issues that local populations in the Sahel region have long been facing.

The first priority is to support the affected countries in consolidating peace processes and, at the same time, responding to the humanitarian emergency.

Damage to agriculture–ranging from farmers’ access to their fields to vital infrastructure such as irrigation schemes, storage facilities and extension services–has been extensive in the affected areas of Nigeria, northern Cameroon, southeastern Niger and western Chad. Many of these people have already sold their belongings, including seeds, tools and animals, to survive.

Immediate livelihood support can ensure that critical hunger needs are met in the short-term. But this is only the initial step to reverse the current trend toward the depletion of livelihoods and consequent human suffering in affected areas.

The vicious cycle of destitution must be broken, and to this end we must ensure vulnerable populations have an opportunity to reap a substantial harvest and replenish their food stocks this year. Failure to restore food production now will lead to the worsening of widespread and severe hunger, and prolonged dependency on external assistance further into the future.

The time to act is now. Farmers need seeds in addition to food. One month ago the humanitarian community met in Oslo [Norway] to pledge funds for the Lake Chad Basin. The planting season there starts in less than one month.

Agriculture cannot be an afterthought. More than 80 per cent of people rely on farming, fishing and herding for their livelihoods.

The impressive gains of the past were achieved thanks to years of step-by-step agricultural development initiatives. We must ensure these are not wiped out by the current crisis.

We need to protect the assets and livelihood systems of farmers and pastoralists not only for today, but for tomorrow and the years to come. And this calls for longer-term resilience building.

A holistic approach is needed to address both the current main drivers of hunger, which include limited food production, high food prices and displacements, as well as the structural causes of vulnerability in the area, including demographic growth and competition over scarce natural resources.

The lack of access to basic social services – health, water, education – and to social protection, will inevitably jeopardise the lives of millions in a region that is highly vulnerable to shocks. Climate change in particular poses a menacing risk to an area exposed to droughts and floods.

FAO is enacting a three-year response strategy (2017 – 2019) to mitigate the impact of the crisis and bolster the resilience and food security of Lake Chad Basin communities affected by conflict.

The resilience of rural livelihoods is key to making sustainable development a reality by ensuring that agriculture and food systems are productive and risk sensitive.

United Nations agencies are also joining efforts to maximise the impact of their interventions.

The crisis is complex, and so is the road to sustainable development. To effectively address economic, social and environmental impacts coherently, we must have a regional, integrated and comprehensive approach in which national actors are on the front line.

Dr Da Silva is director general, Food and Agriculture Organisation of the United Nations (FAO).

By Abubaker Kirunda

Mayuge — President Museveni has said that about half of the 122 million coffee seedlings distributed to farmers by the UPDF under the Operation Wealth Creation programme have dried up due to drought.

Mr Museveni who was addressing a rally in Mayuge District on Tuesday, blamed farmers for not irrigating the seedlings. “Unfortunately, I am told that around 40 per cent of the coffee seedlings have dried up because the beneficiaries didnot water them. This is terrible carelessness.”

Mr Museveni said drip irrigation is the solution to the persistent drought ravaging some parts of the country.

The President, who is on a commercial agriculture sensitisation campaign in Busoga sub-region also told people to stop land fragmentation and polygamy.

“You can improvise with drip irrigation. It has worked excellently for people with small land acreage. All you need to do is put water in small bottles which you will use for irrigation and you will forget about droughts which people think it is a problem.” he told a rally in Mayuge District on Tuesday.

President Museveni also told local and political leaders in the sub-region at the new Kityerela State Lodge in Mayuge District to sensitise the people against land fragmentation, which he said threatens food security among agriculture dependent communities.

“Land fragmentation is a big problem. If not well addressed, it is the source of poverty. Here at Kityerera village, I am committed to ensure that all the 4,000 homesteads are liberated from poverty”, the President said.

The President added that with increased agricultural production and raised homestead income, government will have less financial pressure and will be able to concentrate on infrastructural development projects such as roads and electricity. He said after restoring security in the country, he now wants to concentrate on helping people increase their household income through promotion of modern agriculture.

OPINIONBy Joseph S. Kitamirike

On April 5, the Governor, Bank of Uganda published a statement inviting commercial banks to open central securities depository (CSD) accounts at Bank of Uganda for their clients, issue and accept bid submission forms on their behalf, settle clients’ successful bids and buy and sell securities for their clients.

This may have passed as a positive development for the banking sector, but it is a huge setback for the securities industry.

If this is alarming, you will notice that the announcement did not disclose the law covering these BoU activities. And because all securities activities in Uganda are governed by laws, this article invites you to examine the role of BoU as delimited by the Constitution, banking, securities and public finance laws.

Articles 161 and 162 of the Constitution defines the role of BoU and sets boundaries for it. The framers must have wanted to provide that BoU operates free of external influence, while preventing the Bank from interfering with activities outside its mandate.

First, the Constitution stipulates that activities the Bank engages in must be prescribed in law, so BoU cannot lawfully undertake activities that are not explicitly assigned as its responsibility in the law. Second, the Constitution provides that the Bank cannot be directed by any authority or person, so BoU operates independently.

Now, since regulation always results in regulated entities receiving direction from other authorities, this means that BoU cannot be regulated and, by implication, cannot undertake activities regulated by others under various laws.

In keeping with the BoU Act and the Financial Institutions Act, BoU is the regulator of banking, is the banker and adviser to government. The BoU Act prescribes its role in securities as that of an investor in government-issued instruments and an issuer of securities in its own name.

Additional provisions in the Treasury Bill Act and the Public Finance Management Act prescribe BoU as an agent for the government in issuing securities in the primary market. To my knowledge, these roles are the only ones prescribed for BoU in securities issuing and trading.

When you turn to securities law, the Capital Markets Act (as amended) and the Securities Central Depositories Act are the laws that govern activities in the securities market.

Under these laws, there are regulations and rules designed to operationalise, inter alia, the creation of securities, their delivery to the public and management of securities trading.

Among the securities, that are supposed to be managed under these laws are those issued by the government.

Securities law does not provide a role for BoU, whose presence in the securities market is now comparable to Capital Markets Authority opening and operating a commercial bank.

To my knowledge, there are no other laws under which activity in treasury securities can be regulated and managed.

BoU’s announcement, in spite of the constraints in these laws, has the makings of an unregulated single asset-type securities market parallel to the regulated securities market.

It has been argued in some fora that since BoU issues securities, and it is a constitutionally independent body, its securities activities cannot be brought under the regulation of securities law.

This argument is flawed. The only BoU activities provided for are those that can be carried out by it acting as an agent of government, which itself does not operate independent of securities regulation.

Therefore, it is defective to argue that BoU’s role as an agent of government does exempt government-issued securities from regulation. It can, however, be argued that by circumventing securities law as it is doing now, BoU exposes its principal, the government, to charges of breach of securities law.

Most who have examined this challenge feel the need for corrective action. One school of thought favours the view that BoU should exit those activities, especially those relating to the secondary market, and leave them for the duly licensed parties.

Another school favours amendment of the Constitution to give BoU leeway to legalise its currently contentious securities market activities.

Yet another school advocates for deeper reforms which, if necessary, may result in the clarification of the roles.

However, in order not to advocate for reform of a legal environment where we have not yet fully complied, the change we need is first to ensure compliance with existing law.

Only then can we evaluate intentions of the framers of the Constitution and Parliament in enacting laws excluding BoU from trading and custody of government-issued securities. When we come into compliance, it will be clear that BoU is a regulator, a potential investor with latitude to invest in government-issued securities and a potential issuer with freedom to issue securities in its own name.

A body playing these roles cannot legally and without conflict operate securities market infrastructure or manage securities market activity.

NEW evidence against Oil giant Shell show that its top bosses were aware of bribes paid for the acquisition of Nigerian oil field OPL 245 in 2011.

New evidence has reportedly emerged during the corruption probe into Shell’s acquisition of the OPL 245 oil field off the coast of Nigeria, indicating that top executives were prepared to press ahead with the deal despite knowing that most of the money could end up as political bribes.

The BBC reported it has seen documents that show top Shell executives were aware that more than a billion of the $1.3bn (£1bn) paid to the Nigerian government would be passed on to former petroleum minister, Dan Etete, who was convicted for money laundering in a separate case.

Shell said in a statement that it did not believe that any current or former employees had acted illegally.

A company controlled by Etete – Malabu Oil and Gas – had purchased the rights to OPL 245 for a minor sum of $2m while he was Nigeria’s oil minister between 1995 and 1998.

Shell and the Italian oil company ENI acquired OPL 245 in 2011 and the government allegedly paid about $1bn of the total deal amount to Malabu.

The emails, seen by the BBC, were obtained by anti-corruption charities Global Witness and Finance Uncovered. They show Shell executives were negotiating with Etete for a year before the finalisation of the deal, the BBC said.

The BBC said ENI did not respond to its request for comment but had previously stated it did not believe that the company, or its ENI personnel, had been involved in any wrongdoing.

An email dated March 2010 from a former MI6 officer employed by Shell shows that the companyknew Etete would benefit from the deal despite him being convicted in 2007 for money laundering in France.

“Etete can smell the money. If, at 70 years old, he does turn his nose up at 1.2 bill he is completely certifiable and we should then probably just hold out until nature takes its course with him,” read the email, which was forwarded to the then Shell chief executive Peter Voser.

Representatives of Voser reportedly declined to comment.

Another email dated July 2010 showed that Shell executives believed the deal payment would also end up in the pockets of Nigerian politicians as political bribes, including former president Goodluck Jonathan.

Etete’s negotiating strategy is “clearly an attempt to deliver significant revenues to GLJ [Goodluck Jonathan] as part of any transaction”, the email noted. Jonathan is the former president of Nigeria. A spokesperson for Jonathan termed the allegations as a “false narrative” and told the broadcaster that no charges or indictments have been brought or secured against the former president in connection with the OPL 245 deal.

Luanda — At least three tons of gold are illegally exploited and exported per year from Angola to regions such as Tanzania, Emirates Arab United and other countries.

This was said to the press by the CEO of the Gold Regulatory Agency, Moisés David, on the fringes of roundtable on Gold Market Operation.

He said the situation of the gold is worrying and strategies are been outlined in order to get more data and the respective regions mostly hit by this illegal activity.

He also explained that the illegal gold activities are currently taking place with most frequency in the province of Cabinda, despite reports of the existence of illegal exploitation practices in Cuanza Norte, Huíla and other regions of the country.

The government has invited investors to invest in mineral value addition for the country to benefit more from variety of mineral resources.

According to a statement from the Ministry of Energy and Minerals the invitation comes after the government has last month announced total ban on export of ores and concentrates of metallic minerals to enable all mineral value addition activities including processing, smelting and refining to be carried out within the country.

“The government is inviting capable stakeholders to invest in mineral processing, smelting and refining industries in Tanzania,” the Ministry said, as the government is implementing the Mineral Policy, 2009 and the Mining Act, 2010.

In the Mineral Policy of 2009, the government emphasizes the need to promote and facilitate value addition activities to be carried out within the country to increase revenue from the mineral sector, create jobs and acquire new technology hence to realise maximum benefits from the mineral sector.

According to the statement, the interested persons or firms are required to have the proper technology to ensure that pure metals are produced and exported outside Tanzania.

Also, such companies to have reputable experience in processing, smelting and refining of metallic ores and concentrates as well as sound financial capacity and workable investment plan.

Some of the critics of the domestic smelting however argue that to operate the smelting plant economically, a feedstock of 150,000 tonnes of mineral sand, almost three times the amount produced in Tanzania, are required annually.

Tanzania is endowed with variety of mineral resources from metallic minerals to gemstones and most of the minerals produced are exported in raw or semi processed form.

ANALYSISBy Dorothy Nakaweesi

Kampala — For close to 15 years, Crane Shoes facility located along 6th Street in Kampala have been producing footwear which ranges from safety shoes, military boots, school shoes, polio boots, casual shoes, classic shoes, and many others. But due to a small market the company has been forced to produce below capacity.

Mr Tom Mukiibi, the executive manager of the company, told Prosper Magazine: “We produce more than 1,000 pairs of footwear monthly.”

Mr Mukiibi shares that their biggest challenge is the limited market. This, he says, discourages them to produce more, adding they have the skills and manpower to make more than 1,000 pairs a day.

Crane Shoes, and many other Ugandan manufacturers, have grappled with this market challenge because government, the biggest buyer always resorts to importing products and sourcing contractors from outside the country.

Basic facts

In the last five years alone the Ugandan government has committed more than Shs16 trillion to at least 30 contracts. Out of these contracts, Shs12.3 trillion was borrowed money and the remaining Shs3.6 trillion was generated from taxpayers.

Experts say that at least 91 per cent of the contracts were awarded to Chinese companies. This means that 60 per cent of the Shs16 trillion went to Chinese companies and the rest was distributed to companies from, majorly, India and Turkey. No contract was awarded to the local contractors or producers.

Analysists say if Uganda was not donating all this money to foreign economies, the country would have attained the middle income status years ago.

With this happening, the country’s Current Account deficit has worsened. Uganda continues to import more than what it exports, with the import bill standing at more than $5 billion (Shs18 trillion) against exports valued at $2.5 billion (Shs9 trillion).

Efforts in place

However, the issue of market challenge may soon be a thing of the past following several government initiatives such as the Buy Uganda Build Uganda (BUBU) 2014 policy launched in February. It is a policy providing for the need to support locally manufactured products, knowledge transfer, and human capital development.

To further the campaign, Kasanda North Member of Parliament, Mr Patrick Nsamba Oshabe, presented a Private Members’ Bill dubbed ‘Local Content Bill 2017’ and was given leave to consult the public. If passed into a law, it will support local producers in many ways.

In an interview with Prosper Magazine, Mr Nsamba said: “Every time you miss out on involving the local companies you miss out on capacity. And it will be a far-fetched wish for local manufacturers if they are not supported by government through giving them contracts to grow.”

He further said it is high time for government to think about technological transfer to Ugandans. “It will be ideal after the construction of one express highway for the next highways to be done by Ugandans. But we keep going back to the same country (China),” he said.

He shares that in order to help the local companies government has to change the procurement method to bend it towards building local capacity. To get this, he said, the law has to be in place to support the BUBU policy.

“Policies are very good but you cannot enforce compliance without a law. We must oblige everybody to buy Ugandan products and services,” he emphasised.

New guidelines

Government issued new guidelines to promote Local Content in Public Procurement in accordance with Sections 50 (2) of the PPDA Act, 2003 and Regulation 53 of the Local Governments (PPDA) Regulations, 2006.

This will also facilitate the implementation of the National Development Plan II (NDP II) 2015/16-2019/2020; and the Buy Uganda Build Uganda Policy, 2014.

In this campaign government has identified a list of goods it will start with and these include textiles, cement, iron and steel and leather products.

With the law in offing and BUBU policy and strategy in place, the big question economic experts are asking: How are the local manufacturers prepared to take advantage of these initiatives to prosper?

Manufacturers speak

In an interview with Prosper Magazine, Mr Oliver Lalani, the executive director of Roofings Group, one of the companies dealing in the production of steel products in the country, said the policy is a positive development but it needs to be implemented.

“BUBU is rosy on paper but implementation is something which is lacking. If this is done, we as Roofings, will be ready to take advantage of the benefits it comes with,” he shared.

On how their company is prepared to take on the challenge given the opportunity to supply, Mr Lalani said: “Our company has got a 65 per cent annual utilisation capacity, which is about 375,000 tonnes of steel.”

He said right now the company is producing 190,000 tonnes of steel annually, which is about 52 per cent. He shares that given the opportunity they will be able to supply.

In another interaction with Mr Jas Bedi, the director of Fine Spinners Uganda Limited, a textile company which took over Tri-Star and Phenix Logistics, says that this initiative is great because it will help local industries grow and expand their operations to cater for an expanded market thereby creating jobs.

Good work

Mr Jedi said: “The challenge for the local manufacturers is to build capacity for this market expansion and if the market is guaranteed investments will follow. It’s like the ‘horse before the cart’ which operates in unison.”

According to the chairman of Uganda Manufacturers Association (UMA), Mr Amos Nzeyi, manufacturers have been selling a small proportion of their products. “We are not fully utilising our industries. The capacity utilisation of our industries is 63 per cent. If it was 100 per cent, that would mean a lot of jobs created. If we can buy our products, we can go up to 80 or 90 per cent,” he notes.

Mr Nzeyi applauds the government on launching the policy. “This gives us some leverage in doing business since our goods can be bought. This means we will be building the economy and creating jobs for our youths,” he says.

Question of capacity

With such efforts one wonders whether Ugandans are ready or have the capacity to handle the contracts given the opportunity.

Trade minister and the force behind BUBU policy and strategy launch, Ms Amelia Kyambadde, said: “We want to assure you that this is real and we are (already) implementing it in some areas. We have pushed for the supplies of cement and steel for companies like Roofings and Hima to supply the big government projects.”

“Some companies don’t want to tell us the right or actual capabilities. Getting facts of the output has been a nightmare,” Ms Kyambadde noted.

She said it is only the sugar companies which have been providing quarterly data on production supplies. Going forward, Ms Kyambadde appealed to all other companies that have not been doing so to comply because this is for their own good.

“If we are lobbying for you to get a particular tender to supply or to link you up to some of the companies which want to work with you to buy your products, we need this data because it will give us a basis on where to start,” she added.

And to the acting executive director of UMA, Mr Richard Mubiru, the issue of thresholds should be informed by built capacities. He added that as UMA members they have built a lot of capacities.

“We are coming up with an intervention by doing capacity studies annually in conjunction with Uganda Bureau of Statistics. And going forward information will be available and this will help us know what we can provide,” Mr Mubiru noted.

Consumer’s voice

Mr Brian Ssenoga, a producer of honey under the brand name MiHoney, thinks the BUBU initiative is good but he is not certain on whether government is going to implement it.

He says: “In my area of speciality, we Ugandans produce very good and organic natural honey which we supply to supermarkets all over the country. But our fellow Ugandans from the elite class, including government people will go for honey branded or which comes from other neighbouring countries.”

Mr Ssenoga adds: “Surprisingly they don’t know that it’s this same honey which is imported from Uganda but adulterated, packaged and brought back here in our supermarkets.”

He advises that in order to change the mindset of the Ugandan consumer who thinks that anything Ugandan is inferior or of low quality, Ugandan producers need to certify their products, brand them and pack them well.

Will govt walk the talk?

Mr Henry Kimera, the executive secretary at Consumer Education Trust – Uganda, says that on the onset BUBU is one of the best policies Uganda would have if well implemented through meaningful investment.

“It is a good rural and urban economies transformation policy. That said, the successful BUBU policy is with the Uganda government as the biggest consumer in the country,” he noted.

He said through walking the talk, government will lead us all through practical examples by buying Uganda to make the policy a success. In that the threshold of qualifying as Ugandan good or service should be 90 per cent and supplying company Ugandan or joint venture Ugandan as majority.

“Consumers being the largest economic power, with quality products, they will have quality of service and experience, which is vital and sustainable to any public-private initiative like BUBU,” he added.