Ggoobi calls for cuts on industrial costs, fight against corruption
The research identifies corruption, expensive commercial loans, regulatory bottlenecks and limited access to domestic private credit among the factors influencing the performance of Uganda’s industrial sector.
The finance ministry permanent secretary and secretary to the treasury, Dr Ramathan Ggoobi. (File photo)
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Uganda must lower the cost of industrial production, expand access to affordable long-term financing and strengthen the fight against corruption if it is to accelerate industrialisation, according to research findings presented by the finance ministry permanent secretary and secretary to the treasury, Dr Ramathan Ggoobi.
The research identifies corruption, expensive commercial loans, regulatory bottlenecks and limited access to domestic private credit among the factors influencing the performance of Uganda’s industrial sector.
Ggoobi, a celebrated economist, presented the findings of his research at a public policy dialogue on his doctoral research at the Uganda Management Institute (UMI) in Kampala on Thursday (October 22).
His presentation titled; 'Determinants of Industrial Sector Growth in Uganda: Empirical Insights on Factor Inputs, Macroeconomic Productivity, and Institutional Governance for Uganda’s Industrial Policy', examined five subsectors: manufacturing, mining and quarrying, electricity, water supply and construction.
The study’s estimates indicate that control of corruption has a positive long-run relationship with industrial growth, with a reported effect of 9.99%. Population growth was associated with an 8.48% effect, while regulatory friction and commercial lending rates had negative reported effects of 4.42% and 3.11%, respectively.
Government backs affordable industrial financing
Senior Presidential Advisor on Political Mobilisation Moses Byaruhanga said lowering production costs and improving access to capital were essential to making Ugandan industries more competitive.
He said government should continue reducing bureaucratic delays and the cost of electricity for manufacturers, adding that Uganda’s industrial power tariffs, although lower than Kenya’s, could be reduced further.
Byaruhanga said the Uganda Development Bank (UDB) was an important source of long-term financing because its lending rates did not automatically rise whenever the Bank of Uganda increased the Central Bank Rate.
“Commercial banks’ interest rates are high, but through the Uganda Development Bank, government is providing patient capital whose rates do not automatically rise with changes in the Central Bank Rate,” Byaruhanga said.
He added that reducing the cost of production would help local manufacturers compete more effectively.
The research also points to the need to improve access to domestic private credit, although its reported long-run effect on industrial growth was comparatively small at 0.32%.
PDM could boost demand for factory products
Byaruhanga said industrialisation also depended on whether Ugandans had sufficient purchasing power to buy the goods produced by local factories.
He argued that the Parish Development Model (PDM), which seeks to increase household incomes through productive economic activities, could help create a market for manufactured goods.
“When people earn income from their investments and the people they employ, they spend on consumption, including goods produced by our factories. That gives industries a market, enabling them to increase production and productivity, expand their operations and create more jobs for our people,” he said.
Musasizi calls for value for public money
Finance minister Henry Musasizi said industrial policy required careful choices because government has limited resources and faces competing demands for public spending.
“Given our limited fiscal resources, the central question is; which interventions will deliver the greatest gains in industrial productivity, jobs and exports for every shilling of public money?” Musasizi posed.
He cited industrial parks, land allocation, subsidised electricity and fiscal incentives as some of the interventions government uses to support industrial development.
Musasizi said Ggoobi’s findings could inform decisions on export promotion, import substitution and improving the competitiveness of domestic producers. He also pointed to affordable credit, price stability, lower compliance costs and reforms to mobilise long-term capital through pension and capital markets.
“Therefore, Dr Ggoobi's research should help us assess both the benefits and the costs of government interventions,” Musasizi said.
He added that the Ministry of Finance would use the findings to inform policy decisions and the implementation of the Tenfold Growth Strategy.
Experts warn against measuring success by factories alone
Prof. Gerald Kagambirwe Karyeija a lecturer at UMI, who reviewed Ggoobi’s presentation, said industrialisation should be assessed by the economic and social value it creates, not simply by the number of factories established or the size of industrial parks.
He said progress should be measured through lasting jobs, workers’ incomes, output per worker, domestic value addition, the growth of local suppliers and exports, while comparing these benefits with the public cost of the support provided.
Karyeija cautioned against treating statistical associations as proof that a particular government programme had directly caused industrial growth.
He also called for greater transparency in selecting firms for public support, publishing the beneficiaries and amounts received, and independently evaluating whether subsidised financing, tax breaks and other incentives deliver the intended results.
Such support, he argued, should be targeted at viable firms facing identifiable constraints, tied to measurable milestones and reviewed regularly. Interventions that fail to deliver should be corrected or discontinued after a fair assessment.
Skills, local suppliers remain critical
Ggoobi’s recommendations also include strengthening technical and vocational education and training through apprenticeships developed jointly with manufacturers.
The presentation links the relationship between formal education and industrial performance to a possible mismatch between workers’ skills and industry needs, highlighting the importance of aligning training with employers’ requirements.
It also recommends digitising licensing and regulatory processes to reduce delays and opportunities for corruption, as well as linking foreign investment incentives to domestic suppliers and strengthening the Buy Uganda Build Uganda policy.