Manufacturers battle same issues

Kampala

Nothing seems to have really changed from last year. If anything, the situation has only grown worse than what was anticipated a year ago. It even gets worse in a landlocked country like Uganda, where manufacturers believe they deserve better from the government — yet going by the current economic situation that touts manufacturers as the engine of the economy, one will not be wrong if they say they were treated to a raw deal by government.

In the last eleven and half months, the shilling heavily depreciated against the dollar affecting purchase of raw materials. Manufacturers paid more in taxes because of the high dollar rate the tax body imposes. Inflation hit the roof - causing lower demand for goods and services.

With all that happening within a space of about eleven months — manufacturers seem speechless. And when asked to sum up the year, all they say is: “It’s been a year of mixed reactions.” Meaning: the economic and social terrain has not been conducive enough to allow them feed the market as they would have wanted, a kind of uncertainty manufacturers hate to operate in.

“As manufacturers in private sector, what hurt us most were the power shortages,” the Uganda Manufacturers Association, Policy Officer, Godfrey Ssali said in an interview. “This affects production, translating into losses in production of goods and services.”

With Bujagali Power Project likely to be launched in February of 2012, after severally rescheduling of earlier deadlines, manufacturers fear footing extra costs in generators and fuel, as they head into the new year.

Working with Uganda’s Private Sector Foundation (PSFU), the manufacturer’s umbrella body continues to engage whoever cares to listen and help (lobbying and advocacy) in this regard. “Numerous negotiation and meetings have been going on both day and night with the government (head of state, parliamentary committees) and line institutions such as PSFU, UEPB, UIA, NEMA, KCCA, UNRA, UMEME, CAA, URA and many others,” Mr Ssali said in an e-mail interview.

As the Uganda Bureau of Statistics compiles figures showing specific contribution of the manufacturing sector to the economy, manufacturers believe they would have done much better save for perennial issues such as: power outages, bad roads, inflation, high cost of fuel and the depreciating shilling.

Strides in addressing obstacles
However, manufacturers and industrialists have made great effort in reducing Uganda’s import bill by producing and supplying what was previously being imported from abroad - particularly Kenya, India and China.

This has mainly been in agro processing as well as steel and iron sector, where a lot of previously imported items are now locally produced and supplied to the market.

With the aforementioned challenges, the manufacturing industry in terms of quality and standards is fast catching up. Going by the UMA policy officer, it is even exceeding Kenya’s in some specific items, particularly agro processing.

Although in terms of cost of production, Kenya is doing much better because Uganda is a land locked country; therefore, its cost of production tend to be much higher due to the long distance from the sea, lack of efficient and fast moving cargo trains, as well as under utilisation of water transport on Lake Victoria and other water bodies in the region.

Unlike Kenya, Uganda seems to come short in terms of government’s commitment in areas of funding and implementation of issues critical to manufacturing and the private sector.

Kenya’s government, for instance, is at the fore front of finding new markets, promoting trade and investment through export processing zones for its manufacturers — a factor that the manufacturers’ body thinks is not evident in Uganda yet. This is supported by the fact that government on many instances comes up with policies that affect the sector without the manufacturers’ input.

Responding to how manufacturers can be competitive: Mr Ssali says: “The tired rhetoric that ‘‘the private sector led, people centered, trade liberalisation, open up, privatisation is the best’’ shouldn’t simply be common political statements but should be implemented by the government.”

Improve infrastructure
Like Mr Gideon Badagawa, the executive director of PSFU, says, the government ought to be at the forefront of developing critical sectors like energy, roads, rail and water transport—and with that investors will be more than happy to invest in the country.

Dealing with corruption, taking care of Non Tariff Barriers and availing finance/credit to the private sector at low interest rates, according to the manufacturers will help the country shrug off competition from Kenya and other economies that supply the local market with commodities that otherwise can be manufactured locally.

2012 focus
Going into the new year, manufacturers will lay more emphasis on harmonising standards for the most commonly traded good and services across the EAC boarders, lobbying for the reduction or complete removal of non-tariff barriers, streamlining the market entry and access into other EAC countries and advocating for wide roads to ease transportation of goods.
However as manufacturers, through its association—UMA pushes for the interests of its members, it will be hoping that the fuel crisis stabilises.

What manufacturers would want to see in 2012
“Fuel crisis this year has been unbearable. We have suffered high cost of fuel. We have been hit by shortages and all these affect the supply and distribution of raw materials and finished products needed in the market,” Mr Ssali says. “This has adversely affected Uganda’s manufacturing and industrial sector that tried to rely on diesel to run their generator sets.”

For that the manufacturers want reduction on the tax of diesel or they should be availed with tax free diesel to run their manufacturing plants. This will mitigate the losses that the manufacturers say is not only unbearable but has piled to billion of shillings.

“Quantities and figures for the losses incurred by manufacturers and industrialists haven’t yet been summarized. But our loss ranges from high fuel costs to run and maintain generator sets, high transportation costs, and loss of products that were in the production process as power goes on and off,” the policy expert said. But their new year message is clear: “The private sector (the manufacturers) can only be competitive and attractive to investors if the key tenets like energy and transport are perfectly in place.”

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