May 8—On May 18th Uganda Manufacturers Association (UMA), the country’s second oldest formal business umbrella is to hold its Annual General Meeting amidst a continued decline in purchasing power in the domestic market.
Current UMA Chair, Amos Nzeyi, will be stepping down and a new team elected, but the latest Stanbic Bank PMI indicates business conditions are improving for the agriculture, services and wholesale/retail sectors.
UMA has a membership of just over 700 companies and institutions of various sizes and involved in a cross-section of enterprises across Uganda. It is the leading lobby for business interests in Uganda. However the AGM comes after a difficult year with the economy growing less than 5% in 2016.
On the other hand, prospects for 2017 are looking brighter as the government rolls out the Buy Uganda Build Uganda (BUBU) policy. When launching BUBU in March, Prime Minister Dr. Rukahana Rugunda said, the government wants to see Ugandan businesses winning at least 40% of the local contracts and orders especially those awarded by public institutions, including government ministries and agencies.
This is also in line with an agreement reached by the heads of states of the East African Community (EAC) last year to favour local suppliers. BUBU is now a high-profile campaign being coordinated by the Ministry of Trade, Industry and Cooperatives.
In 2014, Amelia Kyambadde, the trade minister said, “The policy will give guidance to policy makers to ensure that promotion of the consumption of local produced goods is integrated into their policies and procedures. The policy also aims at giving prominence to local produced goods. This policy will be beneficial to the economy and it illustrates the income that can accrue to different sectors.”
“Government is encouraging the consumption of such locally produced products in preference to imported-like products so that we can sustain and expand growth in many other sectors,” Dr. Rugunda said at the launch.
UMA is not happy that annually, Uganda imports goods and services worth about $7 billion, but only 10% of the cash returns go to local industries. The situation is compounded by the present huge expenditure on modernizing Uganda’s infrastructure, but the bulk of inputs are sourced abroad.
‘On average, industrial capacity utilization stands at just 53% and this is not enough to sustain economic development. Many Ugandans now have low liquidity as well as purchasing power that is attributed to investment in large infrastructural projects being constructed by foreign companies,’ according to the UMA March policy report.
This year, UMA will also be celebrating its 25th anniversary after its revival in July 1992, but many members are not feeling very festive. One owner of a ceramics factory told 256BN, “I am regretting very dearly my decision to take out a loan last year. I had a chance to cancel it early in the year, but a key customer pulled out of a deal soon after I got it and as you know interest rates were not friendly.
“My financial projections in late 2015 have proven to be totally out of step with the situation right now. I have had to lay off workers,” he said.
UMA members are also reeling from the financial calamity that befell such big industrial names as Steel Rollings Mills (part of the Casement Group) and several trading companies last year. Numerous company bosses interviewed by 256BN claimed the government could do a better job in championing local manufacturing.
According to UMA, Uganda generally faces many challenges which have spillover effects on manufacturing . Instability in South Sudan has caused several ripples, but notably a sharp increase in Sudanese refugees and disruptions in Uganda’s main export market. UMA also cite high energy costs, inadequate transportation and energy infrastructure, insufficient budgetary discipline, and corruption inhibit growth in manufacturing, investor confidence and economic development.
The Economic Research Policy Centre, an independent think tank based at Makerere University, says it costs $0.6 more to buy a unit of electricity in Uganda than in countries such as Rwanda.
When it come to the manufacturing competitiveness index, UMA says Uganda ranks the lowest compared to its East African Community (EAC) neighbours, Kenya and Tanzania. In 2016, Kenya averaged 6.8% with manufactured exports at 49% of the total export merchandise while Tanzania’s averaged 7% and 36.9% of exports merchandise. Uganda’s manufacturing performance was 0.5% with 24% of the export merchandise for 2016.
However UMA remains optimistic. In its March report its states that rising private consumption through BUBU and local content policies will also drive growth.
‘We anticipate that these will boost both private as well as government consumption as already seen with PPDA guidelines. Credit expansion, which increased by 16% in February 2015, was seen to have dwindled more than three times in 2016 distressing many manufacturers. It’s anticipated with the advent of Islamic banking alternatives, UDB capitalisation and other credit facilities, there will be growth in 2017’, the report reads in part.
“We can only hope that the government follows up on its promises concerning BUBU, because it will mean upturning a cozy arrangement involving hundreds of millions if not billions of shillings in public procurement. It is going to be war,” a contract manager with a commodity firm told 256BN.