In 2017, the government of Uganda launched the Buy Uganda Build Uganda (BUBU) policy through the Ministry of Trade, Industry and Co-operatives (MTIC). The main purpose of the BUBU policy which seeks to increase the local consumption of the locally produced goods and services for the purposes of improving the local business environment through forward and backward linkages to exploit local resources for export promotion.
Owing to the outbreak of COVID-19 and subsequent prolonged lockdowns that disrupted global supply chains, local Uganda enterprises were supposed to take advantage and produce several items previously imported, such as face masks, sanitiser and hospital beds, among others.
In the first lockdown that occurred in March 2020, Finance minister Matia Kasaija appealed to the Ugandan business community to refocus their investments in filling the vacuum created by interruptions due to the coronavirus.
“It is about time that we woke up and produced goods and commodities for ourselves so that we can support the notion of building and buying Uganda,” he said in a statement to Parliament on Thursday, March 19, 2020.
A monthly Bank of Uganda report shows that in March 2020 imports suffered a 10 per cent decline to $492m (Shs1.8 trillion). This was lower than $522m (Shs1.9 trillion) earned in February and $543.7m recorded in January.
With the country under a second lockdown and Covid-19 still ravaging many parts of the world, has the BUBU policy taken route in Uganda?
Former Trade Minister Amelia Kyambadde, speaking during the Consumer Choice Awards in Kampala in May 2021, said local producers sustained supply, especially during the April-June 2020 lockdown, thus boosting capacity of local production.
“We would have not survived the lockdown without locally manufactured goods. All supermarkets had BUBU products,” she said, noting that the private sector had soldiered on despite challenges presented by Covid 19.
The state minister for investment, Evelyn Anite, says currently local manufacturing is coming up to boost hospital bed numbers.
Anite explained that a company, Fabrication Systems, was contracted by the Government through the health ministry to make the beds. In the process, it also employs about 300 workers, 90% being Ugandans.
According to the Ministry of Finance Performance of the Economy report for April, whereas Uganda continued trading at a deficit with the rest of the EAC partner states in February 2021, Uganda’s exports to the rest of the region grew by 8.7% to $ 111.65 million (about Shs395b) from $ 102.73 million (Shs362b) in January 2021.
The major exports during February 2021 included; beet sugar, milk & its products, plywood, tea and maize corn to Kenya; and grain sorghum, portland cement, beet sugar, animal/vegetable oils to South Sudan.
However, exports to Europe decreased to US$ 58.0 million in March 2021 from US$ 64.6 million recorded in February 2021.
But Ms Victoria Sekitoleko, a former minister of agriculture and the vice chairperson of Private Sector Foundation Uganda, says whereas there has been much talk about Buy Uganda Build Uganda, its implementation has been slow, noting: “Let us quit talking about Buy Uganda Build Uganda and start doing it (implementing)”.
Fabrication Systems’ managing director Kalpesh Metha also says the Government should scrap Value-Added Tax (VAT) on locally sourced raw materials.
This, he says, would boost manufacturing by reducing the cost of production.
“Local companies incur VAT on locally-manufactured raw materials from local suppliers, such as Roofings and Uganda Bat and yet, while filing returns at the Uganda Revenue Authority (URA), it is hard to claim that VAT was already paid while purchasing the raw materials. This seems like a double taxation issue on our side,” Metha says.
He suggests that VAT be left on imported raw materials “so that we encourage local sourcing and support BUBU.”
According to Dr Ramathan Ggoobi, the new Permanent Secretary in the Ministry of Finance, says there is no better time than now to focus on import substitution, thanks to the disruption occasioned by the Covid-19 pandemic.
“For import substitution to succeed, the government will have to be involved. Private sector on its own cannot succeed on this endeavour. Countries that have succeeded all over the world in import substitution did so with the involvement of the government,” he says.
“Countries in Latin America were the first to try out import substitution without government involvement and they failed. African countries even before independence and after independence also tried it and failed. Eastern Europe also went this route and failed. East Asia did the same and failed. So you need government involvement to have a robust import substitution,” he adds.
Economic Policy Research Centre senior research fellow Dr.Madina Guloba posits that the lock down occasioned by the COVID-19 leading to financial distress has revealed that Uganda needs to focus on industrialization. Dr.Guloba an economist argues that government needs to deepen agro-industrial linkages as a catalyst for the wider industrialization agenda.
“This is because investment in agriculture ensures that supply chains to the industry are sustained. This strategy will reduce dependency on imports and save on the much-needed foreign exchange,” she explains.
She adds that the public should be rallied to buy domestically and only import what can’t be produced locally. In addition, the government should be looking for markets for Ugandan products abroad.
Due to inadequate fiscal resources and importantly the ability to transfer resources from public to private sector in addition to the country’s low saving culture, let alone the high interest rates the private sector are grappling with, Dr Fred Muhumuza, a lecturer at Makerere School of Economics, is afraid that the opportunity for import substitution may not be seized easily as anticipated.
In addition to susceptibility of the economy to runaway inflation, unrestricted (open) capital accounts (free movement of capital), high foreign exchange rates and narrow tax base, the economist is skeptical, saying this dream will take a while to be achieved, and that is dependent on deliberate planning and execution.