By Penninah Mbabazi
Expanding manufacturing production should be recognized as essential for economic growth in a country, given that manufacturing has potential for value-addition on the country’s existing resources.
Production and export of manufactures have been a leading factor in all successful and catching-up developing countries such as Kenya, Nigeria, Ethiopia and Botswana.
Indeed, manufacturing has been a key factor not only in Africa but also in many emerging Asian and Latin American countries, which have experienced rapid growth in productivity and employment creation, as well as technological upgrading.
Manufacturing and production in Uganda offers upstream/downstream manufacturing opportunities, including food and mineral processing; production of beverages; textile, clothing, and leather production; packaging material; metal fabrication; fish processing; and chemical and pharmaceutical production. Uganda’s central location in eastern and southern Africa is an advantage in terms of potential markets in bordering countries for its manufactured products.
Performance of the manufacturing subsector (both formal and informal) In 2014 Uganda was estimated to have registered a stronger growth of 6.2 percent compared to a marginal 0.6 percent growth in 2013. This growth was driven by the strong performance in processing and preservation of meat 5%, other beverages 19%, pharmaceutical products 14% and iron and steel products 5%. Currently the manufacturing sector contributes 21% to Uganda’s GDP.
However, according to the CIA World Factbook on Uganda, the country still exports more than it imports. In 2016, Uganda earned US$ 2.7bn from exports and USD 4.7bn from imports. Uganda’s trade deficits have put a block to some of the potential sectors such as agriculture from thriving. This reflects a commodity constraint faced in coffee, tea, fish which needs to be addressed and can triple export earnings from US$ 615m to US$ 1.8bn annually.
Can the manufacturing sector be a sustainable way through which Uganda can create more decent, well-paying jobs for its young and growing population? The shift of resources towards manufacturing provides at least four linked and mutually reinforcing major benefits, namely productivity growth, development of linkages and spillovers, economies of scale, and new export opportunities. The manufacturing sector has the potential to create economies of scale and rapidly increase productivity largely due to a high rate of technical change. Labour productivity in manufacturing activities increases through the adoption, development, and mastery of new technologies.
The African Growth and Opportunity Act Trade Programme with the East African countries being signatories to the AGOA trade programme which offers them duty-free access to the United States. Kenya, Uganda, Rwanda, Burundi, Tanzania and South Sudan decided on a ban of imported second hand clothes and shoes by 2019 in order to boost domestic clothing manufacturing.
Rwanda took a stand on banning second hand clothes regardless the threats by United States to review trade benefit to Rwanda, Tanzania and Uganda. Despite being a member of the African growth and opportunity Act (AGOA) the stand is highly recommended hence the need for other states to stand together. This will enable Uganda to strongly grow, establish her industries as well as export more of her goods within and out of the region.
Recommendation Government should invest more into agro-processing across the country which will add value to raw agricultural products. Technological upgrading will allow farmers to transform themselves into small-scale industrialists. It is through this that these proceeds will then be used to build an export-oriented manufacturing base.
The growth of the manufacturing sector is critical in generating value addition, spurring growth in employment and productivity, developing and deepening linkages with upstream and downstream activities along the value chain, and upgrading technology.
The manufacturing sector’s trends portrayed above clearly point to a critical need for a transformation of the Ugandan economy aiming at increasing the share of manufacturing in GDP if the country is to catch up and become a competitive upper middle-income country in the next three decades, in line with the country’s development goal as articulated in the Uganda Vision 2040.
Ms. Mbabazi is a Programme Assistant, Uganda Debt Network (UDN)
