Building Uganda's industrial future: Case study of Kapeeka Industrial Park model

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OPINION

By Nnanda Kizito Sseruwagi

One of the model industrial parks in Uganda is the China-Uganda Liaoshen Industrial Park in Kapeeka, Nakaseke District. About 80 different industrial establishments are spread over 5.2 square kilometres, with each sitting on a minimum of 20 acres.

The name of the park is a combination of “Liao,” from Liaoning Province in northeast China and “Shen” from Shenyang, its largest city, where the chairman of the park, Mr Zhang Hao, comes from. The conceptual planning of the park was made by the China Northern Architectural Design and Research Institute Co., Ltd, and President Museveni laid the foundation stone in 2015.

In its design, it is a fully serviced industrial park with good road and water networks, onsite electricity and a one-stop centre for all business services. It has supporting offices and facilities, including commercial offices, leisure and entertainment areas, and recreational and sporting facilities like football fields and tennis courts.

The industrial park is designed mainly for investments in Agro-processing, building materials, textiles, light industry, assembling of household appliances and logistics and warehousing. Most of these are planned to undertake manufacturing using mainly local raw materials and supply both local and export markets. Where certain raw materials cannot be sourced locally, investors are free to import them to support their manufacturing process.

The idea behind this industrial park, which was conceived in 2013, is to support the economy through value addition. This vision is already being achieved, with textile factories producing quality merchandise exportable to Europe as well as serving the local market. There are also a number of factories that are into food processing, e.g. maize milling and making snacks out of dried fruits.

The government is working to ensure there is a market for the goods produced from the park. It has signed trade agreements with China, COMESA, Europe and other trade blocs. The agreement between Uganda and China is critical since it helps the country to export products from Uganda to China without tax. Such incentives are in place to enable manufacturers to expand and produce more to supply the markets. These are the market opportunities that should be presented to investors to attract them to start businesses in Uganda.

As the country develops its industrial capacity, there is a need for the government to invest more in road infrastructure, extend and ensure reliable power supply to the industries, and build sewage and water facilities. Water is specifically identified as a challenge because Uganda does not have enough capacity to supply all plants, and sometimes, the electricity also does not meet the industrial needs. Therefore, the government should address the challenge of an unstable power grid.

The managers of the industrial park are keen to ensure that local communities benefit from its opportunities. For instance, most of the local materials are purchased from Ugandans. Most of the people employed are also deliberately recruited from communities near the park. There are also, of course, indirect jobs created in the supply chain, e.g., people providing housing facilities, food, and other utilities.

At the start of the project ten years ago, few Ugandans could manage the technology of the park. However, with time, there has been skills transfer and more people are now taking on skilled work in the industries. More Ugandans are already doing better in the marketing and management field, where they started taking part from the commencement of the park.

With time, more Ugandans will understand the business and also take control of factory activities. The tile maker, Good Will factory, has already trained thousands of Ugandans on how the factory works, and the more Ugandans get skilled, the fewer the number of Chinese instructors. The ultimate goal is to have the factories fully run by locals.

The park’s parent company is Zhang Group, an entity that had existed in Uganda for about 20 years by the time the park was launched. The group brings together four enterprises: Hash Security, Airang Hotels and Restaurants, Smartec Hisense products and Liao - Shen industrial park. It invested over $400 million in the park and created employment for tens of thousands of people.

The story of this (these) industrial park(s) is promising because of several reasons, one of which is the fact that it is modelled after similar and successful parks in China. When China’s growth trajectory was taking off, the government invited foreign companies from Japan, the United States of America and Germany to start factories and equip the local people with skills. After about 10 years, local Chinese were able to run their factories. This is the hope for Uganda, too – achieving skills transfer and domestic ownership of the commanding heights of our economy.

The writer is a senior research fellow at the Development Watch Centre.