The Observer (Kampala)

13 January 2013

Uganda: Govt Must Play Central Role in Industrialisation

In his New Year message to the nation, President Museveni raises a pertinent question that points to the destiny of this country: indigenous Ugandans are not investing in manufacturing.

And there couldn't be a more striking eye-opener for the new year! To paraphrase Makerere's Prof John Ddumba-Ssentamu, foreign investment can only stimulate an economy, but cannot transform it. For real development to take place, there must emerge an indigenous class of business, administrative and political leaders to sustain the momentum through constant innovation.

The onus, therefore, is beyond the businessmen, who, going by President Museveni's explanation, are not in manufacturing because they don't have the required money. Museveni's diagnosis is partly true; it is not the whole explanation. Of the three leadership categories Prof Ddumba identifies, the primary category to bear the responsibility is the political leadership. This must set the agenda.

What for example, is Uganda's industrialisation strategy? Is it resource-based, light technology, medium technology or high technology? In what ratios can we combine these different levels of industrialisation? Which sectors do we focus on as lead sectors? How do we factor the regional integration variable into this equation? What should be the role of the state in all this?

These and related questions are to be answered by the political leadership, beyond the now-tired 'value-addition' and 'same level of development with Korea at independence', depending on which side of the political leadership one is talking. The path and strategy defined by the political leadership translates into specifics, facts and figures once the administrative/technical leadership swings into action.

Beyond general statistical abstracts, sector-specific, updated business-level investment data are very crucial. Data on such variables as resources, initial capital outlay, technology aspects, projections of returns on investment, break-even period and related minute details. Once this is available, active state participation in the economy and clear legislation are the other pillars on which indigenous businessmen can hold firm to invest in manufacturing.

The state must play the surrogate entrepreneur, in what Charles Handy calls the elephant-flea relationship. Through the public-private partnership framework, the state should take the lead in such crucial areas as initial capital, technology, corporate governance, in select key sectors. The joint investments will be both markets for cottage-level manufacturing and incubation centres for indigenous corporate leadership development, a variable essential for the growth of an indigenous industrialist class.

And if lack of funds be the factor, as raised by President Museveni, the government is better-placed to find the funds as the lead investor, in joint investment with the indigenous industrialists. The isolated project-level funds scattered in MDAs can be centrally pooled into Uganda Development bank to finance Uganda Development Corporation as the vanguard of our industrial development.

Counterfeits are a monster that the political leadership needs to kill first, if we are to see an emerging indigenous industrial class. Uganda has become a counterfeiter's haven, a factor that threatens away genuine foreign investors and suppresses indigenous innovation. We cannot initiate such arrangements as franchise or licence manufacturing from reputable global brands, when the market is flooded with cheap fakes and rejects. Virtually every sector is affected. One possible solution is managing this threat at EAC level, to have WTO-compatible measures against trade in counterfeits.

As industrial magnate Naushad Merali of the Sameer group argues, we cannot develop East Africa by shopping malls, like Dubai with only three million people...these can be employed in the shopping malls. East Africa has over 130 million people. Only industrialisation will save us...!

And the starting point is defining, in specific terms, the industrialisation path that we need to take.

The author is a partner at Peers Consult Ltd

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