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.