By Stephen Wandera
KAMPALA, Uganda Civil society has issued a list of demands a day before the Ministry of Trade Industry and Cooperatives (MTIC) 2017/18 annual trade sector performance meeting. In a press statement issued Tuesday October 30, 2018, the 9th consultation is taking place under a theme “enhancing competitiveness of agro-based Micro, Small and Medium Enterprises (MSMEs) for national export development”.
In Uganda, MSMEs account for approximately 90 percent of Uganda’s private sector, employ more than Shs2.5 million people, generate over 80 percent of the country’s manufactured output and contribute up to 18 percent of the country’s gross domestic product.
“The high import taxes currently at 30-35 percent import duty on the right primary packaging materials for the locally produced goods have often resulted into compromise of product quality due to poor packaging. This has often led to rejection and less competitiveness of these products both at national and regional markets. This has subsequently hindered MSMEs ability to fully exploit the vast market opportunities,” said Mr Africa Kiiza, the programme officer trade policies and negotiations, Southern and Eastern African Trade Information and Negotiations Institute (SEATINI)-Uganda.
The cost of food-grade agro-processing machines is high and unaffordable by most start up MSMEs, Mr Kiiza read the press statement.
He added, “As a result, some MSMEs have resorted to use of machines that are not food grade which makes the final product inferior at the market due to standard issues. This has been exacerbated by limited research in fabrication of tailor made agro-processing machines which are affordable and easy to operate by agro-based SMEs.”
Ms Justine Mukazungu, the managing director, Stina Foods castigated the high cost of electricity.
“High power tariffs and connection to the grid continue to hamper SMEs growth, production and competitiveness both at national and regional market. SMEs in Uganda pay Shs383 (US$ 0.10) per unit which is higher if compared to other EAC partner states like Kenya which is currently at US$ 0.047 per unit. Also, due to power fluctuations/outages, SMEs often have to dismantle their machines every time outages occur which is tiresome and leads to losses in production. Due to these power related challenges, many MSMEs have had to shut down due to lack of affordable and stable electricity.”
She also hinted at the challenges with quality management and post-harvest handling to reduce losses.
Ms Mukazungu explained, “Taking the case of oil seeds, agro-based SMEs are faced with challenges of post-extraction quality management. With the high quality of power tariffs and outages, it is difficult for MSMEs to maintain prescribed safe storage requirements in post-extraction quality management due to poor storage facilities. For example, processed shea butter is not supposed to be stored at more than 20º centigrade which is difficult for many MSMEs due to high cost of power and stability challenges. This has often resulted to compromising of the quality of the product to inferior to other related products at national and regional market.”
Ms Susan Namuddu, the executive director, Africa Centre for Trade and Development, also blamed the competition from cheap imports on the local market that has frustrated local entrepreneurs.
“Uganda’s market is flooded by cheap agro-processed imports like juices, honey, chili, tomato paste, grain flour, vegetable oil, sugar, dairy products, including raw products themselves like fruits, cereals among others. For example, even with a 100 percent tax imposed on imported sugar, Uganda Revenue Authority (URA) continues to collect more taxes from the importation of sugar which peaked to over Shs242 million collected in form of taxes in the last seven months. These have subsequently outcompeted local products and frustrated local production by MSMEs,” she said.
Ms Nanduddu further explained, “Government has put in place numerous measures to provide finance to entrepreneurs in Uganda. However, in spite of these initiatives, access to finance by majority of startup agro-based MSMEs is a challenge, as these finances is only accessed by the already operational and fairly competitive MSMEs.”
Mr Kiiza said in spite of the available markets, Uganda’s utilization of the opportunities measured in share and competitiveness proportions remains low, with exception of COMESA where the country’s formal exports increased to 51.32 percent (US$ 1,483.72 million) in 2017/18 from US$ 1,262.94 million in 2016/17. Uganda’s low trade share in these key markets has subsequently led to a huge trade deficit reported by the Ministry of Finance at US$ 131 million as of May 2018. Efforts to reduce this trade deficit, and promote competitiveness have resulted into initiatives aimed at increasing exports in value added products into the aforementioned markets.
He said if well implemented, this can result into multiplier effects like employment creation through forward linkages between agriculture, industry and service sectors, and increasing Incomes at both household and national levels which can lead to poverty eradication and the promotion of sustainable development.