How BUBU policy is revitalizing local manufacturing sector
By Our Reporter
When the ‘Buy Uganda Build Uganda’ policy was first mooted in 2014, the architects of the initiative were not only determined to have Ugandans take pride in consuming locally-made goods and services, they were also aware of what the policy would do for Uganda’s poor trade imbalance.
Ms Amelia Kyambadde, the Minister of Trade, Industry and Cooperatives, said if adopted, the policy would enhance consumption of locally produced goods and services by giving preference to them over the imported goods and services.
The government would rake in over US$300 million or a trillion shillings every year if Ugandans were encouraged to consume locally produced goods.
Kyambadde has always had her backers such as the Uganda Manufacturers Association. They say individual consumers usually make relatively small purchases and manufacturers can only speed up production and become more efficient if the government which buys in bulk is compelled to buy local.
But critics of the policy say the campaign can only do better if the private sector which the ministry expects to play a crucial role is supported with friendly manufacturing policies. More critics of the policy say the business market is not driven by passion for home-made products that will only last a short time when better quality imports are available.
Other critics like Bank of Uganda Governor, Emmanuel Tumusiime Mutebile say the policy is against the spirit of the East African Customs Union’s free trade. Mutebile has even called the policy a “selfish economic policy” that can easily derail the East African Country integration progress.
But Kyambadde has always been determined to ignore her detractors saying during the launch of the policy in March 2017, that the government would soon re-align its procurement processes to give preference to locally-produced goods—an initiative that would ensure that close to US$300 million is clawed back.
Two years on since her pronouncement, she came back to the Uganda Media Centre on Feb.26 to brief Ugandans about what her policy has achieved so far. Speaking ahead of the first BUBU Expo, Kyambadde noted that over the last years of implementation, there has been improved capacity of local products and service providers.
She added that Buy Uganda Build Uganda policy is premised on the PPDA Act, 2014, under which amendments are being made to among other things provide for reservation scheme regulations to give force of law to the policy.
Its objectives include; promotion of consumption of local goods and services; promotion of standards to guarantee quality goods and services; provision of capacity building programmes to local suppliers of goods and services.
In the iron and steel sector, for instance, there has been an upsurge in steel manufacturing with 24 steel industries coming on board with an annual installed capacity of 1.7 million tonnes. This is almost double the total installed capacity five years ago, which stood at just 866,000 tonnes per year.
Similarly, there have been marked improvements in the cement industry. Uganda currently has five cement factories producing 4.43 million tonnes per year – an improvement from two million tonnes five years ago.
Kyambadde explains that the exponential increase in capacity for iron and steel and cement has been precipitated by large Government projects including roads, bridges, dams (Karuma dam, Isimba, Bujagali and others) and the planned oil and gas pipeline.
There has been some progress in the textile sector too. The ministry of trade says the country now produces an average of 130,000 bales equivalent to 24,050 tonnes of cotton per year. This has been attributed to an upsurge in the ginnery business around the country.
There are close to 40 ginneries with an installed capacity of close to one million bales with a total spinning capacity of 12.2 tonnes per day.
Trade ministry officials say the yarn produced is mostly consumed locally for production of fabric. Uganda has also markedly improved its weaving capacity of 80,000 metres per day and knitting capacity of 8.2 tonnes per day.
The recent improvement made in the local textile industry has been quite impressive that government security agencies including police, UPDF and prisons are now procuring most of their garments locally from Southern Range Nyanza also known as Nytil Picfare.
The trade ministry estimates that the country could actually earn Shs 6.7 bn if parents purchased locally-produced school uniforms for pre-primary pupils. It could also earn upwards of Shs 190bn from locally-produced school uniforms for primary and secondary school uniforms annually while the Army, Police prisons and UWA uniforms would fetch over Shs 33bn if sourced locally.
According to the Trade ministry, the Uganda National Bureau of Standards (UNBS) has so far supported over 900 small and medium scale enterprises with product certification to improve their chances of accessing the local market; mainly in hotels and supermarkets and some are exporting in the region as a result of compliance.
As a result, there has been increased shelf space of local products in supermarkets as a result of increased shelf space of local products in supermarkets as a result of increased capacity and improved standards. Shelf space for Ugandan products in supermarkets now stands at 40%.
Products range from honey, sugar, detergents, cosmetics, food stuffs among others. Ugandans have taken control of the supermarket business and are largely selling Ugandan products. Examples of such supermarkets include Quality, Capital Shoppers, Megha Standard, Master Supermarket and many other small scale businesses.
The policy is spurring local agro-processing in order to support local farmers; the Government has initiated the agriculture value chain development project to the BUBU policy and reserved US$ 3.5 million for the purchase of local products such as local seed multipliers, local fertilizers and seed dealers and agro-processors.
Officials at the Uganda Manufacturing Association say the BUBU initiative has helped improve productivity in the local manufacturing sector. Previously, some of the industries were operating at 55% of installed capacity but have now risen to almost 70%.
That sentiment seems to be shared by Neville Igasira, the Marketing Manager of Jumia, an online shopping company.
Jumia is renowned for selling high-quality imported products but last year it encouraged our vendors to promote Ugandan-made goods and services so as to dispel the notion that Ugandan products are of poor quality.
Igasira says last year the company encouraged its vendors to market Ugandan products. Igasira says the campaign was a resounding success and Jumia intends to carry on with the campaign this year.
But Dr. Fred Muhumuza, a development economist based at Makerere University, says it is still early to attribute the recent uptake of locally-manufactured goods and services to the inward-looking policy.
“It is not clear whether the Government has deliberately imposed taxes on imported fabric to force the armed forces to buy that which is locally produced,” Muhumuza said, “Besides, the armed forces have been buying fabric even before the BUBU policy was passed.”
Away from textiles, Kyambadde says, the local footwear industry has been boosted by seven medium sized footwear factories and more than 800 micro and small scale footwear entrepreneurs in the country producing about 1.5 million pieces of footwear. Still, she says, shoe production is still at artisanal level.
Within the furniture and metal works, there has also been growth of the construction sector in Uganda which now stands at 33%, thanks to increased capacity and improved quality for local furniture and metal works producers.
As a result, the government departments have started procuring office furniture from Uganda Prisons industries and other suppliers of locally made furniture in accordance with the president’s directive. Some schools are also procuring desks locally.
In the medical supplies/pharmaceutical sector, the National Medical Stores procured medical suppliers worth Shs 156.056bn from local companies in the 2017/18 financial year. In the 2017/18 financial year, the Uganda National Roads Authority awarded contracts worth Shs 3.7 trillion and out of this, contracts worth Shs 450bn (12%) were reserved for national providers.
In addition, a total of Shs 423bn (11%) were awarded to local providers through mandatory sub-contracting by foreign providers. In the energy sector, before the issuance of the guidelines on reservation schemes; 90% of the cables for construction of power lines were imported from China and India.
But at the moment, the Uganda Electricity Distribution Company Ltd reserves the procurement of cables to manufacturing companies in Uganda. In the 2017/18 financial year, UEDCL procured energy equipment worth Shs 1.1bn from local companies.
In the emerging oil sector, the Petroleum Authority of Uganda says local companies have supplied local products worth US$ 37.24 million (Shs 141bn) or 28% of the US$ 133 million (Shs 500bn), which has been spent in the oil and gas sector by the end of 2018.
Ugandans have benefitted by supplying local made foods, beverages, office supplies, drilling and production materials, construction materials and in offering services like catering, transport, security, management, and land surveying, clearing and forwarding, civil works, supplying fuel, conducting environmental impact assessment studies, communication and waste management.
In probably one of the best cases, Kkatt Consult, a Ugandan company, recently partnered with Artelu Eau and Environment, a French company, to provide engineering services during the final stages of construction of Isimba Dam. The Ugandan company was allocated US$900,000 (Shs 3.302 bn), which is 22.5% of the total monetary value of the consulting service contracts.
Similar inroads have been made in the tourism, entertainment and education sectors. Going forward, the trade ministry says the Buy Uganda Build Uganda initiative implementation will even gain more traction in the country if entrepreneurs improve hygiene, packaging, comply with the required standards and formalize their businesses.
Ms Kyambadde says the biggest challenge is the mindset of Ugandans who still think local products are inferior and do not match international standards.
Funding, also remains another challenge for local entrepreneurs to be able to produce the goods to a certain level of standard, she adds.
“There is also a knowledge gap on how to access UNBS, what BUBU means and information about the industry that manufacturers want to develop.”
“These are some of the challenges we have encountered,” she says. But the minister is also optimistic about the future noting that the growth of ICT will boost the initiative by helping Ugandans access some of the services. “We are working hard to bridge the information gap,” she says.
To Kyambadde, Buy Uganda Build Uganda is the highest level of patriotism that we must all embrace as citizens, investors and stakeholders in the Ugandan economy. “ and it will enable us attract more investment and reduce on our import bill.
“It will also help us strengthen our national capacity to undertake major national infrastructural projects with appreciable national content.”