Govt stuck with stunted local start-up factories

A technician shows of some the new machines procured by the Uganda Industrial Research Institute at Namanve Industrial Park near Kampala recently. PHOTO/STEPHEN OTAGE

What you need to know:

  • UIRI boss Prof Charles Kwesiga says most entrepreneurs they train lack capital to hire skilled manpower, and buy the appropriate technology to set up their own factories.

The Uganda Industrial Research Institute (UIRI) says it is stuck with several local start-up industrial projects that have failed to mature and stand on their own without extra government support. 
The UIRI executive director, Prof Charles Kwesiga, said in a recent interview that they are stuck with some start-ups they started incubating as far back as 2005. 
He said the start-up projects have failed to grow into self-sustaining modes because of lack of capital to finance their own factories, hire staff and buy equipment.
UIRI is the government’s agency for incubating home-grown start-up industries. 
“The incubator helps someone who wants to get into business to a point where they can be self-sustaining, and are able to enter the world of industrialisation and stand alone and have a product in the market and start realising some revenue,” he said.
Prof Kwesiga said when they train entrepreneurs to the level of beginning to set up their own factories, the biggest roadblock to most of them is the finances to hire skilled manpower, and buy the appropriate technology.
He said at this point, it doesn’t make sense to abandon the entrepreneurs and allow the whole project to flop. 
Prof Kwesiga said instead, UIRI now enters into agreement on profit-sharing or rental arrangements until the entrepreneur gets enough money to set up their own factory.
“One of our longest entrepreneurs [Premier Dairies Ltd] has now secured a plot in Namanve Industrial Park, where they can now set up their own factory. Another, Livara, is now ready to start building their own factory after we started from scratch, but are now selling on Amazon,” he said.
Asked what else hinders entrepreneurs from breaking the progression ceiling, Prof Kwesiga cited uncoordinated planning of the industrial parks that government is setting up in different parts of the country, where different utility companies set up their own infrastructure at leisure.
“Most of the equipment the investors install in their factories is very sensitive to dust and yet the industrial parks do not have tarmacked roads, piped water and Internet connection,” he said.

Women protest
Prof Kwesiga’s revelations come in the wake of a recent press conference by the Uganda Women Entrepreneurs   Association Ltd (Uweal), announcing the launch of a campaign to raise Shs25b for their own business incubator in Namanve. 
The initiative aims to help women-led enterprises thrive.
Dr Barbara Ofwono Buyondo, the Uweal chairperson, said with more than 4,500 members, they have failed to secure slots to be trained by UIRI. She said the available slots at UIRI were forever booked and yet government, through the Ministry of Trade, has heavily invested in UIRI to develop home-grown products. 
Since its establishment in 2006, UIRI says it has incubated 60 companies, most of which are cottage industries dealing in products such as juice, leather, textiles, cosmetics, dairy processing and mushroom production, among others. 
Prof Kwesiga, who first introduced the idea of business incubators in the country, challenged government to create special banks dedicated to lending loans to Small and Medium-size Enterprises (SMEs) in order to break even. Current commercial banks’ lending rates range anywhere between 18 percent and 25 percent, and when repayment of a loan takes more than two years, the borrower pays twice the amount borrowed.
Dr Buyondo said their centre is meant to help women access processing technologies, local, regional and global markets, among other things, through processing, warehousing, packaging, entrepreneurship training and ICT support.

Some of the companies incubated by UIRI

Olive Kigongo’s Amagara Cosmetics
They started operation at the Uganda Industrial Research Institute (UIRI) in 2011, but had to carry out research on skin products for two and half years. They have a business plan. 
UIRI approved their products but when they produced and sent to the market, they discovered manufacturing is not a smooth journey.

Ms Kigongo did not foresee the mindset of Ugandans who feel that imported goods are better than locally manufactured ones. Much as the products made in Uganda are of good quality, they usually shun them. The cost of manufacturing in terms of utility bills, and transport are very high. 

They import raw materials from Kenya yet the latter also manufactures similar products, which come very cheaply since they are near the coast. 

Therefore, it becomes difficult to compete with Kenyan-manufactured cosmetics.
Any imported raw materials are taxed, borrowing is very expensive and if it was not because of the facility at UIRI, they would have closed shop by now because they require close to $500m (about Shs1.7 trillion) to set up their own factory.

Samuel Nuwagaba’s Paper production
The company has been housed at UIRI for four years now. It manufactures packaging paper bags from pineapple waste, banana peelings, and waste cotton. The idea was hatched from the demand for packaging paper in the market. The entrepreneur has not left UIRI because of lack of machinery for production. He needs a beater, extractor and autoclave machines but they are very expensive.

The situation has been worsened by the availability of the cheaper option of the kaveera because the local market is still using it. He says he requires about Shs300m to purchase the equipment.
Mr Nuwagaba says if he could access a grant, he would be able to produce enough paper bags for the market and move the company to its own home.

Carol Twahirwa - Mega Milk and Mega Youghurt
Ms Twahirwa joined UIRI in 2014, but her business was adversely affected by the Covid-19 pandemic, especially when schools and academic institutions were closed. She says schools were her biggest clients. The entrepreneur says she is still with UIRI because she does not have equipment such as pasturizers, homogenisers and milk tanks, which require close to Shs2.5b. She acquired a packing machine for yorghurt and milk, which cost her Shs700m.

Much as she has acquired land for her factory in Namanve and has money to start construction, her biggest challenge is money for the said equipment. 

Ruth Namara’s Heritage Bread
The company started operations at UIRI in 2016. The entrepreneur says she has faced more challenges in the current Covid-19 pandemic because they depend on imported wheat. When wheat prices go up, they have to increase the price of bread. Ms Namara says they have a challenge of their bread not being accepted in some supermarkets. She has not left the UIRI facility because they need to acquire land and equipment.

Prudence Ukonneka - Bella Wine
She is among the successful entrepreneurs whose business now own its own premises. She says she joined UIRI in 2008 to help her with product development. She had challenges with production and packaging. 
She was advised to grow slowly until she won the trust of the banks, which financed her production unit in bits. 

Today, UIRI is her consultant. They have been advising her on improving the quality of packaging, labels, the quality of wine and it has gained acceptance in all the East African countries.

Other companies still at UIRI are those involved in leather and textile manufacturing, meat and beef processing, cosmetics production, fruit juice processing and cow horn products, among others 

Companies incubated by UIRI since 2006 and are operational 

Name and Products
Amour Group Company    Cosmetics
Amari Naturals Company Ltd    Cosmetics
Aleosha Organic Natural Health Products    Cosmetics
Blue Swan Ltd    Production Of Toiletries & Laundry Products
Buhara Tailoring & Handcraft Group    Textiles And Weaving
Beso Investments Ltd    Leather Processing
Bugweri Youth & Women Tailoring & Textiles Association    Tailoring & Textiles
Divine Mercy Investment Ltd    Production Of Cosmetics
Excel Hort Consult Agribusiness Incubator    Tailoring
Ikirah Education Centre    Cosmetics And Laundry Products
Jimtex Pet World Ltd    Production Of Dog Antiseptic Products
K-Roma (U) Ltd    Wine And Fruit Juice Production
Kabeihura Farmers Ltd    Diary Processing
Karubuga Dairy Farmers    Diary Processing
Katiba Traders Co. Ltd    Potato Diary Processing
Kigezi Highland Beverages Limited    Water Bottling
Kalangala Women And Youth Group    Textiles And Soap Making
Kashekuro Banana Innovation Platform    Honey Processing
Kirigime Development Sacco Limited    Briquette Processing
Katebe Farm Ltd    Livestock And Crop Farming /Distribution
Luuka CommuniTy Development Group    Cosmetics & Briquette Making
Maziba Fruit Wine Producers    Wine Production
Mopha Beauty & Skin Care Ltd    Cosmetics
Mima Quality Flour And Supplies    Agro-Processing
Mushroom Training Resource Center    Mushroom Research, Processing And Training
Nyakihanga Fruits & Vegetable Growers Cooperative    Juice Processing
Oribags Innovations  (U) Ltd    Paper Processing
Rwot Omara Women’s Group    Peanut Butter Processing
Rukarara United Youth Project    Palm Oil Production And Laundry & Cosmetics Processing
Scoya Blessing Ltd    Peanut Processing
Task Group of Companies    Production of Cosmetics And Laundry Products
The Good Hair Collective    Cosmetics
Yildi Enterprises    Tea & Essential Oil Processing
Your Choice Agro Processors    Peanut Production
Amagara Skin Care Products    Cosmetics
Atcg Solutions    Dna Sequencing Services  
Afrimash    Mushroom Cultivation and Processing
Acklean Investment Ltd    Cosmetics
Brentec Vaccines    Production of Chicken Vaccine
Capital Logistics & Procurement Ltd    Bakery 
Candle Light Holding Co Ltd    School Chalk Production
Derekorp Limited    Juice Processing
Del Agro    Diary Processing
Grand Edge Uganda Ltd    Diary Processing
Kits Wood Ltd    Carpentry 
Kata Ochards General Suppliers Ltd    Juice Processing
Kenroyal Enterprises    Wine Production
Lanic Enterprises Ltd    Paper Processing
Lechem Bakery    Bakery
M/S Premier Dairies (U) Ltd    Dairy Processing
Nyowe Ventures Company Ltd    Cosmetics
Ngoya Investments Ltd    Diary Processing
Obene Jaramogi & Sons Tororo (U) Ltd    Diary Processing
Oel Kimara Dairies Ltd    Diary Processing
Spencer Holdings    Meat Processing
Sam Paper Products        Paper Processing
Shamma Confectionery Ltd    Bakery
Trade Masters (U) Ltd    Bakery
Tasty Boo & Beverages Ltd    Juice Processing
Tropicana Foods and  Beverages Ltd    Diary Processing

About UIRI

The Uganda Industrial Research Institute (UIRI) traces its roots to the East African Federation of the 1970s, as a precursor of the then East African Research Services Organisation (EARSO), which was headquartered in Nairobi, Kenya.
EARSO served as a regional research and development institution for Kenya, Tanzania and Uganda. In 1977, when the East African Federation was disbanded, EARSO also collapsed. Kenya formed the Kenya Industrial Research and Development Institute. Tanzania followed suit with the establishment of the Tanzania Industrial Research and Development Organisation, while Uganda created UIRI.
Prof Charles Kwesiga the UIRI executive director,  says in 1987, President Museveni negotiated with the Chinese government to construct the UIRI campus in Nakawa and in 1997, construction started. The Institute was completed in 2000 and handed over to government. 
UIRI is meant to be a world-class research and development institution that supports the country’s nascent industry. Prof Kwesiga says one of the biggest challenges the institute faces is lack of funding to help the incubatees with financing for startup machinery, salaries for workers and other overhead costs before their enterprises can stand on their own.
Asked what plan they have to provide such capital, Mr Ramathan Goobi, the Permanent Secretary in the Ministry of Finance, says as government, they are coming up with a parallel financing and banking system for startups because most financial players are too commercial in nature. He says it is difficult for incubatees to use money from commercial banks to test their ideas. 
“We are capitalising Uganda Development Bank (UDB) for large incubates and for small ones, we are passing money through Uganda Microfinance Support Center. For UIRI in particular, we created the innovation fund which supports someone to experiment their ideas,” he says
He adds that when the idea becomes commercially viable, the incubatee then borrows from UDB where government will automatically acquire shares in such an enterprise. If the entrepreneur is not interested in partnering with government, they pay off the loan and buy off the government shares.
Mr Richard Mubiru, the manager, enterprise promotion and growth at the Ministry of Finance, says government has instructed Enterprise Uganda to establish a national business development network to guide government investment in supporting incubatees because they all have different needs. He observes that some of them may not require cash, but assistance in strengthening their internal management systems. 
He says some that have grown, have undertaken ambitious expansion projects and failed to meet the targets they anticipated and they end up collapsing. He says the national business development services network encompasses incubation facilities because they have to instill discipline among the incubatees.


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