28 November 2012

Uganda: Manufacturers Ask Govt to Reduce Cost of Power

Manufacturers have asked the Government to reduce the cost of electricity to enable them cut down the cost of production of goods and services.

The chairman of Picfare Group of Companies, Kishor Jobanputra, noted that the high cost of production due to high electricity tariffs was a major bottleneck to the growth of the manufacturing industry.

Jobanputra said following the 70% increase in power cost early this year, Southern Range Nyanza factory pays a monthly energy bill of about sh500m, which he described as unsustainable.

"The cost of production is too high. Now that power is generated from relatively cheap hydro sources, the Government should revisit energy costs, otherwise industrial competitiveness will be affected," he said

"There is also need to continue the VAT concession for the five-year period as provided for under the National Textile Policy to mitigate challenges affecting the sub-sector."

Jobanputra also asked the Government to set up strategies to ensure proper administration of import duty to eliminate the "massive under valuation and declaration" of imports, which undermines the optimal performance of the sub-sector.

"There is need to establish a minimum dutiable value for textile imports at $5 per kilogramme," he suggested

Jobanputra was speaking to Uganda Revenue Authority boss Allen Kagina and MPs on the finance committee who were on a tour of industries in Jinja that are benefiting from government incentives to assess their level of progress and impact on the community last week.

He noted that the total investment of Picfare Group of Companies is expected to hit sh75b by the end of 2012 and sh150b by 2016 with the manufacture of new products such as egg trays, pencils, mathematical sets and toilet paper.

Currently, the company that has a workforce of over 2,000 makes books and garments, including school uniforms and uniforms for the Ugandan army and South Sudan, Rwanda and Burundi police.

"We are still negotiating to supply to supply armies of Tanzania, Zambia and Malawi. We also hope to diversify into mosquito nets, but we need more support," Jobanputra said.

However, the MPs were concerned that out of the 200,000 bales of cotton produced by Southern Range, only 10% is consumed locally.

Earlier, the officials had visited BIDCO oil refinery in Jinja, where they toured the factory before holding a meeting with the company management.

BIDCO managing director, Kodey Rao, explained that since its establishment, the $32m company has increased its production from the initial 300 tonnes to 500 tonnes per day.

He said apart from cooking oil, BIDCO also manufactures cooking fat, soap and jerrycans, making it one of the leading suppliers in the East African region.

But the MPs said remuneration to workers is still poor, with some getting a monthly pay of only sh100,000.

At BIDCO refinery, they noted that some workers lacked protective gear. They also noted that there were few Ugandans in top management.

"We made a policy decision to recruit more Ugandans and many are being trained for bigger responsibilities. We know it is cost effective to employ local people than bringing in expatriates, but the problem is that it is difficult to retain them as many of them leave for greener pastures after years of training," Rao explained.

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