By Benesa Edrine
When the National Resistance Movement (NRM) took power in 1986, its first years, between 1986 and 1992, the policy debates and actions were dominated by restoring security, economic reconstruction and stabilization.
Post 1992, shifted gear to dedicated actions aimed at actualization of NRM’s number 5 of the NRM 10 Point Program; “Building an independent, integrated and self-sustaining economy”. It was envisaged that an independent, integrated and self-sustaining economy would stop the leakage of Uganda’s wealth abroad and thus protect democracy, national security and national unity. And in 1992, President Yoweri Museveni articulated thus;
“There is no way that Africans can emancipate themselves from poverty and backwardness without carrying out an industrial revolution. As long as we continue exporting cheap, raw, primary commodities, our present situation will not change (Museveni, 1992: 208).”
And; “Our economic programme hinges on reviving and diversifying production, both in the agricultural and industrial sectors, with a view to creating a well-integrated, self-sustaining economy … this particularly involves restoring traditional export crops, and also expanding non-traditional crops such as beans or simsim. (Museveni, 1992: 45)”
The opportunity for Uganda is ripe. Domestic and local investors looking to establish investments in Uganda have the opportunity to benefit from the now expansive African market enabled by the African Continental Free Trade Area (Africa has 1.3 billion people and is projected to have 2.5 billion people by 2050), access to quota-free and duty-free market in Europe under the Everything else But Arms (EBA) arrangement and over 6000 products listed under the African Growth and Opportunity Act (AGOA) arrangement.
The key legal and policy frameworks supporting the acceleration of industrialization in Uganda
Uganda’s quest for strong industrial growth and development is on an upward trajectory. The latest data sets suggest that Uganda has over 5,000 operational industries in various sectors. Jinja remains Uganda’s industrial hub with over 100 industries, more than double the number of industries it had in its heydays. The National Development Plan III, has three programmes directly linked with industrialization: Manufacturing; Innovation, Technology Transfer and Development; and Private Sector Development.
The foregoing is buttressed by key legal and policy frameworks;
- National Industrial Policy of 2020; a framework for Uganda’s Industrialization, Employment and Wealth Creation targeting value addition and increasing proportion of manufactured goods in both exports and GDP and competitiveness.
- National Trade Policy of 2007 – supporting productive sectors of the economy to trade, domestically and internationally.
- National Strategy for Private Sector Development, 2017/18-2021/22 – aims at supporting the development of a competitive private sector.
- National Export Development Strategy, 2017/18-2021/22 – targets value addition for export markets.
- Buy Uganda, Build Uganda (BUBU) – targets domestic consumption of domestically produced commodities.
The NDP III (2020/21 – 2024/25) specifically aims at “enhancing household incomes and improving the quality of life of the population by holistically focusing on resource-led industrialization for export-led growth”. The aspiration is to increase the industrial sector’s contribution to GDP to 31 percent, up from the current 27.4 per cent; the share of the labour force in industry to 26 percent, and the manufactured exports as a percentage of total exports to 50 percent by 2040. Indeed Uganda’s Vision 2040 states that a strong and competitive industrial base is important to create employment, advance technology and a resilient economy. The theme for the national budgets for the recent past financial years has been: “Industrialization for Job Creation and Shared Prosperity” and the theme for the Budget for FY 2021/22 was “Industrialization for Inclusive Growth, Employment and Wealth Creation.”
A deep-dive into Uganda’s industrialization so far.
Sustained peace and security have provided the basic anchor for Uganda’s economic growth and development. From 1986 to date, the Government has ensured peace and security in all parts of the country. Also, Macroeconomic stability and economic growth resilience have played a major role. Uganda has witnessed sustained macroeconomic stability underpinned by low and stable inflation averaging five per cent.
The volume of production for the manufacturing sector increased by three per cent for Calendar Year 2020. The main contributors to this increase were Bricks & Cement (34.1%) which was mainly due to a 35.7 per cent increase in the volume of Cement & Lime Production.
Textiles, Clothing and Footwear contributed 23.9 per cent, which was mainly due to an increase in the manufacture of Textiles & Garments (98.4%). Chemicals, Paint, Soap & Foam Products contributed 14.8 per cent and that was mainly attributed to an increase in the production of Chemicals & Pharmaceuticals (38.3%).
In 2017, the share of manufactured items to total merchandise exports in the East African Community (EAC) stood at approximately 22 per cent. In addition, the contribution of Manufacturing Value Added to the GDP of EAC was 7.9 per cent. In the same year, the share of industry to total employment stood at 7.5 per cent. The main value-added products exported included articles of apparel and clothing, tobacco, iron and steel, essential oils, plastics, and pharmaceutical products.
Currently, the industrial sector’s contribution to GDP is 27.6 per cent; with mining and quarrying contributing two per cent, manufacturing 15.4 per cent, electricity 1.3 per cent; water 2.3 per cent and construction 6.6 per cent.
The economy has also registered consistent growth, expanding from UGX 64 trillion in the Financial Year 2010/11 to 128 trillion shillings in the Financial Year 2018/19.
The oil and gas factor
Uganda is inching closer towards commercial extraction of its vast oil and gas resources. In April 2021, Uganda signed three key agreements to kick start commercial production of oil. These are: The Tariff and Transportation Agreement (TTA), the Host Government Agreement (HGA) and the Shareholders Agreement (SHA). These developments are expected to unlock about USD 20 billion in investment when the Final Investment Decision is concluded, with positive spillovers in other productive sectors of the economy.
Regional Industrial Development agenda
In 2017, the share of manufactured products to total merchandise exports in the Common Market for Eastern and Southern Africa (COMESA) region stood at approximately 24 per cent, while the contribution of Manufacturing Value Added to GDP of COMESA region was 10.7 percent. In the same year, the share of industry to total employment stood at 10.3 percent.
The EAC demand for manufactured goods is growing annually at 16 percent. Products for which the EAC provides a large number of opportunities, given their demand trends include, but are not limited to, vegetable oils, pharmaceuticals, iron and steel products, fertilizers, cement, cotton apparel, leather footwear, and heavy petroleum. This offers the possibility of enlarging production of these products within EAC.
Industry Value Added as a share of GDP is steadily improving across most of the Partner States with the exception of Kenya. This performance is expected to significantly increase given the intensified efforts to stimulate industrialization such as encouraging import substitution, promoting development of potential value chains and the Buy Uganda, Build Uganda (BUBU) policy. As a pioneer of the EAC, Uganda is committed to the adoption of the EAC Industrial Development Policy and has included key aspects of the EAC Industrial Development Strategy in this Policy, where relevant to the Ugandan context. These include:
Implementation of the revised EAC Common External Tariff (CET);
- Supporting of Ugandan exporters within the block to maximally benefit from these revised tariff structures;
- Upgrading of Micro Small and Medium Enterprises (MSMEs) by promoting strategic dialogue between the Public and Private sector; and
- Supporting targeted industry value chains with widespread linkages to productive sectors within the region.
The value chains highlighted in the EAC Industrialization Policy include; Iron-ore and other mineral, processing; Fertilizers and agrochemicals; Pharmaceuticals; Petrochemicals and gas processing; Agro-processing; and Energy and Bio-fuels.
The EAC has also developed strategies for cotton, leather, automotive, fruits and vegetables, pharmaceuticals and extractive and mineral value chains.
EAC Partner States agreed to maintain taxes on goods originating from COMESA and the Southern Africa Development Cooperation (SADC) until June 2021. This preferential treatment is aimed at supporting and boosting local production through import substitution, as well as protecting locally manufactured goods against similar subsidized imports. The sectors expected to benefit include: textile and apparel, leather, edible oils, tiles, processed tea, cocoa and coffee, meat and meat products, steel articles and iron and metal products.
The East African Community’s Vision 2050 targets leveraging industrialization for structural transformation and improved intra-regional and global trade. Specifically, it targets increasing manufacturing contribution to GDP by 10 percent.
African continental industrial opportunities
Intra-African exports are largely processed or intermediate goods; whereas African exports to the rest of the world are predominantly unprocessed produce and extractive commodities. This provides an opportunity to expand the industrial base in Uganda to increase on the level and scope of value addition for effective participation in the African Continental Free Trade Area (AfCFTA).
In March 2018, Uganda and other African countries signed the African Continental Free Trade Area (AfCFTA) Protocol which aims to create a single continental market for goods and services. The AfCFTA is a large market with a GDP of over 3.4 trillion dollars. The potential impact of the AfCFTA includes boosting intra-Africa trade, manufacturing exports, job creation and enhanced incomes.
At the regional level, Uganda is a member of the Common Market for Eastern and Southern Africa (COMESA), East African Community (EAC), and the Southern African Development Community (SADC) Tripartite Free Trade Area (TFTA).
The TFTA, in particular, follows a developmental approach to regional integration and is anchored on three pillars, namely: market integration, infrastructure development, and industrial development. The objective of the Industrial development pillar is to address supply side and productive capacities in member countries.
In thinking about how Uganda can best leverage industrialization for growth, it is important to consider the global environment in which industrial strategies are being implemented.
In five to 10 years, Uganda will be more industrialized country, with industries and industrial parks equitably distributed throughout Uganda. We should see the shift to more high-value, high-tech industries, more high-skill jobs, increased transfer of knowledge and skills, increased number of domestic investors, and many more.
With the guidance of President Museveni, the Uganda Investment Authority has acquired approximately 8.5 square miles of land in the four regions of the Country for free from local governments to establish 25 fully serviced industrial parks across the Country. Seven industrial parks are already operational. The Investment Authority also operates a one-stop centre that offers quick facilitation and aftercare services to domestic and foreign investors.
In line with the Investment Code Act of 2019(amended) clause 12, the Uganda Investment Authority implements expansive incentives to local and foreign investors.
As the country, therefore as we gear towards the 62nd independence anniversary this week, special focus should be drawn towards the urgent need to address the unemployment question, especially among the youth, with specific reference to the recently released census figures. Industrial development has been earmarked by the NRM government under President Museveni as a unique vehicle to derive mass employment for the unemployed.
The writer is the Deputy Resident City Commissioner Nakawa Division.
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