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The story of Tri-Star Apparel, the blind and the evil elements

By Vision Reporter

Added 13th November 2006 03:00 AM

Today, Africa is the continent still lagging behind other continents in terms of socio-economic transformation and development.

Today, Africa is the continent still lagging behind other continents in terms of socio-economic transformation and development.

Today, Africa is the continent still lagging behind other continents in terms of socio-economic transformation and development. In the last 500 years, European societies have transitioned from peasant, feudal societies to middle class, skilled working class societies. Africa is still stuck with quasi-feudal, peasant and comprador (agent of foreign interests) bourgeois ideas and way of life. Africa, in general, as well as Uganda in particular, are very rich in terms of natural resources. However, the balkanization (political fragmentation) of Africa and conceptual confusion make the utilisation of these natural resources for the transformation of our society very difficult.
In some of my previous speeches and writings I have pointed out the strategic (big) bottlenecks that have caused Africa to lag behind. One was the failure to give freedom to the private sector exemplified by Obote’s Common-Man’s Charter of 1970 that confiscated the shares of private companies in order to “distribute wealth” and Amin’s uprooting of the Asian Ugandan entrepreneurs in order to “empower the indigenous Ugandans” economically.
These were big fallacies because you do not distribute nothing (if you do not produce, you have nothing to distribute) and in order to empower the Blacks, it was necessary to actually empower the Asian entrepreneurs that had already started the entobo, penjo, entaango (nucleus) of modernisation rather than disrupting them. What Obote and Amin achieved was the collapse of the entobo (the nucleus) of the small modern sector. The consequence was severe shortages of consumer goods (“essential items”), the magendo (smuggling) and the kusamula (speculation). With the collapse of the nucleus of modernisation (the small commercial–industrial sector), came the shrinking of tax revenues for the Government. The Government could, therefore, neither pay the public servants adequately nor could they maintain the infrastructure (roads, schools, hospitals, etc). The teachers, therefore, started parasiting on parents through the PTA extra-charges on parents not to mention coaching etc., inflation spiralled to 240%. This made implementing projects in Uganda impossible because within one year the cost of a project would go up by 240%.
The National Resistance Movement had been in resistance to the dictatorial killer regimes ever since 1971. By the time we took power in 1986, we were not only accomplished fighters, but we had also studied the problems of the economies in Africa. Although ideologically many of us were radicals, we had realised the mistake of disrupting the private sector.
Therefore, starting with 1987, after consultations with the World Bank and IMF, we decided to apply certain macro-economic stimuli in order to assist private sector-led recovery and growth. The stimuli selected were the following:
  • Control inflation by only spending the money you raise in taxes rather than using the printing of paper money to finance Government expenditure;
  • Liberalize the foreign exchange market by allowing those who earn dollars to keep them in their own external accounts, thereby making the Uganda currency a fully convertible one;
  • Liberalize the marketing of coffee, cotton, etc., by providing competition to the Government Marketing Boards;
  • Liberalize the housing sector by abolishing the Rent Control Board;
  • Liberalize the transport sector by allowing competition to the Government bus companies (UTC and People’s Buses);
  • and others.
    The impact of these macro-economic stimuli on the economy was dramatic.

    The following factors can highlight some of our achievements:
  • Ever since 1991, inflation rate has been about 5%;
  • The annual rate of GDP growth has been about 6.5%;
  • The housing sector has boomed, the transport sector has boomed;
  • The supply of consumer goods exploded (both imported and locally produced);
  • Tax collection has gone from 4% of GDP to 13.5% of GDP;
  • Smuggling has reduced;
  • Foreign currency black market has stopped;
  • Speculation and hoarding of goods have stopped;
  • and others.

    In addition to the macro-economic stimuli, we also did physical rehabilitation of the infrastructure, especially roads. The liberalisation brought in private telephone companies in the telecommunications sector – telephone lines jumped from 28,000 in 1997 to 1.5 million now. The rehabilitation and reform of the physical infrastructure and telephone communications sectors made contact among Ugandans easier and cheaper. I can now ring my farm manager in Kisozi, from Yumbe. During the campaigns, I could ring my supporters in Kampala at any time of the day and, even the terrorists can easily ring the Daily Monitor on mobile phones for interviews from their hideouts in southern Sudan and northern Uganda.
    Therefore, the Movement has caused Uganda’s minimum recovery through the liberation of the private sector from the constraints imposed on them by the regimes of Obote (1970) and Amin from 1972 onwards.
    In so doing, we have solved one of the strategic bottlenecks that have kept Africa backward. We led the whole of Black Africa in doing so. By 1987, the IMF, World Bank and privatisation were “dirty” words in Black Africa. However, having studied the situation for almost 20 years, since 1965, our correct conclusion was that liberalisation; privatisation and private sector-led growth were the correct elements in the way forward.
    Although our economy rapidly recovered, reaching 10% growth of GDP in 1994, the other strategic bottlenecks were still in place. Some of them are:
  • A small market on account of political balkanization;
  • A small urban population compared to a large rural population that produce similar goods and cannot, therefore, buy from each other;
  • Lack of access to external markets on account of protectionism by the countries that were pretending to help us;
  • Lack of access to the regional markets because of the political balkanization already referred to above and a slow pace of integration;
  • Low purchasing power of the population of Uganda due to the cumulative effects of all these factors.
    The problem of small internal markets is a problem for businesses in the whole of Africa because the African market is fragmented by the artificial borders.
    Recently, almost all the African leaders were in China for the very strategic Sino-African Summit. I hope everybody there drew the necessary conclusions. China covers a land area of 3 million square miles and has got a population of 1.3 billion people. All these are under one political authority. It is these two factors – the size of the land area and the size of the population that helped China to resist against the imperialists (Americans, Japanese, British, Portuguese, etc.) and have now helped her to transition into a world power. Africa is almost 4 times bigger than China. However, she is disorganised by the colonial borders; hence, the problem of small markets.
    The Movement, from the very beginning, was aware of this problem. Point No. 9 of our ten-point programme advocated for regional integration in Africa. When we came into power, I told our Western friends (Americans, Europeans, etc.) as well as our Eastern friends (Chinese, Indians, Russians, Japanese, etc.) that instead of talking of “aid” they should talk of “trade”. Eventually, they listened. Assisted by our sister, Rosa Whittaker, working for congressman Wrangel, but, eventually, Assistant Minister for Trade of the US Government, I pushed this line. Fortunately, President Clinton agreed. He was assisted by the brothers of the Black Caucus, Congressmen Wrangel, Donald Paine and others. Senator Bill Frist, the Republican, as well as others were also very useful. President Clinton opened the USA market to the least developed countries in Africa for 6,500 manufactured products – tax free, quota free!! Unbelievable but true!
    Previously, all the so-called “donor countries” and even our Eastern friends had a practice where they would impose a low tax if we exported raw-materials to their countries, but they would impose a very high tax if the Africans were so arrogant as to want to process the coffee into instant coffee or cocoa into chocolate. These were called escalating tariffs. I opposed this parasitism and hypocrisy. Fortunately, President Clinton, convinced by Rosa Whittaker and the people she mobilised, agreed in October 2000 to open their market to us in the form of the African Growth Opportunity Act (AGOA). When President Bush took over, he maintained the policy. I salute them. The Europeans followed suit with Everything but Arms (EBA).
    The useless English newspapers in Uganda, The New Vision and The Monitor, had no space to educate Ugandans about this huge victory of the African people. The US market is US $11 trillion. The entire African market is only US $550 billion. How could anybody who claims to be a leader fail to see this? What are such people for, when it comes to leadership? Within Africa we are struggling for uniting the African market (COMESA, EAC, etc). China, eventually, due to my pressure, allowed us to export 191 products (tax free, quota free) to their market. In the recent summit, they have increased them to 440 products.
    With this gold mine, given our raw materials of coffee, cotton, tea, fish, leather, etc, I have started struggling to attract investors to come to Uganda to manufacture goods of the quality that could be accepted in the USA and the European Union (EU) markets. In spite of resolving the problem of markets, there are other problems that the political class and Government officials take long to solve so as to assist the private sector to export to these markets:
    lEasy access to land;
  • Cheap money; low transport costs;
  • Low electricity costs;
  • and others.
    The present shortage of electricity, caused in part by the Sixth Parliament, against my entreaties, is a typical example.
    In spite of all these bottlenecks, we attracted some credible groups that could help us to take advantage of the USA, EU and Chinese markets I fought so hard for, assisted by Rosa Whittaker. Some of the brother African leaders also championed this cause. We salute them. One of the investors we attracted was a Sri Lankan textile exporter known as Kumar. He had about 215 factories in Sri Lanka employing 10,000 people. We sent there our people to look at these factories. They confirmed that they were, indeed, there. He came and I offered him the old site of the Coffee Marketing Board (CMB) which he transformed into a first class garments factory.
    In the export business to the Western economies, the importers must come and inspect the factory first so as to ensure that it is clean, the machines are the right type, workers are in hygienic conditions, etc. Otherwise, they will not make you eligible to export to the USA or those other markets of the West. He trained our girls into first class garment workers. The factory started in December 2002. Today they have exported 3,110,600 pieces of garments to the USA, earning US $12 million. This is tremendous. My aim was to break the psychological inferiority complex that our people cannot produce products of high quality that can enter the snobbish markets of the West. Our children, organised by the Sri Lankan, did it.
    Nevertheless, apparently, Mr. Kumar, the original Sri Lankan, had problems of finances in his Sri Lankan operations. When I came to know this, I was not bothered. Uganda was not married to Kumar.

    The fundamental gains were three:
  • The Sri Lankans and Rosa Whittaker had identified for us importer companies in the USA;
  • First class machinery had been procured to make the garments; and
  • Our children had been trained to make the garments.
    Kumar had not used much of his money. He had used loans from Uganda Development Bank (UDB) amounting to US $3 million to pay for labour, electricity, import fabrics (ejoola), from China, etc.
    As I have already said, this has already earned US $12 million. Of course, those who inherited the operation from Kumar have not paid back the loans of UDB and are still importing fabric from China instead of making it here which was the original plan and the profitability is still eluding them. That notwithstanding, out of the eight or so problems involving the export of garments to the USA, we have now solved four:
  • We have got buyers in the USA (this is the ‘king’ factor);
  • Trained garment workers;
  • Acquired good machines; and
  • Built a good centre (factory building) and textile school.

    The unresolved issues are:
  • Making the fabrics within Uganda from our cotton which will make the whole operation cheaper by eliminating much of the transport costs for the fabrics from China, Mombasa and Kampala and back to Mombasa, then to USA – it will now only be the transport from Kampala-Mombasa-USA;
  • Get another owner to replace Kumar who will put in his own money rather than relying on the present Government guaranteed loans from UDB;
    lWork with Kenya and the Private Sector Foundation to lower the out-bound transport costs to Mombasa by eliminating a lot of inefficiency on the road, railways and the port;
    land others.
    I reject the position of those who want us to remain in bondage by arguing that Uganda cannot export garments from our cotton; that we should continue to export unprocessed cotton for which we get US $1 per kilogram instead of US $15 when it is transformed into garments. If I make profit by getting US $1 per kilogram why do I, inevitably, make a loss by getting US $15 per kilogram when I add value to it? Some people talk of high transport costs. How is unprocessed cotton transported out? By magic? Why do we still make profit on cotton (a raw material)? The Ministry of Finance, Planning and Economic Development officials must help the private sector to solve all outstanding issues of our investors so that they solve the teething problems of a newly industrialising country. Therefore, those spreading misinformation about Tri-star should desist. Their conduct is un-professional and wrong.
    Initial problems for pioneer companies are inevitable and expected. Why is it that the European countries subsidise their businesses, including farmers? The Europeans, the Americans, the Japanese, etc., have been subsidising unprofitable farmers for the last 60 years since the end of the 2nd World War. Why doesn’t the “well informed” Monitor newspaper educate the Ugandan public about that iniquity? Or is Daily Monitor’s mission to cripple us on behalf of somebody? Uganda will not subsidise the manufacturing firms.
    However, we shall assist them to get over the initial hurdles. The question to ask of Tri-star and of all our other manufacturing firms is: “Will you be able to make profit after you are assisted to get over the teething problems?” If a manufacturing enterprise cannot make profit after the energy, transport, high interest rates problems have been solved, then we can abandon it in good conscience. Otherwise, I am determined to end the modern slavery of Uganda of exporting raw-materials and earning only 10% of ex-factory value of the finished products out of those raw-materials.
    I salute Tata group for, finally, coming to manufacture instant coffee out of our coffee. Our processed coffee has, indeed, already entered the huge Chinese market. We should make other products out of coffee such as liquor, medicine, fuel, etc. We should also make other products from cotton such as textile, garments, vegetable oil, animal feed, gun powder, etc. Fish has already moved in the right direction and so has tea. The rest must follow.
    The writer is the President
    of the Republic of Uganda





    The story of Tri-Star Apparel, the blind and the evil elements

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