Uganda drafts policy to create more industries

Tuesday November 27 2018

Workers at Pipeline Design and Foam Industries, One of the Plastic recycling plants in Uganda Photo by Morgan Mbabazi

Workers at Pipeline Design and Foam Industries, One of the Plastic recycling plants in Uganda. Uganda is developing a new policy to support industrialisation. PHOTO | MORGAN MBABAZI | NMG 

JONATHAN KAMOGA
By JONATHAN KAMOGA
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Uganda is drafting a new national policy to boost its industrial growth and cut its trade deficit.

According to government officials, the policy will be ready for Cabinet review in January next year

Under the old policy, Uganda’s industry and manufacturing sector’s contribution to the GDP grew 18.5 per cent between 2008 and 2017, well below the targeted 30 per cent.

According to the Ministry of Trade, Industry and Co-operatives, the country’s industrial development stood at 6.2 per cent of GDP in the financial year 2017/18 compared with 3.4 per cent in the year before.

The government hopes that the new policy will increase these figures within a decade.

Minister for Trade, Industry and Co-operatives Amelia Kyambade last week blamed the old policy’s shortcomings on the high cost of doing business in the country.

According to the World Bank, Uganda ranks behind East African counterparts Kenya and Rwanda in ease of doing business.

The government is banking on the Uganda Development Bank to support both local and foreign industries The Uganda Development Corporation as the government’s investment arm; and insurance schemes to safeguard industries will be established.

The proposed policy also seeks to review and strengthen the laws that promote industrial development such as the Industrial Licensing Act, Investment Code Act and the East African Common External Tariff.

The government also wants to increase funding to the industrial sector to promote skills among the labour force and support SMEs.

“It’s time to put money into the industry so we can add value to the raw materials we have and export,” said Denis Ainebyoona, Assistant Commissioner of industry in the ministry of Trade, Industry and Co-operatives.

Attracting investment

Mr Ainebyoona said that with the new policy, the government will prioritise attracting investment to sectors with potential of creating jobs and reducing importation of certain products.

The prioritisation will see value addition in agro processing, tea, coffee, fisheries, extractives, cosmetics, gold and iron and steel.

“Globally, industrialisation has played a key role in the development of economies; and we think it is now time Uganda and Africa stepped up this,” Mr Ainebyona said.

The country wants to tap into different trade agreements that give them access to premium markets like the Common Market for Eastern and Southern Africa, the Africa Growth and Opportunity Act and the new Africa Free Trade Agreement, to sell its industrial products.

Policy experts are also pushing the state to ensure that financial markets work better.

Uganda plans to build about 22 industrial parks to attract investors, but critics say that if the parks are no better serviced than the existing ones, industrialists will still avoid them.

For example, Namanve Industrial Park opened with a poor road network and electricity connection. The park sits in a swamp that requires extra investment to set up a building.

The high cost of doing business is attributed to power fluctuations, a poor transport system, high power tariffs and high interest and exchange rates.
The government has prioritised building hydropower dams and roads in a bid to reduce these cost.

Whereas Uganda has the “Buy Uganda Build Uganda” policy that requires buying from local manufacturers, local industries have continued to suffer competition from foreign ones importing similar products.

The Uganda Manufacturers Association said that some of its members, especially in the cement and stee, are, however, the starting to benefit from BUBU after government directed it agencies to buy from them.

This, the association said, will help individual industrial develop their capacity and the quality of products.

UMA said there should be clear guidelines in the new policy tot protect local producers.

Protection

Makerere University political economist Julius Kiiza noted that the role of the government as a regulator should be seen in both where foreign and local companies should invest and labour protection.

“If we are going to open our economy to foreigners and allow them to determine what our people are paid, then whose government will we be?” Prof Kiiza said.

Former National Planning Authority head Dr Kisamba Mugerwa expressed frustration with government’s lack of implementation of its policies.

Mr Mugerwa said that while he was still at the helm of NPA, government officials frequently deviated from what was planned.

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