Buying local by force of law

By Agnes E. Nantaba

Is the push to enforce new `Buy Uganda, Build Uganda’ policy good for business?

As Uganda’s manufacturing sector grows, local producers have hatched a policy to compel the government, through its agencies, to buy locally made products.  Dubbed ‘Buy Uganda Build Uganda’ (BUBU), the new policy aims at enhancing consumption of locally produced goods and services through according them preference over the imported equivalents. The move has, however, drawn criticism from some who say a policy to compel pride in local products is not necessary if quality standards are met.

The policy is a boost to ‘Proudly Uganda’ campaign that was launched by PSFU in 2013 with the aim of ensuring that Ugandans commit to local products by increasing demand for local goods and services. The advocates claim it will ensure that existing jobs are kept and new jobs are created.

The pushers of the new policy; including the Ministry of Trade and Industry, the Private Sector Foundation Uganda (PSFU), and the Uganda Manufacturers Association, say initiatives towards encouraging the purchase and use of Ugandan products that have been in development for more than eight years must finally come to fruition.

Ssebaggala Kigozi, the executive director of the Uganda Manufacturers’ Association, says since individual consumers make relatively small purchases only, manufacturers can only speed up production and become more efficient if the government which buys in bulk is compelled to buy local. He said this is the only way the objectives of BUBU can be achieved.

“Goods bought in bulk locally provide quick capital that could be ploughed back into the business to increase efficiency and timely production of the required goods,” Kigozi says.

Improved performance

Kigozi says factories are mushrooming and expanding which are signs of tremendous improvement. Official statistics also indicate that over the last couple of years, Uganda’s manufacturing and industrial sector has positively grown from 8.9% of GDP in 2007 to 26.1% based on data released in February 2012.   Kigozi adds that many Ugandan manufacturers are committed to producing quality products and have maintained their reputation for decades. To him, therefore the BUBU policy is a confirmation to consumers that they can consistently rely on Ugandan made products.

However, Fred Kakongoro Muhumuza, Senior Manager Financial Services Inclusion Programme KPMG says the business market is not driven by passion for own made products but quality and standards. According to him, many buyers are hesitant to buy Ugandan products that will only last a short time when better quality imports are available.   “BUBU can only be viable if investment is geared towards product development to boost quality and attract sales. The advocates of the policy should focus on issues of availability and accessibility of quality products,” Muhumuza says adding that a policy to compel local pride in own products is not necessary if quality standards are met.

But the Uganda National Bureau of Standards (UNBS) Executive Director, Ben Manyindo, dispels concerns of quality of local products since Ugandan manufacturers have the capacity to produce quality products.

Manyindo’s organisation is responsible for product quality certification scheme and certifies the quality of products and grants the manufacturer a permit to affix the UNBS quality mark either on the product itself or on the packaging.

“The mark is an assurance to the customer that the product conforms to Uganda standards and is of good quality,” says Manyindo who adds that, to ensure production of quality goods, traders are advised to seek guidance from the standards agency for certification of process and systems.

But, as some manufacturers testify, the attitude of buyers to local products is not uniform. Some, like David Ssentongo, a mechanic at Wheels Motors Garage in Kampala, are happy with some local products. Ssentongo is particularly happy with the quality of batteries made locally. He maintains that a range of batteries have for long been imported into the country but the quality of Uganda batteries has always overshadowed them.

“Uganda batteries are made suitable for all kind s of vehicles basing on international standards. It is very rare for professional drivers and car users to prefer imported batteries over the locally made Uganda batteries,” he says.

In contrast, Margaret Muwonge, a producer of knickknacks, says penetrating the local market remains a big hurdle.  She says she has traversed most supermarket chains with her peanut butter, eggs, and mushrooms, with limited success.

“Some claimed my products would not sell while others lambasted my production capacity stating that I could not sustain supply after listing the products,” she told The Independent. Only one supermarket told her to increase her production capacity and when she did; they gave her a trial run of six months only. Her greatest fear now is that her products might fail as they are not accorded visible and eye catching space on the shelves like the case is for imported products. She also complains about the mode of payments which also delays and makes it hard for her to effectively maintain production. “The reason they give is that my products; despite them being cheaper, are not as fast moving as the imported peanut butter that some customers prefer,” she says.

With such challenges and many more, the manufacturers now want the government of Uganda and partners to enforce the `Buy Uganda, Build Uganda’.

Focus on quality

The Minister of Trade, Industry and Cooperatives Amelia Kyambadde says, however, that the amount of locally made products accepted in the big local stores had increased considerably after closely supervising them. She says Ugandan products now make up about 40 per cent of goods in supermarkets. While launching the BUBU policy, however, she also said it will work best for local manufacturers who produce and supply high quality products that earn them a good reputation from procuring entities and consumers. She said quality goods with the recognised standard mark will, in addition, attract the regional and international market.

“This can as well help suppliers win international contracts that are more lucrative,” Kyambadde said. “The reason some consumers associate with imported products is the lack of trust in the very own Ugandan products. BUBU is here to hearten all traders, distributors and manufactures and ensure that only high quality goods are supplied to the market,” she added.  But other officials like Moses Ogwal, who is the Director Policy Advocacy at PSFU, say BUBU can only work if it is enforced. He says BUBU will stimulate economic growth.

“BUBU banks on preference and procurement of locally made products to ensure growth and increased tax,” Ogwal says.

He points at Uganda’s budget for the Financial Year 2014/15 which stands at about Shs15 trillion and says, since approximately Shs3 trillion is spent on wages, the government spends the rest on procuring goods and services. He wants the government to be compelled to spend most of this balance on purchasing Ugandan made goods and services which meet quality standards. He gives the example of the infrastructure sector where 85% of the Shs1.3 trillion the government budgeted on roads construction is given to foreign companies.

“It is unfair to local companies since they can ably offer the same services while contributing to economy growth,” he says, “The perception that locally made products are either not there or of poor quality as compared to the foreign or imported is what the BUBU policy stands to refute,” Ogwal says.   Despite Ogwal’s optimism, local manufacturers remain hurdled by multiple challenges. Among them are the erratic energy supply, high interest rates, and poor transport infrastructure. These contribute to the high shelf prices of some local products.

Yet Joyce Mutungi who runs a whole sale merchandise shop in Kampala’s business hub Kikuubo says some consumers only look out for the price to a product. The lower the price, the higher the sales, she says. To her, a trader needs to stock variety of the same product in different brands to beat the competition and be in position to sell to all ranges of consumers.

She says biscuits imported from china are usually priced lower than those made in Uganda. They go for as low as Shs 50 per small packet while those made in Uganda like Everyday and Riham cost as much as Shs 500 for the smallest packet.

Local manufacturers complain about such Chinese junks which have become ubiquitous in Uganda as a major challenge. They say the so-called Chinese investors import low quality products into the country that usually attract customers looking for lower prices as compared to locally made products.

Local manufacturers also still face challenges of both Non-Tariff Barriers (NTBs) and Technical Barriers to Trade (TBTs) ranging from the high energy tariffs that were hiked by roughly 70% in 2012, the unreliable supply, the high fuel costs for transport, and the high taxes levied on some machinery, raw materials, and spare parts.

Kigozi also complains about the low status or grade of the feeder road networks that are supposed to promote supply and distribution, the low demand for goods, and the limited skilled labour to run the machinery.

As calls for enforcement of the BUBU policy increase, therefore, questions remain about how it will be integrated in the government’s liberal market policies and whether, in enforced, they will help local consumers get a good deal. Business experts continue to challenge the workability of the policy claiming consumers’ preference cannot be legalised but rather can be triggered through producing good quality products that can beat the imported ones.