By Kitts D. Mabonga
FINANCE AND BANKING
The government has reportedly set up a policy and regulatory mechanism with a view to facilitate the setting up of industrial development bank.
The objective of the Bank is to bolster the easy encumbrance free of financial large scale loan services to the growing manufacturing industry which is the new engine for the economic development agenda of the country.
The development came to light recently during a special presentation made during a two-day national financial institutions symposium and expo that was held at Lugogo targeting to build the knowledge capacity of manufacturers to access financial services.
The meeting was organized by the Uganda manufacturers Association [UMA] board to help bring together both manufacturers and commercial banks in sharing information over how best the two
partners can work together for the good of the economic development of the country.
A presentation made by Francis Ogwang the country manager East African Development Bank [EADB] titled ‘a presentation to the Uganda Manufacturers Association symposium on ‘A case for an industrial development Bank in Uganda.
Ogwang highlighted that a roadmap for preparations of a cabinet paper justifying the establishment of a dedicated Industrial Bank to support sustainable development of both public and private sector were underway.
He stressed that the objective includes to facilitate the transformation of Uganda’s industrial sector by providing financial and advisory support for the establishment of large, medium and small industrial projects/ enterprises, and the expansion, diversification, rehabilitation and modernization of existing enterprises.
He explained that an apex industrial bank is a development finance institution, usually owned by the state, Non-Regulated by the Central Bank or a federal agency.
He said Industrial banks differ from commercial banks because some do not offer demand deposit (checking) accounts.
Strong Advisory function. Syndications/lead arranger capability, Business turnaround specialists. Development grants. Technical Assistance Fund. Industry incubation center. Feasibility studies, investment appraisals
The Ugandan economy has grown steadily since the 1990s, GDP @ 6.5% p.a and it has experienced some economic transformation, but its manufacturing sector has stagnated.
With high population growth rates @ 3% p.a and many youths entering the labour market each year, @ 700,000, industrialization remains crucial for Uganda
During this period, the share of agriculture value added in GDP declined from 53% in 1990 to 24% in 2018. The contribution of industry (including manufacturing, construction and mining) to GDP grew from 10% to 20%, and the contribution of the services sector from 30% to 48% (WDI).
State of industry
The manufacturing sector is dominated by agro-processing, food and beverages, household products, construction materials and fast-moving consumer goods. Most firms are small and medium enterprises concentrated in Kampala and the Central region.
Most of the manufactured products produced in Uganda are aimed at domestic consumption, and exports are limited to the regional markets (which include Rwanda, Burundi, South Sudan, Democratic Republic of Congo (DRC) and the regions of Kenya and Tanzania bordering Uganda)
The entrepreneurs’ class in Uganda is small, and invests mostly in trade and services, with manufacturing left to a handful of firms. Domestic firms involved in manufacturing are dominated by the Ugandan–Asian conglomerates, which are often very diversified, with investment ranging from agriculture to manufacturing to services.
The main challenges facing domestic and foreign manufacturers operating in Uganda include high costs of power, inadequate infrastructure, limited availability of technical and managerial skills and lack of financial sources, especially in terms of longer-term financing
Why industrialize
The National Planning Authority (NPA, NDP III) projects that, if current trends continue, the gap between the working-age population and the employed population will increase from 5 to 22 million people (NPA, 2014).
Some benefits industrialization offers include:
Potential for higher spillovers, jobs. Many youths are entering the labour market, Import substitution. The import-export market.
Affordability of goods as a result of increased availability/supply.
Reduced income disparity as a result of Increased jobs in industry. Improved medical care as a result of better income
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