Business and Finance
Questioning Uganda’s retail market growth
Addressing us students and faculty at Makerere University in 1991, President Museveni asserted that Uganda was exporting jobs by simply exporting raw materials.
He demonstrated this by the simple example of a kilo of cotton against a T-shirt: simply exporting a kilo of cotton means that the vital value addition stages take place outside Uganda, and we import the same T-shirt at a cost 30 times the kilo of cotton we exported. The future, he added is in industrialisation, and since man chose cotton as the main fibre when he decided to clothe his nakedness, and Uganda is blessed to have the best cotton in the world, we must take advantage of this.
Recently, prominent East African industrialist, Naushad Merali, the chairman of the Kenya-based Sameer Group, echoed the same while addressing a section of the Ugandan business community and policy makers in Kampala. In his words, ….we cannot develop East Africa by shopping malls….like Dubai, which has 3 million people…East Africa has over 130 million people..only industrialisation will liberate us…
Over two decades since the Kilo-of-Cotton-T-shirt dichotomy, Uganda goes chest-thumping as the fastest growing market for retail business in East Africa. Should we be celebrating or this should get us worrying?
Beyond the figures (averages and percentages), what lies behind this ‘growth’? And whose growth is this? A walk through Kampala, from the upmarket shopping centres to the downtown flea market reveals it all: a consumer-importer economy. Be it textiles and garments, footwear, electricals, electronics, furniture, paper products, name it.
Stifling economy, innovation and skills
Since it is the final consumer who pays for everything, we are simply exporting jobs, skills, technology, while stifling the little innovation that there is in the country. The overall impact is that we have grown to worship anything foreign, rejecting even our own quality home-made products. Thanks to our open-door liberal policy, we have literally become a dumping and damping ground. This is the aspect of our free trade that should make us worry.
Besides stifling local initiative, the dumping scares away investment in genuine manufacturing. Bata had to close production and resort to importation, as it was being outcompeted by cheap imports. We preach self-employment and job-creation to young people, but how tenable is this? A graduate of a polytechnic who had specialised in leather technology had to abandon his cottage factory and join the army of hawking imported used shoes, belts and handbags.
With the cost of manufacturing rising in Europe, Uganda and East Africa would be choice investment destinations for global manufacturers. Global brands and designer names like Marks and Spencer find it cheaper to produce high quality, European standard garments outside Europe, exporting them from those overseas production centres. Nestle, the Swiss food giant produces the biggest percentage of her brands outside her headquarters, her motherland Switzerland.
Not time to chest-thumb
Instead of chest-thumbing about this ‘growth’, the policy makers and industry leaders must go back to the drawing board, to revisit the liberalisation policy. There are enough clauses and provisions in the various World Trade Organisation (WTO) agreements and protocols, which can be exploited to protect infant industries. This is the only way to create jobs. Allocating billions to the youth in national budgets in the current environment of dumping and damping will make no difference.
It will be more rational and job-creating, to set a time-frame within which to reduce and eventually eliminate counterfeits and used goods from the Ugandan market. We only need to tell Bata, Clarks or Marks and Spencer that that we have a five-year target within which to eliminate counterfeit and used textiles and shoes from Uganda.
They will come running with their money, technology, expertise and brand reputation. And the jobs they will create will not be matched by 100 years of allocating 44 billion for the youth to do manufacturing in gazetted places in city markets, as our current budget says.
The author is a business analyst based in Kampala