Local Content Bill to promote import substitution - PSFU

On May 20, this year, Parliament passed the Local Content Bill 2019. The bill, which is currently awaiting formal assent by President Museveni is expected to support all efforts towards entrenching import substitution. Mr Gideon Badagawa, the executive director of Private Sector Foundation Uganda (PSFU), explains the benefits of this bill to the private sector and economy. Below are the excerpts:

What does the Local Content Bill 2017 that has just been passed by Parliament entail?
The major objective of this bill is to maximise value-addition and job creation through the use of local expertise, goods and services, businesses, and financing in all undertakings where public funds are used.

Currently, about 75 per cent of our national budget is focused on public procurement and until this law is put in place, 60 per cent of taxpayers’ money has been externalised through civil works contracts, purchase of goods and services as well as the procurement of international consultants.

This bill therefore, is intended to ensure that certain goods and services are exclusively procured from within Uganda as well as require that civil works are subcontracted to Ugandan firms. This intervention will help build local capacities but also drastically reduce the externalisation of Uganda’s meagre resources.

Which goods and services does this law talk about?
Some of the goods and services which shall be procured exclusively from Uganda and supplied by the local companies and individuals, include coffee, cotton, maize, mangoes, onions, groundnuts, eggs, oranges, lime, wheat, beef, potatoes, sunflower, cassava, tomatoes, flowers and live animals.

The list of services that shall be procured locally, include personnel transportation, security, banking, services, foods and beverages, hotel accommodation and catering, human resource management, stationery, and office supplies, emergency response services, customs clearance, fuel supply, land surveying and public works, in accordance with the threshold determined by the Minister.

Other services under this category, include clearing and forwarding, crane hire, locally manufactured construction materials, in-land transport, the supply of locally available drilling and production materials, environmental impact assessment, ICT services, waste management, and textiles products for the army, police, school, hospitals.

Also other services that shall be procured locally are the legal services, insurance services, accounting services, sugar/sugar products, animal/human food, agricultural inputs, scholastic materials, steel products, plastic products and electrical cables.

Why is this bill useful to the private sector and the economy at large?
The passing of this bill is expected to support all efforts towards entrenching import substitution and ultimately export promotion. This is now demanded by the new order. By ensuring that the goods and services are manufactured and delivered to the customers by Ugandans, and by ensuring that subcontracting to Ugandan contractors in civil works is undertaken, the law shall go a long way to assure Ugandans of jobs, increased capacity utilization in industries and therefore output, skills upgrading, and finally, increase our capacity to export while using our own raw materials.

The bill is also intended to stimulate backward integration, as well as push to attract more foreign exchange receipts for Uganda. The overriding objective of this bill is to make our country more self-reliant with a varied range of opportunities. We want to export more while reducing those goods previously imported.

This will help us narrow down the trade deficit currently at $3.2 billion (Shs12trillion). This law shall further the private sector increase its capacity utilisation by assuring them of a sure and stable market. The challenge for the private sector will then be to measure up to the standards, quality, and volumes required by the local markets.

This is where we need to work a lot with Uganda National Bureau of Standards (UNBS), Uganda Industrial Research Institute (UIRI), and National Agriculture Research Organisation (NARO) to verify standards, undertake research, incubate firms, and commercialize production. The law is also expected to help technology learning across the productive sectors.

How should the private sector get ready to seize the opportunity offered by this bill?
The private sector should get organised by sector in supplier groups, farmer cooperatives, trade associations, construction consortia, among others.

In short, we must get organised to assure that government and all our customers of quantity, quality, and standards required by the market, whether public or private. The advantage of this bill is that it emphasizes market-driven production, in line with PSFUs Lead Firm Model.

We believe the bill shall also go a long way to assure Ugandans of jobs, increased capacity utilisation in industries and therefore output, skills upgrading, and finally increase our capacity to export while using our own raw materials.

Many bills have been passed. Why should an ordinary Ugandan mind about this?
Ideally, the overriding objective of this bill is to make our country more self-reliant with a varied range of opportunities. We want to export more while reducing those goods previously imported. This will help us narrow down the country’s trade deficit currently at $3.2 billion (Shs12 trillion). The bill is intended to stimulate backward integration, as well as push to attract more foreign exchange receipts for Uganda.

As the umbrella organisation of the private sector, what role are you going to play to see that this law is implemented to serve its purpose?
PSFU is committed to supporting through mobilising and sensitising the different sectors about the provisions of this bill and the guidelines thereof. This is to be done with the support of the Public Procurement and Disposal of Public Assets (PPDA).

We also need to identify sector potential and develop linkages within these sectors by developing sector value chains. And of course not forgetting organising the private sector into cooperatives that can be able to negotiate markets but also work with lead agencies to help meet market standards and volumes.

What will be the government’s role in this case?
What we want from government is to develop the capacity of institutions such as UNBS, UIRI and other incubators to support enterprises on product design, packaging, standards, as we continue to compete with other products that are imported. The private sector will always be reminded that the Local Content Bill looks at preferential schemes and not protectionism.

Ensure that all accounting officers including Chief Administrative Officers appreciate the object of this bill and comply with its provisions and guidelines.