Why Ugandans must support the local content campaign

Workers in the spinning section of Nytil Picfare factory in Jinja last year. For Uganda to attain middle income status by 2020, local investments and production must be supported to create jobs and income for Ugandans. PHOTO BY STEPHEN OTAGE

What you need to know:

If we must attain the middle income status by 2020, all Ugandans must support the campaign to develop local content. All countries that have transited to middle income status have supported public and private investments to expand in order to provide jobs, pay taxes, and drive exports, Gideon Badagawa writes.

Uganda has targeted to be middle income by 2020.
Enhancing growth and income through investments must be driven by the private sector.
To do this, investments must be supported to expand in order to provide jobs, pay taxes, increase savings and drive exports. All countries that have transited to middle income status have traded this path.
Uganda’s target is to double its income within the coming three years from the current Gross Domestic Product of $25 billion (Shs89.5 trillion) to about $45 billion (Shs161 trillion). On average every Ugandan is expected to be earning $1,040 (Shs3.7m) then, up from the current $780 (Shs2.8m).
For this to happen, internal capacities to save, invest and generate incomes must grow. But how does this happen? While it is appreciated that government has negotiated markets outside the country, Uganda has not generally and significantly benefited from these markets.
Why? The challenge has been the lack of organised value chains from production to markets.

Market driven production
Our philosophy at Private Sector Foundation Uganda (PSFU) and I believe for our economy, is to promote market driven production rather than product driven marketing. The latter is unsustainable.
The question is: What does the market want and what capacities do we have to satisfy these requirements?
Ostensibly, for any investment to establish and sustainably grow there must be an assured market.
Most of the time external markets are not assured, and we have seen this with the South Sudan market, the East African Community market itself or even African Growth and Opportunity Act market.

Knowing the game
Such markets can only be assured if a trade agreement is secured and signed off. For any business enterprise, a market forms a bigger part of its business plan.
A business will be viable and profitable if they know what to produce, how to produce it and where to sell it. The biggest market any government can assure its citizens is the local one.
The argument goes that until the local market is assured, Uganda can never take off. And this has happened in several countries against the principles of the World Trade Order under World Trade Organisation.

Uganda is only a late comer! Once we have an assured local market, investments will grow faster and we will all be able to better support our economy.
The appeal, therefore, is for all government ministries, departments and agencies including the local governments, especially the accounting officers, and procurement professionals, to understand and appreciate the rationale for and guidelines under the local content policy.
Many times good policies are let down by individuals who are entrusted to implement such policies.

Buy Uganda, Build Uganda policy
Government has recently launched a policy to support buying of locally made goods and services – the Buy Uganda, Build Uganda (BUBU) policy.
The idea is to work with and support industries to grow. The challenge though is twofold; whether the entire government machinery can be rallied behind this programme and two; whether our business enterprises can quickly work on and improve internal capacities to produce and enhance standards to fit within the market requirements.

Need for competitiveness
While government or for that matter any other entity or individual may want to support local production by providing market, they will only do so for those that are able to up their game and meet market expectations by way of volumes, standards and timeliness. It is these three facets that will spell our competitiveness as we build capacity to take advantage of the regional/expanded markets.
Many of our industries are producing fast moving consumer goods with a few in steel and others in building and construction materials.
Contractors (including those sourced from outside the country), schools, hospitals, hotels & restaurants, security forces, and so on, are all spending significant budgets to source these products, most of them from outside the country while we all watch.

Forex repatriation
A lot of foreign exchange is flowing out of this country while local production continues to crumble. When goods such as uniforms, scholastic materials, steel or cement are sourced from within the country, we stimulate industry through backward integration and so increase the capacity of our people to earn through jobs and purchasing power increases to further support industry.
It is this approach that will help usher Uganda into the middle income status.

The PSFU is already moving to work with all institutions that can support this capacity development programme, especially for small and medium enterprises.
We need partnerships from government, the business community and development partners. We are also urging that businesses that establish must always register if they shall benefit from this local procurement scheme. No public tender can invite informal entities to bid for supply of goods, services or consultancy work. Our local manufacturers must know this and plan better.
The private sector should also work with the Public Procurement and Disposal of Public Assets Authority to simplify the bidding processes.
Bidders especially the small enterprises must understand these processes to be able to take advantage of this scheme and I am happy this is already beginning to bear fruit.

Assurance needed
Most of all government needs to reassure local enterprises that they shall be paid on time in order not to constrain business cash flows. This has been one of the biggest challenges in public procurement, but for which again, commitment has been made by the Secretary to the Treasury to have it resolved. The Local Content Bill is being discussed and the private sector is making its input.
We all now need to support this policy and have it effectively implemented as we move to a middle income country.