COMMENT: Why ‘Buy Uganda’ is bad deal

Secondly, although BUBU as a policy is not law, as a starting point for government decisions, actions, and possibly law, it needs to be couched in clear objectives, procedures and protocols describing what, when, and how it will be applied and performance measurement parameters.

That BUBU’s main focus is on the two elements of the PPDA Act that enjoin the government Procurement and Disposal Entities (PDEs) to favour Ugandan suppliers of goods and services in competition to foreigners is shortsighted.

Pushing for reservations schemes and preference schemes for Ugandan-leaning suppliers of goods and services to the government is potentially counterproductive. They can be abused by rent seekers and become conduits for public procurement corruption and supply of sub-standard services and goods by well-connected entities.

The greatest danger they pose, however, is that they are driven by the tendency of myopic technocrats to camouflage their failure to craft workable policy strategies by offering short-term tactical advantages to agitators.

BUBU should target expansion of the local production value chains which are the only guarantees of jobs and general improvement in household incomes for majority of Ugandans.

Reserving the supply of staff uniforms of all government departments to one local textile firm, for example, does not per se guarantee expansion of cotton value chains.

Instead, it could potentially perpetuate dangerous monopolistic inefficiency, high costs, poor quality, corruption, and lost tax revenue. These would hurt Ugandans more in the long run.

Focus on value chains

The Trade ministry should instead, be pursuing a duo-pronged liberal approach which allows import substitution to thrive at pace with a free open market regime.

Using the cotton value chains example, competition between local and international suppliers could be coupled with concrete incentives for locals at strategic points in the cotton value chain. The government could ensure that cotton growing is aggressively encouraged, that farmers have right inputs, that small scale ginneries bloom and compete with big ones, and that textile mills improve efficiencies and lower costs to capture both local and export markets.

How many Ugandan households use Ugandan made linen? How many schools have uniforms made of locally made textiles? How many of us are wearing anything made out Ugandan cotton today?

Section 3.3 of the of the BUBU policy document issued by the Ministry of Trade offers a comparison of the PPDA policies of Kenya, Tanzania etc.

But the policy comparisons that the BUBU promoters should be looking at are not the PPDA Act. They should instead be looking at the Uganda Investment Codes.

Almost without exception, governments of poorer countries target foreign direct investments whenever they speak of investments. To them, the word investor means foreign investor.

The Uganda Investment Code, for example, has a specific section titled “protection of foreign investors”. It does not have an equivalent section for protection of local investors. Rwanda’s Investment Code takes a similar slant but expressly states that the code is for “all investors regardless of origin” and in Section 5 states that “foreign investors shall enjoy equal treatment as Rwandan investors”.

But it is the Tanzania Investment Guide 2014/15 that BUBU promoters should be reading. It replaced Tanzania’s National Investment Promotion and Protection Act (NIPPA) which was a bit like what Uganda’s Trade Minister Amelia Kyambadde is pursuing 30 years later. Tanzania, which is the fastest growing economy in East Africa, abolished the kind of concessions for local producers and suppliers that Kyambadde wants. Instead, it offers investors capital deductions and allowances. Kenya also offers capital deductions on manufacturing machinery and hotel construction. Uganda could do the same. The East African Customs Union treaty rendered protectionism dead.

But what BUBU advocates should really be thinking about and crafting are ways, means, and policies to get the Ugandan public buying Ugandan-made goods and services. At the supply level, they should be looking at forming and nurturing Local Investors Forums, creating Local Business Alliances by horizontal coordination. Such formations enable easy upgrades in production processes, product quality and marketability. At the consumer level, they could be working on creating local equivalents of `cash mobs’ which encourage locals to gang up in solidarity buying from local businesses.

Individual mango famers from Luweero might not currently compete with the juicy South African oranges in Shoprite stores, but they could compete in future if they formed a united front to improve productivity, quality, and – through synergy  and economies of scale, reduced transactional costs and lowered consumer prices. Then Ugandan cash mobs could be rallied to buy Ugandan-only mangoes. That is not as easy as passing a law that 30% of the value of any infrastructure project should be awarded to Ugandan firms. But it is what Ugandans really want – and deserve.

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editor@independent.co.ug