Tuesday, September 18, 2018

KAPEKA: AN UNLIKELY INDUSTRIAL AREA

If the boss of Goodwill Ceramics Ltd is to be believed his products are causing upheavals in the Uganda tile market.

The $30m (sh115b) factory tucked away in Kapeka, about 60 km from Kampala, started operations in April and is already making serious inroads into the local market.

“The feedback we have from the market is that our tile are too hard,” said Goodwill Managing Director Yang Frank with a chuckle.

“That with other tiles they can use simple cutting tools but with ours they need more serious equipment.”

This speaks to the durability of his product.

A straw poll of hardware dealers in Kampala confirms the perception that the tiles are of better quality than those imported from China and the pricing putting downward pressure on tiles in the market.

"The factory has the capacity to produce 40,000 square meters of tiles a day in 200 different variations. They have built up their operations to 28,000 square meters a day. They sell under half their daily production at 12,000 square meters. In storage they have enough tiles to supply all of Uganda for two months...

But this is only one of the establishments setting up in the Liao Shin Industrial park in Kapeka, which covers over five square miles.

Around the corner Ho & Mu Food Technology have just done their initial export run to China of candied dry mangoes and factory manager Majorie Mugenyi is confident of future prospects.

“Our capacity is to process 20 tons daily into four tons of candied dry mangoes. This will be expanded to 40 tons,” she said in an interview, with plans to expand into pineapples, jackfruit and passion fruit.

So far they exported all the initial 180 kg of fruit to China but are looking to Europe, Canada and the region as potential future markets.

The factory was closed for maintenance but she said at peak production they employ a hundred people from the surrounding areas, nine in ten of whom are women.

By the end of the year the industrial park promoters project that ten companies will have come on line, producing everything from vegetable oil, animal feeds, industrial alcohol, electronics and textiles.

At full capacity the industrial park will employ 15,000 people.

It is an interesting snap shot of what form our industrialisation may take.

Looking at the portfolio of industries lining up to take up space at the Kapeka facility, the vast majority are looking to exploit the country’s natural endowments, be it clay in the case of goodwill ceramics or fruit or vegetable oil or textiles.

Yaheye International Investment Group has the capacity to process 3,000 tons of maize annually and for now is processing maize into flour for the domestic and regional markets. It is however planning to triple it capacity and go into the manufacture of animal feeds, industrial starch and alcohol.

But more importantly they are setting up for export and as a consequence the investments being planned for not less than $10m in the park. This is important because if we are going to generate jobs and boost tax revenues we need to think about producing for export. Import substitution has undeniable benefits in saving foreign exchange but producing for exports --- especially food means you have to adhere to international quality standards and produce industrial quantities to sustain the related industries.

Ho & Mu have ten acres of mango, about 3,000 trees, under development, but will still need to reach out to farmers as far afield as Kasese and eastern Uganda for their supplies.

"The sad thing for the existing factories is that they do not have reliable power, despite the reported surplus in production by our dams...

Goodwill Ceramic reported that since their inception in April they had suffered 113 power outages the equivalent of 15 days without power during the period.

Efforts are underway to increase the existing 22kva line to 133 kva, which everybody thinks should come with an improvement in supply but not necessarily reliability.


It is an interesting venture in the heartland of the Luwero Triangle, which if managed well and with proper support from government should see a transformation not only of the area but of the country, as similar parks are set up around the country.

Tuesday, September 11, 2018

WITH THE ECONOMY WE HAVE TO BITE THE BULLET

The challenge of Uganda is that we don’t have enough money! Surprise! Surprise!

The annual budget is sh32trillion, which means government has committed to spend about sh800,000 per Uganda for this year. On education, health, security, building roads and all other things government spends on. As Ugandans we are contributing about sh400,000 of this sum in taxes with the sh400,000 deficit coming from borrowings – locally and abroad.

I repeat this statistic because when I first broke it down it shocked me to the core. And it still does.
Put in this perspective is blindingly, obvious to me, that the government budget is too small. And secondly that with such a small kitty how is government expected to achieve anything.

I mean they have earmarked sh57,000 for each Ugandan’s health needs and  for our protection they have committed the princely sum of sh53,000 per Ugandan for the whole year.

Putting aside our official’s propensity to dip their fingers in the till, how can anything get done to any satisfactory measure with these statistics?

"This numbers look starker when viewed against our population growth and development ambitions.
As it stands now our population is set to double every quarter century. So it’s 40 million now and will be 80 million in 2043 and 160 million in 2068, assuming the current growth rate continues, which it will unless we get a grip on poverty. A story for another day...

All these multitudes deserve good health, education and other social services as well as good infrastructure and a coherent government.

The World Health Organisation recommends that countries should see health expenditures – both in the public and private sector, of about $84 (sh310,000) per person a year. According to the latest statistics available in 2015 Uganda health expenditure came in at $46(sh170,000), just over half the recommended average.

Using these figures private expenditure on health is about sh117,000 per person annually. Assuming the ratio of public to private health expenditure remains the same government would have to double its budget just to meet the bare minimum requirements.

This in health but similar increases or more are warranted from everything from the gender ministry to Uganda National Road Authority (UNRA) to energy budgets. Just to get us to where we can all live bearable lives.

The next question is, where do we find the money to ramp up our spending?

URA a year or two ago set themselves the task of ferreting all the tax dodgers in the informal sector. We were shocked to hear that among the tax dodgers URA  has its eye on accountants, lawyers, doctors and all those professionals who go into self-employment, they counted them as being in the informal sector.

The recent taxes on mobile money were an attempt to tax incomes that were proving hard to find.
This was probably one of the less radical tax initiatives – despite the howling, this government could have suggested.

There is a lot of money in land. Tax all the land I say. People with idle land will be forced to put it to use or lease or sell it to others who can. With that single stroke we will increase production which in turn will bring in more revenue.

Of course the issue of land is always politically sensitive. So the leader who bites that bullet will either be working themselves out of a job or be ready to pull out all the stops – forget tear gas, to enforce his will.

"The writing is on the wall. These are desperate times – or about to be, and therefore require desperate measures...

We will not be the first.

China’s chairman Mao in a race to industrialise determined that his country needed to produce more steel. In this effort people were required to have a backyard smelter in order to meet the steel production of individual collectives. To meet those quotas people ended up smelting everything cutlery, fixtures and furniture.

The result, this was the beginning of one of the world’s largest steel industries, but the unintended consequence was that in an effort to fire up those millions of backyard smelters, the impact on the environment was so devastating that the repercussions continue to date.

There are no shortcuts.

There will be short term pain and woe onto those living in the era of transition, but as they say there can be no gain without pain.


And it will be an other generation of politicians that will benefit from our sacrifice, because there be no romance without the finance.