What Devki’s $500m project reveals about Uganda

_______________

OPINION

By David Mukholi

On Sunday, President Yoweri Museveni and Kenya’s President William Samoei Ruto inaugurated the construction of a $500m Devki Mega Steel project in Kayoro village, Tororo district.

Dr Narendra Raval, a Kenyan industrialist, is the investor behind this huge project, which aims to boost steel production in the East African region.

As development projects in Uganda and neighbouring countries boom, steel demand is increasing, guaranteeing a steady market.

This project will not only support ongoing development initiatives but also create employment opportunities. It is estimated that approximately 15,000 jobs will be available.

It is not only in Tororo, but Raval is also planning to invest in an iron ore refinery in Kabale district.

Once it is up and running, it will not only produce steel, but also create jobs. It is estimated that an additional 16,000 jobs will be generated.

For a country that was once on a growth trajectory and disrupted by war, political instability and bad governance, this shows that Uganda is getting on the right track.

That a Kenyan decides to invest in Uganda is something to note. Investors like Raval do not put their hard-earned money in troubled places.

They invest where there is stability and good business prospects. His Tororo project is a vote of confidence in Uganda as an investment destination.

Back in the 1960s, shortly after independence, Uganda had investors who set up industries and businesses that supported the economy.

Jinja was more attractive to them because of its proximity to power and transport links; that is how it became an industrial hub.

As the country was on a promising course, the politicians spoiled the party. It first started with the 1966 crisis, in which then prime minister Apollo Milton Obote abrogated the Constitution and toppled president Sir Edward Mutesa.

The political showdown was not good for business; it resulted in the declaration of a state of emergency in Buganda. This restricted movement, which affected lives and business.

Amidst the contestation for power, insecurity increased. Although there are no reports of businesses and investors who left the country, the deteriorating political and security environment was worrying and caused uncertainty, which is a disincentive to investors. Potential investors most likely went elsewhere.

Then came policies like the nationalisation in 1969, a threat to the private sector, which scared investors. The 1972 expulsion of Asians during the reign of Idi Amin followed.

The move was calculated to economically empower Ugandans, but instead plunged the country into economic chaos.

The Asians went away with the capital and entrepreneurial skills, triggering economic disintegration.

Besides the economic collapse, Amin’s reign of terror, characterised by gross human rights abuses, was antithetical to a good business and investment climate.

Worse still, the government hardly had any strategies in place to resuscitate the ailing economy.

The comfort and pride were that the economy had been handed over to Ugandans. However, they failed to do what the Asian did for several reasons; insecurity and political instability were some of the hindrances.

In those days, it was not safe to move. It was not safe to have money or be seen as having it. Also, movements were impeded by bad roads and the breakdown of the transport sector.

From 1970 to 1979, the economy shrank from $1.02b to $1.64m.
Following the fall of Amin, there was another spate of insecurity and political instability as political struggles ensued.

However, the removal of Amin raised little hope, and some positive bits were registered, and the economy rose briefly to $4.2m as recorded in 1982. But it went on the downward slide again, and by 1986, when the National Resistance Movement (NRM) took power, it was at $3.6m. Today, it is estimated to be at about $61.3b.

When Devki Mega Steel comes to Uganda, it is aware of Uganda’s potential and is motivated by the security and stability. In addition, the investor has established that there is transport infrastructure to get to key markets in the regions.

The road from Tororo to Nairobi and onwards to Dar es-Salaam is good, as well as to Bujumbura, Juba, Kigali, and to western Uganda, the route to the western Democratic Republic of Congo. Roads are one of the key elements that make it easier to do business in a country.

Uganda intensified road construction by increasing funding from sh398b to sh3,442b (3.4 trillion) in the 2015/16 financial year. Since then, the budget has remained high, enabling the development of major trunk roads that now connect to nearly all of Uganda’s border points, thereby opening access to wider markets.

Also, for a good business environment, Uganda had to invest in power generation. Devki, like any other industry, operates on electricity. Although industries collapsed in the 1970s due to poor entrepreneurship, insecurity and political instability, there was also erratic power supply. The only power-generating Owen Falls Dam was in disrepair and would not drive the industrialisation with the 60MW. Today, Uganda generates more than 2,000MW.

The improved electricity is driving industrialisation and has enabled the running of several industrial parks, including Namave, Luzira, Kapeeka in Nakaseke, Mbale and Jinja.

The once industrial town of Jinja is waking up, now hosting the Kiira Motors plant. Due to insecurity after the fall of Amin and the early days of the NRM, investors found it safer to locate factories and businesses in Kampala, where security was better. Today, the story is different; investments are across the country.

Devki Mega Steel’s multimillion-dollar investment follows others in Uganda. There is a $50m cassava starch processing plant commissioned recently in Namasagaali, Kamuli district. The investor, Dr Mathias Magoola, revealed that his partner had raised $150m to invest in several projects in Uganda.

There is also the $5.6b oil fields and pipeline project in the Albertine Graben, nearly completed with first oil expected sometime next year.

These developments and others not only give Uganda hope, but also tell its long journey of recovery. They show a country that once fell into despair but is now steadily rebuilding. Insecurity has given way to stability, political turbulence to predictability, and sound policies have helped the economy regain momentum.

However, some threats have to be averted. Corruption is a big one that has to be dealt with. Public administration inertia is another leading to procrastination, delaying decisions and project implementation.

X-@dmukholi1 dmukholi@gmail.com