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Salim Saleh’s quiet revolution

How Kapeeka Industrial Park may be signaling a fundamental change in Uganda’s policy attitude

THE LAST WORD | ANDREW M. MWENDA | Last week, on a visit to Gen. Salim Saleh in Kapeeka, I decided to also visit “his” industrial park. Although I travel for fortnightly pilgrims to Kapeeka to dialogue with Saleh, I last visited the park in 2018 when it had only one mango processing factory working.

Now, the park has a ceramic factory, Goodwill, which works 24/7 producing 40,000 square meters of floor tiles daily. Then a second ceramic factory produces bathroom ware – sinks, toilets, bathtubs and other ceramic products like plates, cups and jugs. In both ceramic factories, local materials contribute 95% of total input.

There is another factory producing florescent tubes, bulbs and other electric wares; another producing school bags and suitcases and another weaving clothes. In total, the park has 20 factories that are in operation and another 40 under construction.

Already, Goodwill Tiles is a popular brand that has conquered the Ugandan floor tiles market and is now also a competitor in regional markets in South Sudan, DRC, Eastern Kenya and Northern Tanzania. Others factories in the park export their goods to China.

In Kapeeka, and increasingly in many other parts of Uganda, Saleh has initiated a quiet revolution: the shift from our much-loved agriculture to manufacturing.

But being populist, Saleh has retained his agrarian attachments. In my many debates with him, he strikes me as someone who thinks we can create a society of prosperous peasants by investing in increasing household incomes at homestead level. It is an exercise President Yoweri Museveni, seems focused on. Sadly, it is an exercise in futility. Intellectually, Museveni understands that the future of Uganda lies in manufacturing. I suspect his obsession with increasing household-incomes in agriculture is driven by political, not economic considerations.

Uganda’s manufacturing prospects are looking good. For two decades, the share of manufacturing to GDP had stagnated at 8%. And Uganda was not alone. Across Africa, and with the exception of Ethiopia, our continent has been de-industrialising i.e. the share of manufacturing to GDP has been declining or stagnant – including in South Africa, the most industrialised country on the continent.

This was largely a result of the success of neoliberalism in Africa where our governments were convinced by international financial institutions to abandon industrial policy. Today, I am proud to reveal that the share of manufacturing to GDP in Uganda is 18%.

Why is manufacturing important? Because it is an activity that adds value to our products, has infinite possibilities for productivity growth and creates large-scale blue-collar jobs for the less skilled.

The main cause of our poverty is the production and export of unprocessed goods. These make us earn less money in international markets since they tend to attract continually declining prices – to put in in economics language, they face deteriorating terms of trade. Yet we import finished products i.e. value added products, which enjoy improving terms of trade i.e. continually improving prices. This also explains our persistent trade deficits.

Why and how has Goodwill succeeded in conquering the local Uganda market and is now penetrating the regional one?

First government imposed a 100% duty on imported tiles, thereby making them immediately uncompetitive domestically.

Second, Goodwill works on a large scale. The factory in Kapeeka is 960 meters long employing 600 workers on a 24/7 basis and produces 40,000 square meters of floor tiles per day. This allows the firm to enjoy economies of scale. As production lines increase their volume of output, they tend to reduce their unit costs. This is the reason one can buy a square meter of floor tiles from Goodwill for as low as Shs25,000.

Goodwill gives us the best idea on how to construct industrial policy in Uganda. Our few industries are not competitive not just in international markets, but most critically, even on the local Ugandan market. From textiles to sugar (where we produce the raw materials cotton and sugar cane ourselves), it is cheaper to import clothes from China and refined sugar from Brazil and Cuba than to buy it locally. There are a couple of factors that cause this; such as the cost of electricity (a kilowatt hour of electricity in Uganda is 7 US cents against one cent in China), the cost of credit (interest rates in Uganda are 17% whereas in China they are at 2%) etc.

But the biggest competitive disadvantage to Ugandan manufacturers is their small scale. As already explained above, this greatly explains their high unit costs. What is needed is for them to expand in plant size to capture economies of scale. One needs to study east Asia to see how governments used industrial policy to drive manufacturing growth. The size of firm or plant required to achieve the aforementioned economies of scale is typically large in relation to the assets of firms in a poor country. The risks that confront potential investors are therefore high. Hence the investment process gets slowed down unless these risks are significantly reduced.

In Japan, for example, the government assumed the risks of large-scale investments using subsidies to firms. This allowed Japanese firms to price their products at below current average costs in order to gain market-share against foreign rivals in the domestic market. Thus, the government was able to carry a company’s negative cash-flow through these various forms of subsidy. As firms gain market share and increase production, the unit costs fall eventually to match this forward price. Then this assistance would be removed and applied to the next stage of even higher technology industries to be nurtured to international competitiveness.

In Uganda, Museveni got convinced that subsidies lead to corruption and inefficiency. But this is only partly true and only in some countries. In fact, for East Asian tigers, subsidies were the basis of industrial growth and international competitiveness. As the example of Japan above teaches us, the subsidies were not permanent, were also target driven and time oriented. Once a particular level of pricing had been achieved within an agreed time frame they would be removed. The second lesson was that subsidies were industry, not firm-based as Uganda has always done.

If Uganda wants to outgrow its chronic trade deficits, create large scale jobs for its youth, put itself on the path of continuous productivity growth, and gain a foothold on the ladder to economic transformation, then it must think manufacturing. It will have to give incentives to firms such as tariff protection, different forms of subsidies, access to long term affordable credit, cheaper electricity, better infrastructure to transport goods, etc.

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14 comments

  1. All those factories are owned by Chinese. We need to incentivise local businessmen to go into manufacturing otherwise to let foreigners run our manufuring economy frightens me sometimes given our immediate past history.

  2. 40,000 metric tons per day is a lot of tiles. A square metre is about 5-10 kg. One ton can have 100-200 square metres. 40,000 metric tonnes per day is 4-8 million square metres. That seems a bit much to produce per day. I suggest you check this information and if incorrect, please edit your story.

  3. Thanks Andrew for your pilgrimage. But our biggest problem and enemy of development is dishonesty.

    Remember Francis Fukuyama says that: with honesty a country can develop into a Middle Class economy in 20 years. In 20 years, it was the philosophy of honesty and reliability that Japan you have referred to, and Germany rose out of the ashes of the Second World War.

    E.g., in 1986 when Mr. M7 and your Saleh of this country were jumping over dead Ugandans in order to access power and acquire what you are now glorifying; Singapore was launching its Subway Railway, Mass Conveyor public Transport.

    But in Uganda, because of corruption, 36 years later and counting; your now pet NRM administration destroyed the only Railways and Bus Transport system; and have been launching backwardness and crowding our streets with dirty and deadly 14-seater improvised cargo van (taxi), and Boda-boda for public transport.

  4. 1. When a plane is on Autopilot mode it means it has reached a certain altitude and the pilot does not need manual control of the plane.M7 is now running Uganda in that mode. The government has really played her role in ensuring that the facilities and atmosphere for establishing businesses are in place.The whole world cried tears of joy when M7 insisted on constructing hydro power dams he did this because the country has enough raw materials needed for industrialization.
    2.The rise of the middle class in Uganda is not by accident;Ugandans have access to Finance and Loans meaning that Banks know that they are credit worthy.
    3.Ugandans love judging people by their appearance/face value;The people who live in rural areas may appear poor on the surface but when you visit their little homes you will find sacks of grain which they store so that they sell when the prices rise,they pay for the TV they watch meaning that they have GOTV and star times decoders what does this mean? They need sophisticated social influence to make them appear corporate,When you visit farm lands in USA and Europe the farmers love their work and they have a positive attitude unlike here where people participate in farming just because they are economically stranded and to some extend they feel shy about it.
    4.The Good will tiles are good but they need to improve on the grip on the surface of the tiles so that they are not slippery; ( Those tiles have really excited Ugandans and her neighbors but despite that excitement; they also need to be guided on the type of tiles to fit in the living room,terrace,kitchen and wash rooms, Betty Nambooze of NUP fell in the bathroom because she put the wrong tiles in her bathroom.
    5.Mr.O;So what was the train supposed to have transported after the war?iI have never seen a nation develop out of honesty;actually naturally gifted leaders develop nations.
    6.Just imagine Andrew and Saleh discussing Uganda’s future? this really made me cry.
    7.@Nada so you wanted Andrew to carry the tiles on his head to test its weight?The tiles of good will may not have the same weight as those from Spain or Italy.

    • But Winnie, who was responsible for the 25 years of civil war in Uganda? When did the war end? And including roasting 79 human being in a Railway Fright Wagon in Namukura Railway Station; who failed to maintain but destroyed and cannibalized the Railway Transport and fed the materials into the Recycling Steel Mills? And after 36 years of neglect and ruin how much will it cost to train personnel from scratch, revamp the line, wagons and/or coaches from Kasese to Pakwach?

      Who destroyed the Cash Economy from the Cotton and Cattle Industries for which the Railway transport was servicing? In other words, you are suggesting that we are still at war with ourselves.

      And Winnie, if honesty and/or reliability is not important for the good of human relation like: in the family; among friends; in Education/Science, technology/Construction Industry and sic nation building; wait until one day e.g. your mechanic mounted your car with a fake tires, brakes, vital spare-parts, lubricants; etc.

      In a nutshell Winnie, you mus be a very dishonest and unreliable person not worth listening to let alone dealing with.

    • Winnie, I used the Goodwill tiles for my bathroom, toilet, laundry room and office. Good enough, I carried the boxes, and I can estimate the weight myself. I asked a valid question and expect it to be clarified. Journalism has to provide correct information to the public.

      Now, your reaction to my question speaks a lot about yourself. Sometimes it’s better to hold on to your fingers on that keyboard.

      • Nada;Tiles are in different shapes and sizes hence the variation in weight.May be the ones you carried on your head were the small sizes.

  5. @ Mr.O:Ugandans have moved on and the wounds have healed;Besides that wars are always fought between 2 parties why do you assume that the ruminants of the Obote’s army were not brutal?
    2.In life; mankind at times finds herself in an ethical or moral dilemma read “Rush Worth Kidder’s approach to ethics”
    3.Where you one of the drivers of the trains?Because it seems you have so much attachment to it; The current theft of railway slippers is as a result of the boom in the steel industry but i suggest that government introduces electric trains to deter theft of railway equipment its not too late for the works ministry to carry out a feasibility study. The only snag would be the uniformity of the wagons that other EAC counties use.Otherwise the railway line covers quite a distance who will guard the whole railway route to avert theft and damage to railway equipment? with electric trains the whole route has electric current flowing day in day out hence deterring theft.
    4.Every field of study has ethical considerations what you call “honesty”are you a Pastor? anyway for the Presidency; there is no school that trains them.Presidents find themselves dealing with challenges for example; before South Sudan was liberated from the Arab Sudan it was a breeding ground for rebels who disorganized northern Uganda .USA has issues with N.Korea especially with the missiles and computer hacking so if a President is to be”Honest” according to you they should say its “Okay”Presidents always swear to defend their nations from social and political aggression.
    4.I have made some good money out of my honesty.
    5.The LRA rebels all spoke Luo( ICC even had to fly in a Luo interpreter during the Ongwen trial) i still don’t see NRM ‘s involvement its just that during war; there are wild imaginations ,conspiracy theories and false accusations that may make a naive person fall for any narration.For me; the only believable narration is that the ruminants of the Obote army still believed that they could still gain back power and the support of the Bashir government.Yes NRM was supposed to have protected the people but the style of war was unique its the idea of keeping the Acholi temporarily in camps that resolved the war.

    • Winnie, at the expense of others (country) you might have moved on with your dishonesty and unreliability. But because of your dishonesty vis-a-vis the regime you religiously support and defend; the rest of Ugandans have not moved on, but instead backward from where they were in 1986. E.g. If Ugandans have moved on; in 36 years, how did we end up with 87% of our youths on the streets, unemployment and the widespread poverty?

      How did we arrive at 24,000 per year that Ugandan youths are being traded and exchanged like cattle, and enslaved in the Middle East, and the unfortunate some whose vital organs are harvested and bodies fed to crocodiles in Thailand? How do you interpreted the celebration and outburst about the demise of Gen Tumwine? Is that moving on?

      And Winnie, Honesty or Reliability has nothing to do with Religious belief or being a Pastor. It is the “principle”. it is that which determines whether a person is religious or not; not the other way around. In other words, where there is honesty and/or reliability (trust, truth-facts), there is no need for religion or beliefs.

      And Winnie, it was dishonesty that got Boris Johnson out of office. It is dishonesty that Trump’s home was raided by the FBI and current investigation about documents that shouldn’t have been found in his private residence.

      And Winnie, the 20 years of IDP concentration Camps were by design, to depopulate, stupefy and dehumanize the people of Acholi Sub-region. After all Mr. Museveni one time referred to our people as a bunch of “baboons” just as referred to Jimmy Akena’s, Taban Amin and Okello Oryem’s father (Obote Amin and Tito Lutwa) respectively as “Swines”. In other words, it was a concealed genocide through biological means sic, poor feeding, poor hygiene and contiguous diseases.

      For the 20 years (1986-2005), on average 1,000 children were dying per week (Min of Health and UNICEF Reports). How many lives were those? Calculate for yourself. And during that period, how many children did not set foot in school/classrooms. In other words Winnie, if one or two of these children (now dead or ignorant/uneducated adult) were yours, would you still casually say that Ugandans have move on?

      And Remember Winnie, the wounds of war never heals. Tell me e.g., when will the wounds of the current war between Russia and Ukraine will heal?

      In other words Winnie, including you, dishonesty get people killed and countries destroyed.

  6. @ Mr.O:You are entitled to the concoctions in your head.
    1.Concerning the many unemployed youth heading to the Arab world for jobs;Being a youth and being in adolescent stage is a deadly phase in life one needs guidance i personally up to now still has a tattoo on my arms luckily its that of a biblical verse because of the caliber of people that i work with i am not understood why have i given this example; at that age you make decisions that make you regret later on in life.
    2.I always ask myself what stress does a young woman of 19 have that makes her sleep with any man for money?Is that still NRM’s problem?I always advise young ladies that it pays to read books you don’t how good it feels when your car is serviced by the company ,you have a fuel car,you are invited for international meetings and paid allowances in dollars,you travel business class i just wish that they could taste such life.
    3,This generation takes pride in being young but their heads are empty and there is nothing they can resolve.Now if you are not daft why do you insist on traveling to middle East well knowing the risks?
    4.Those who laughed at Tumwine’s death just have mental disorder.How do you justify one’s excitement as a result of looking at a grave or dead people?
    5.The youth of these days live in an era where life is good there are so many social amenities,electronic gadgets that they feel that they should have at any cost;their role models are rich as a result of being gay,sex workers or drug dealers so according to them there is a short cut to good life. I see parents in a real dilemma because in their time;they had few amenities and things like going to school was a big deal yet now being a school drop outs is a voluntary decisions.

  7. The general has other responsibilities.

  8. Attacking each other isn’t healthy in such platforms . Write your comment and leave the judgement to be decided by consumers.

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