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Businesses are not looking for cash bailouts but guaranteed markets

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Added 29th July 2016 02:05 PM

H.E the President must be applauded on his stance to rescue local suppliers by clearing domestic arrears, commitment to support suppliers to South Sudan market and the resolve to have forces procure uniforms locally.

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Gideon Badagawa is the executive director of the Private Sector Foundation Uganda

H.E the President must be applauded on his stance to rescue local suppliers by clearing domestic arrears, commitment to support suppliers to South Sudan market and the resolve to have forces procure uniforms locally.

By Gideon Badagawa

Uganda’s import bill today stands at a whooping 6billion USD while the export capacity is merely $2.8b. With a trade deficit of more than $3b, Uganda must quickly implement the Local Content Policy or ship out.

H.E the President must be applauded on his stance to rescue local suppliers by clearing domestic arrears, commitment to support suppliers to South Sudan market and the resolve to have forces procure uniforms locally. While this is recognized it will be impactful if contracts signed with foreign firms, always carry a clause that obligates them to work with local companies through subcontracting to help build local capacities.

With this policy such companies should also be required to source products (that meet standards requirements) from the local market. The argument has been that Ugandan products especially in the construction sector are substandard. But we know that the standards of steel from our steel industryhave been widely accepted by the Japanese and South Korean contractors at the Nile Bridgein Jinja. Why would such steel not be accepted by the Chinese doing the Entebbe Express way, Karuma Dam or the Standard Gauge Railway? For information, the 60 year old Owen Falls dam was constructed using Tororo Cement and today Isimba dam is using Tororo Cement. What is true however is that, cement is being imported from source countries of these contractors. How then do we avoid local firms getting distressed?

Uganda must wake up to this reality. While these projects will last 5 years or less, the indigenous local companies and other Foreign Direct Investments (FDIs) have the duty to create employment and anchor this economy for a lifetime. Regional markets are closing to our Local companies. For instance, if sugar is not being stopped from entering Kenya, Democratic Republic of Congo (DRC) is stopping Steel and Cement exports from Uganda or Tanzania is stopping our Rice exports. South Sudan has now completely restricted market access. Our companies have borrowed to produce and sell to these markets.The sugar factories are not looking for bailouts but the implementation of the zoning policy and a guaranteed market

Government is therefore duty bound to provide market for the local producers using the huge public procurement budget which local companies here have contributed to heavily through tax revenues. Ugandans should not mobilise resources from within and have foreign companies externalize it. It should be known that nearly 80% of our national budget (Shs 18 trillions) is accounted for in public procurement (goods, services, civil works). Why should this amount of money be simply expropriated through foreign contractors? And we talk about lack of production? Why must we import goods and services that Ugandans can produce and which we know, conform with the minimum standards requirement? From where does Government expect to fork a whooping Shs 6 trillion to settle debts if we do not support local companies? Government needs to share its medium term procurement plans under the Medium Term Expenditure Framework (MTEF) so that the local suppliers (contractors and service providers) can plan for this market.

Along with this, is for Government to recognize the huge potential this country has in minerals e.g iron ore, oil by products, highly trainable labour etc. If the steel companies , for instance were assured of a ready internal market they would increase their capacity to add value to this iron ore to make steel and supply to local projects. If Hima Cement, Uganda BAATI, Southern Range Nyanza, Picfare, Uganda Clays, Nice House of Plastics, Quality Chemicals etc, shared in the public procurement plans and budget for Ministries, Departments and Agencis (MDAs), Local Governments, Schools, Health Centers IVs, Uganda National Roads Authority (UNRA) (Bridges), Kampala Capital City Authority (KCCA)(Flyovers, City roads), etc and the market is assured for them over the medium term without compromise on quality and standards, then enterprises would plan to improve technology, expand investment and train labour to meet the needs of the market.

Power tariffs are still high because investments have not expanded to use the redundant power (nearly 200MW) which we are paying for dearly. Remember this power cannot be stored! Can this be the solution to reduce our tariff structures in the medium term? Uganda National Bureau of Standards (UNBS) has given a standards mark for many of ourproducts and the argument that Ugandan products are substandard can therefore NOT hold water.

We have a very good opportunity in Government programmes like Universal Primary Education (UPE), Universal Secondary Education (USE), tertiary institutions, the forces, hospitals etc. But schools still import scholastic materials yet we have Picfare, Oscar industries, Nice pens, the Chalk factories etc here in Kampala.

Southern Range has the capacity to supply Uniforms to all the forces, today; it only operates 60% of its capacity. All these products are of world class standards and we applaud our local entrepreneurs. But even if such products were of sub optimal quality, should we not send specifications to manufacturers so that they begin to work towards the requisite standards and be ready to supply in the medium term. Kenya has taken this approach and they now supply locally to all these international projects including the Standard Gauge Railway (SGR). But have Ugandan companies been exposed to the required standards specifications? No at all! Buy Uganda Build Uganda (BUBU) is the magic bullet for Uganda and until it is triggered, Uganda’s aspirations to get into the middle income status will remain blurred.

Uganda’s preconditions for takeoff into the middle income is to build local capacities totalize local raw materials, increase jobs, expand investments, increase output, grow the tax base and generate exports while reducing the import bill to save the very scarce foreign exchange. It is this approach that will stabilise Uganda’s economy. All accounting officers must therefore be required to implement it as provided for in the Public Procurement and Disposal of Public Assets (PPDA) amendment act 2014 and the BUBU policy.

The writer is the executive director of the Private Sector Foundation Uganda

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