According to Business Insider Magazine, Africa is becoming a hotspot for Foreign Direct Investments (FDIs) due to her rich natural resources, youthful population, and untapped markets. This is good news for the continent and even better for Uganda because, according to a report by the United Nations Conference on Trade and Development (UNCTAD), titled, “World Investment Report 2023,” FDI to Uganda grew by 39% in 2022, putting the country in 8th position on the continent.
This progress is no accident, the leadership of President Museveni has played a vital role, he is the most passionate crusader of industrialisation in Uganda. Let us not forget the vital role played by a young and dynamic team at Uganda Investment Authority led by Mr. Robert Mukiza working along with an equally young Minister of State for Finance in charge of investment Hon. Evelyn Anite and Chairman Board of Directors, Mr. Morrisson Rwakakamba.
While Uganda is registering success in attracting FDIs, she is floundering in creating, nurturing and sustaining a local investor class. With many local giants collapsing, Biyinzika being the latest, there are murmurs that the Government doesn’t care about local investors. If foreign investors can be given hefty concessions, why can’t Ugandans be bailed out when in distress? The government is actually doing its best through policies like Buy Uganda, Build Uganda (BUBU).
BUBU aims to promote the use of locally manufactured goods and local skilled labour. But for this concept to succeed, we Ugandans need to strategically position ourselves along the production value chain in order to play our respective roles in building our own economy as we financially profit along the way.
The policy is undoubtedly very important in supporting local manufacturing by encouraging Ugandans to consume locally produced goods and services. If well implemented, it has the potential to improve the quality of goods produced and services offered, and also promote the ‘Made in Uganda” brand.
However, there is an even better but unsung policy than BUBU, and I will call it “Supply Uganda, Pay Uganda (SUPU)”. I say unsung because part of it is provided for in government policies, for example under the Public Procurement and Disposal of Assents Act, local content has a mandatory 30% favour.
Parliament passed the National Local Content Bill, 2022 that compels any person using public money or utilising Uganda’s natural resources or carrying out an activity requiring a licence to prioritise Ugandans and resident companies owned by citizens in public procurement. The bill gives preference to goods manufactured in Uganda as well as services provided by Ugandans or their enterprises.
For a large part, Uganda has implemented local content policy fairly well but when it comes to paying local suppliers, the government has struggled at best and or failed miserably at worst. According to Private Sector Foundation Chairman, Mr. Nzeyi, domestic arrears have increased by a whopping 62% from shs4.65 trillion to shs7.55 trillion between 2021 and 2022. Matters were not helped by the fact that the Government allocated a paltry shs205 billion as payment for domestic arrears in the 2023/24 financial year budget, which is just about 2.72%.
The implication of not paying local contractors and suppliers is economically catastrophic. It means Ugandan companies and individuals are eliminated from participating in Government procurement processes because their capital, along with profits is held up, hence suffocating the cash flows, resulting in economic ruin for them and lost tax revenue for the government respectively.
The most enduring negative outcome of not paying the private sector for services rendered is that Ugandan companies will not grow into larger and sound business entities. They are normally bankrupted by payment delays and are denied resources for research and development in the long run.
We forget that if we were paying our local companies promptly, there wouldn’t be a desperate need for sourcing Foreign Direct Investments (FDIs) and providing foreign investors with revenue haemorrhaging incentives. Ugandan companies would grow and accumulate enough capacity to invest in the very sectors that require the capital and know-how that foreign investors come with.
Consistent and prompt payments of domestic arrears mean that the private sector players would enjoy an enhanced reputation with credit sources, secure favourable interest rates, protect the supply chain and reduce the need for borrowing. Today, banks and other credit providers have become reluctant to lend to them.
Enterprises would avoid incurring penalties and interest emanating from un-serviced loans due to poor payment of their monies which worsens the overall debt burden. Paying domestic arrears ensures compliance with relevant laws and regulations, preventing potential legal consequences that will further drain the little resources of local companies.
Supply Uganda, Pay Uganda policy aka SUPU has several advantages for individuals, businesses, and the overall economy of Uganda. A strong local private sector supported by an equally strong local market will create employment, wealth, a strong research and development component and transform Uganda into a prosperous country.
Let us not concentrate on foreign investors only, let us invest the same resources or even more in promoting Supply Uganda, Pay Uganda as we do in attracting FDIs. Ugandans deserve to eat and enjoy some “SUPU”.
Magezi Kiriinjju
Communications Officer
Government Citizen Interaction Centre
A Member of Campfire Ideological Study Group.
