Manufacturers in celebratory mood, demand tangible support from government

Every year, the annual international trade fair comes amid different challenges. This year, members of the Uganda Manufacturers Association (UMA) have been complaining about high interest rates and the high cost of raw materials and other inputs.

The usual pomp was on display at the trade fair, which was held from Oct. 4 to Oct.10 - included different designs, colors, numerous types of commodities, crowds of people, new products, new companies among others that were put up by various international entities from across the globe that turned up to showcase their products and services. But beneath the pomp were pensive manufacturers who are worried about the country's low competitiveness.

While many of the exhibitors and business leaders said they were committed to serving Ugandans, create jobs, and earn foreign exchange for the country, they said there were key issues that the government needed to fix to enable them run business smoothly.

Many did not spare even the theme; "50 years of creating wealth and growth in Uganda" - saying it was "too theoretical." They said the government should prioritise fighting counterfeits on the market, subsidizing businesses, control ling inflation and ensuring that manufacturers affordable credit from financial institutions among others.

Positive exhibitors

Richard Kintu, the sales executive at Winning Star General Company, said trade fairs have in the past helped to connected them to new customers.

"We exchange contacts among ourselves for business purposes," he said, adding and many of them call us back for business. Kintu said as importers of electrical materials, the biggest challenge on their side has been the volatile exchange rate.

"Sometimes we are forced to sell at a giveaway price so we can dispose of some of the products because of the high price caused by the depreciation of the exchange rate," he said before urging government to come up with lasting solutions to the problem.

"If the exchange rate could be fixed for some time that would be good," he said.

Lubowa, a sales executive for Kinyara Sugar Works Ltd, said their business was facing the challenge of "speculators" in the market.

"Sometimes we hear that the price of sugar has gone up even when our factory price has not changed," he said. "The public sometimes loses trust in us for nothing. So we don't know what we can do but if government has any solution for that then they should help us."

Lubowa shared Kintu's views saying sometimes they have imported equipment at high costs due to the high exchange rate, which "eats up" their profits.

He said they were confident that showcasing the company's sugar connected them to new potential markets and gave them a chance to hear from their customers. The Uganda Bureau of Statistics recent manufacturers' indices justify manufacturers concerns.

For instance, it (UBOS) recently reported that prices of all manufactured goods increased by 10.6% during the 12-month period leading up to June 2012 from June 2011. Also, in the year ending May 2012, Producer Prices registered an increase of 13.5%, which was blamed on the recent spike in headline inflation and the rapid depreciation of the exchange rate in the second half of 2011.

Dan Muhumuza, the general manager at Shumuk Group, recently argued that since economic volatilities set in last year, the cost of doing business in the group went up.

He said Shumuk Aluminum Industry Ltd (SAIL), manufactures of aluminum household utensils, was experiencing high costs on power, furnace oil and on transport among others.

For instance in April last year, SAIL spent Shs 30 million on power per month to run company activities but the costs had increased by 60% in the second half of the year and at the beginning of 2012.

This he said was "bad news" to both the company and the consumers because the final cost of an item produced would record a higher price.

"We expect the costs to reduce because inflation is reducing," he said, adding "of course we had to keep in business to meet customer demands."

Some hope

2012 has been particularly hard for investors because of the record interest rates that soared to about 30% in recent months.

In an interview with The Independent on day two of the Trade Fair (Oct. 5), Sebagala Kigozi, the executive director of UMA, urged government and other stakeholders to assist manufacturers in doing business.

"We are happy the Central Bank is steadily reducing the central bank rate," he said. "We will be happier if banks do the same on their lending rates."

He said if manufacturers access loans at a high cost, the end user/consumer would be the one to pay the price. "So the high cost of doing business affects everyone," he said.

Most commercial banks announced a cut in their lending rates ahead of the October Central Bank's announcement of the CBR. Most banks set their base lending rates at around 23%. Bank of Uganda data says commercial banks weighted average lending rates had jumped to 26% in August this year from 21%, in 2011. But with the October cuts, manufacturers still say banks have to reduce rates further if their businesses are to be revamped.

Commenting on this year's theme, Sebagala said his members have fulfilled some elements in the theme by creating jobs, wealth for the people and thus enabling them to earn income. "For us that is creation of growth and wealth," he said. "Every time we organise fairs we record more numbers and that proves to us that we are doing a good job."

He said the first fair organised in 1993 only attracted 220 exhibitors compared to this year's, which attracted more than 1,000 including government departments.

Sebagala said the last 19 Fairs have provided a unique platform for marketing products and services through networking and face to face interactions among the manufactures. "They have enabled participants from overseas to introduce new and improved technologies on the Ugandan markets," he said.

The event has also been a revenue cow for the manufacturers' body. UMA reportedly spends over Shs 500 million to organise the event.

According to figures from UMA website, space in both outdoor and halls costs between $80 and $1,050 depending on the size of space for the exhibitor. Combined with the entry fee of Shs 4,500 per person, total revenue soars to about Shs 2 billion.

Going forward, Sebagala said the government needs to partner with the manufacturers and empower small scale businesses to grow. Also important is the need to boost the agriculture sector which provides raw materials for industries.

"If we have these things done we will not be the same in the next 50 years," he said.