Manufacturing sector, the engine for Uganda’s growth

Mubaraka Nkuutu Kirunda has been acting as the executive director at Uganda Manufacturers Association (UMA) for about four months. He spoke to The Independent’s Julius Businge about the prospects of Uganda’s manufacturing sector.

Manufacturing is among sectors that experienced negligible growth in the first half of this financial year (the sector grew from -4.2% to -2.8% in Q1 and Q2 for this FY). This growth came amidst usual sector challenges related to power tariffs, unreliable markets, and unfair competition from foreigners, and poor infrastructure .What did you observe in the two quarters?  

Our business is not separate from the dynamics of our economy and last year was tough. It was an election year and this slowed down the operations of manufacturers because of uncertainties that come with political activities.

There was prolonged drought that even continued up to early this year that cut down on amounts of raw materials for our industries involved in agro-processing.

Our usual good markets of South Sudan and Eastern Democratic Republic of Congo were unstable, and so we could not do much to export there.

Power tariffs remain high in our country with the cost of one unit going for 12 US cents. The president wants this cost to go to as low as 5 US cents per unit. A big percentage of manufacturing costs is related to electricity. If we attain the 5 cents per unit, we will cut power costs by half.

In relation to these usual challenges, what milestones has the association recorded in trying to manage them?

Power tariffs were at some point at 17 US cents per unit. We were part of the discussions that show pricing reduce to the current level of 12 US cents.

There is a time we went to court to challenge the Electricity Regulatory Authority over these tariffs. Fortunately, UMA asked us to settle the matter out of court. The downward trend is encouraging.

Recently, we were at the centre of the approved Buy Uganda Build Uganda policy (BUBU) that is being slowly implemented to support local manufacturers and other businesses and we have been instrumental in advocating for local content laws and policies to support growth of our local industries.

We are happy government has agreed to give 40% of business to local industries in development projects.

We are engaging government on issues of business guarantees where government of Uganda and that of South Sudan can talk to each other to bail out businesses that lose their money, property in times of instability. This would give us confidence to invest more in this country.

Some foreign investors have argued that Ugandan industries lack capacity to deliver on local content arrangements; sticking to this move would mean you are scaring away investors?

That is not correct. Our local industries have to be supported and that is why we are not calling for 100% local content. We believe local content is another engine for growth in terms of jobs, exchange rate stability and revenue generation to government when it comes to funding budgetary needs. Big projects worth millions of dollars like Karuma, Isimba, Standard Gauge Railway and others mean a lot to us.

How has your advocacy work been received by government and local investors?

Some of our members like Hima Cement, Tororo cement and I think Kampala Cement are supplying cement to Chinese- Sinohydro Group Ltd that is constructing Karuma dam. Roofings is supplying steel products to the same company for the same project.

Companies like Nyanza Textile Industries Limited popularly known as Nytil and others are being given orders to supply uniforms to the army and medical workers.

We insist on saying buy local and build this economy. Government offices use a lot of imported products yet we have companies producing these very products locally. Our culture needs to change.

But some of these policies like BUBU are being opposed by important agencies of government like Bank of Uganda who say they are a threat to international trade policies?

I am not an economist like Governor Emmanuel Tumusiime- Mutebile. But what I know is that he wants to protect the shilling through exports. But the only way to increase our exports is by having our local industries doing well.

BoU’s monetary policy report for April says that loan extensions to manufacturing remain weak. Could this point to a notion that your members are defaulting on bank loans?

Commercial bank loans are very expensive in Uganda. We are borrowing at 20% and more yet in other countries rates are much less. The economy is not doing well and so is the manufacturing sector.

Yes, we have new firms coming up but they are struggling. Government should recapitalise Uganda Development Bank to extend cheap credit for long term investments.

In the short term, as Acting ED, where do you want to see UMA?  

We shall do a lot of collaboration with various stakeholders on issues concerning electricity, infrastructure, local content, markets

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editor@independent.co.ug