Publication

Local Content Development in Uganda

By August 6, 2020August 10th, 2020No Comments

Local content refers to a process used to support local entrepreneurs, companies and individual professions. Local content is achieved through national policy and legislation. The Ministry of Trade and Industry has formulated the “Buy Uganda Build Uganda” (BUBU) Policy, 2014. This was formulated on the basis of research done in the trade sector. The objective is to promote Ugandan products in the trade sector.

The other local content avenue is found in the Public Procurement and Disposal of public Assets Act (PPDA). The Act provides for Preference and Reservation Schemes. The Act provides for Preference to be given to the domestically manufactured goods, Ugandan Contractors and Consultants in order to promote economic emancipation and development of capacity. A point advantage is given to bids that show Ugandan nationals are a participating either as a company or individually.  This allows competitive advantage when competing for public procurement contracts with foreign manufactured goods, foreign contractors and consultants. Reservation is a process where certain areas of trade, employment, public procurement and investment are restricted to nationals only.

The PPDA allows Preference and Reservation to promote particular sectors within specified geographic areas using specified public procurement contracts or parts of a contract. The Regulations under the Act provide for a Preference and Reservation schemes to be developed by a Competent Authority. The Competent Authority shall certify the eligibility of a particular provider to participate in a preference scheme. The question is who is the competent authority envisaged under the law?  This remains vague under the law

The Oil and Gas sector laws provide for a local content advantage of 48% to be given to domestic companies/providers of services and goods. This law has not developed implementation guidelines.

Current status

The BUBU Policy has been slow in implementation. Each sector has tried to make use of it individually. This Policy lays emphasis on retail traders dealing in domestically produced goods. The Policy is to enhance the visibility of locally manufactured goods on the shelf in competition with foreign goods. This Policy has not been evaluated to assess its performance.

The Policy needs; an implementation mechanism, enforcement and a monitoring and evaluation mechanism to periodically review its performance and effect improvement.

The Preference and Reservation schemes have not been implemented due to the fact that they have to be approved by the ‘’Competent Authority’’. The definition of competent authority means ‘’a government office which has the mandate to perform a specified function.’’ Where is this office? This largely curtails the implementation of the law in that aspect. The Oil and Gas sector is developing enabling regulations to implement the local content. The Standard Gauge Railway project has projected 40 % local content in the project.  The question is what will be 40 percent?  Is it goods, services or works or employment under the contract? If its public procurement, is the SGR agreement providing for the contractor to use Ugandan public procurement legislation? The bigger question is what amount’s Ugandan Company?  Local content in Uganda faces challenges because of enabling policy, legislation and implementation, monitoring and evaluation mechanisms.

The current areas have not developed detailed local content i.e. Trade and Retail Industry, Infrastructure, Water, Financial services, Communication, Insurance, Printing , Agricultural, Health, Labour and Immigration, Retirement benefits, Oil and Gas, Education, Banking, professional bodies.  These areas have no known local content available to Ugandans.

There is need to bring the Private Sector Foundation and individual professional and trading associations on board to promote local content in their areas.

Other African countries have developed local content along the lines of Black Economic Empowerment (BEE), 2003 in South Africa, Citizen Economic Empowerment in Botswana (CEE), 2012, Veterans Empowerment in Namibia, Youth and Women groupsspecific local content Oil and Gas laws in Kenya, 2015, locally/national registered and owned firms in South Korea, Tanzania, and Ethiopia. The most prominent is the BEE in South Africa which is aimed at promoting black economic emancipation. This is managed, implemented, monitored and evaluated by a specific Government agency. The BEE agency is set by an Act of Parliament under the Ministry of Trade and has a code of good practice which provides a standard framework for the implementation and measurement of BEE across all sectors of the economy. All entities both in the private and public sector operating in South Africa by law are required to abide to this Policy. The use of public funds is key in implementing local content. In many countries government contracts awarded to private firms are supposed to follow public procurement rules. So public funds do not end at contract award but all providers of services and goods are meant to benefit under a particular project.

The large projects in Uganda such as Karuma and Isimba dam, The crude oil Refinery , standard gauge, construction projects- road, rail and building, consultancies to supervise dams and airport construction, printing of text books, printing of ballot papers etc should have local content in the form of;

  1. Locally made materials
  2. Employment of nationals in public and private sector jobs
  3. Transfer of skills (capacity building) through Joint ventures, sub contracting and attachment of public officers, private sector players and students
  4. Reservation of certain areas- i.e. retail trade and goods readily available in Uganda.
  5. Margin of preference for Ugandan firms i.e. 15% of goods and 10% on services and 7 % on works projects is provided under the PPDA Act.
  6. Restriction on importation of finished goods so that goods are manufactured and finished in Uganda. I.e. import raw materials of not more than 50 per cent.
  7. Local participation in Public Private Partnership projects.

Advantages

  1. Payment of taxes in Uganda
  2. Increase in employment
  3. Saving foreign currency
  4. Building capacity of domestic industry

Recommendation;

There is need for the following;

  1. Develop a comprehensive national local content policy across the all sectors of the economy
  2. Set up an independent agency to research, advise, recommend and coordinate the implementation of local content across all sectors in the economy. I propose this is housed at the Prime Minister’s office for ease coordination across the Government Entities. The Ministries of Trade and Industry through trade policy and Ministry of Finance through public procurement will play a big role in enforcement as well.
  3. Develop standard and uniform guidelines for public and private agencies and enforce compliance with the Policy and law.
  4. Identify the areas where Ugandan companies which have capacity to undertake delivery of goods, works and services. This should include both private and Government owned institutions’.
  5. To develop monitoring and evaluation tools to review local content performance.
  6. Build capacity for local content participation
  7. Develop and automate a database of Ugandan providers for ease of implementation of local content.
  8. In all the above, liaise with the public and private sector to develop policy, strategy and capacity.

Without these measures in place Uganda shall continue developing other countries and leaving the citizens at the mercy of so called experienced companies from aboard.

Edgar  Agaba, partner

eagaba@agabamuhairwe.com

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