How Unfair Competition Is Crippling Ugandan Manufacturers

by Christopher Kiiza
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Unfair competition is posing a significant threat to Ugandan manufacturers, hampering their growth and sustainability. One of the primary challenges arises from the influx of locally made and imported cheap and counterfeit products flooding the market.

These products are produced under lax regulatory standards, and undercut quality manufactured goods in terms of pricing. As a result, Ugandan manufacturers struggle to compete on a levelled playing field, facing decreased demand for their products.

These substandard products compete with those from compliant manufacturers who invest in meeting required standards, making their goods comparatively expensive. Consequently, consumers tend to favour the more affordable, uncertified products, leading to unfair competition in the market.

According to Anti-Counterfeit Network (ACN Africa), Uganda loses up to 6 trillion shillings to counterfeits and substandard products every year.

On September 1, 2023, Parliament reconsidered and passed the Competition Bill which had been returned by the President on 24 July 2023. The Competition Bill, 2023 is intended to facilitate fair

competition in markets and prevent practices having adverse impacts on competition in markets and primarily seeks to control anti-competitive behaviour of firms that has a negative impact on competition in Uganda’s market.

In the same vein, Uganda has a fully established body, the Uganda National Bureau of Standards (UNBS) that is mandated by the UNBS Act Cap 327 to enforce standards in the protection of public health, safety and the environment against dangerous, counterfeit and substandard products. The Bureau also is mandated to ensure fairness in trade and precision in the industry through reliable measurement systems, strengthening Uganda’s economy by enhancing the competitiveness of local industries and promotion of quality exports through standardization.

The same Act prohibits the importation, manufacture, sale, distribution or holding for the purposes of selling any product that does not meet compulsory Uganda standards.

Despite the regulation, Mohamed Abdulati Algallta, the Chief Executive Officer of Britania Allied Industries Limited – a member of Uganda Manufacturers Association (UMA) says the production of substandard products and their widespread distribution in the market is enormous and impedes the growth of authentic and compliant manufacturers.

“We have challenges in the market that are restricting us from growing, such as unfair competition. We have a standard that we have to stand up for, and apply to our products. However, there are some products in the market that are not meeting the standards, they are not certified by UNBS. These products are produced with low-cost raw materials that don’t meet the standards. Some are imported while others are locally produced. They don’t even seek approval of UNBS,” he says.

As per the UNBS mandate, all manufactured products on the market must be certified under the UNBS product certification scheme to indicate that they meet quality standards. This means that each product released to the market by the manufacturer must bear a UNBS label.

Some of the products that must be certified under the UNBS Product Certification Scheme include; packaged drinking water, biscuits, non-carbonated soft drinks, bread, energy drinks, tomato sauce, fruit juice drinks, among others.

Annually, manufacturers of these products and many more pay for permits for each product.

On the contrary, makers of substandard goods avoid these expenses as their products lack approval from UNBS. Despite this, their products still enter the market, offering lower prices compared to those produced by compliant manufacturers, leading to unfair competition within the market.

Abdulati says such unfair competition is posing a significant threat to Uganda’s law abiding manufacturers.

“Every year, we pay for permits for each and every product. We have over 40 varieties of biscuits, 9 varieties of splash, 8 varieties of sansip among others. That means that we pay for each and every product. A minimum for every product is one million minus testing. So, you can imagine how much we are spending just because we say we have to live up to the commitment of quality.”

Manufacturers don’t entirely blame UNBS over the presence of sub-standard products on the market. They say the Bureau is understaffed, and cannot therefore fully wipe substandard items out of the market.

“The last time we did benchmarking in the market, we collected some samples from different products, and we found these products do not meet any of the requirements of UNBS. When we reached out to UNBS, they said ‘we are understaffed, we cannot reach everywhere especially upcountry.’ These products are still existing in the market and are bothering our markets. This brings two problems; it affects the investor, and provides non-health products to the consumer,” says Mariam Muganga, the Quality Assurance Manager at Britania.

In addition to failing to meet the minimum standards established by UNBS, numerous substandard products contain a quantity that is less than what is stated on the packaging. This deceives consumers, who then opt for substandard products under the false impression of receiving the purported quantity.

Manufacturers have repeatedly suggested a solution to combat unfair competition, which involves implementing a ban on products that lack testing and certification from UNBS. They propose strengthening UNBS support to extend its coverage across the entire country, including

borders, to prevent the importation of counterfeit goods into Uganda.

Additionally, they recommend comprehensive coverage and inspection of every manufacturer to ensure compliance.

Govt Response To Tackle The Problem

The Minister of State for Industry, David Bahati in response says, counterfeits have no place in Uganda and must be wiped out.

“Substandard products both in quantity and quality have no place on the market. We should not have any substandard products on the market because they undermine the growth of other companies, and also affect our health as Ugandans. We are making sure that we enforce and support UNBS through increased funding to make sure that they have the capability to follow up these products because they are a danger to our community and businesses,” Minister Bahati says.

He adds that if unfair competition is not tackled by eradicating counterfeits from the market, the country’s goal of value addition, import substitution and export promotion will not be realised.

It is worth noting that the government, especially president Yoweri Museveni has severally campaigned for value addition and agro processing to achieve the country’s aim of import substitution and export promotion, and put an end to the export of raw materials.

Long Term Effects Of Unfair Competition To Manufacturers

Unfair competition, typified by the prevalence of substandard products and other unscrupulous practices, poses significant challenges to manufacturers and the manufacturing sector in Uganda.

The price competition posed by cheaper substandard products, though seemingly beneficial to consumers in the short term, jeopardizes the survival of domestic manufacturers. Unable to match the low prices of substandard products on the market without compromising on quality, local manufacturers find themselves at a competitive disadvantage, leading to layoffs, reduced investments, and, in extreme cases, business closures.

It is noteworthy that unfair practices extend beyond substandard products to encompass unethical market behaviours such as counterfeiting, intellectual property theft, and tax evasion. These practices not only harm manufacturers economically but also impede innovation and stifle long-term sectoral growth.

Way Forward

To counteract the adverse effects of unfair competition, Uganda must bolster its regulatory framework, enhancing the enforcement of quality standards and imposing strict penalties for violations.

Additionally, fostering international collaboration to address the transnational nature of unfair practices is crucial.

The government should also invest in capacity building for local manufacturers, enabling them to compete effectively through improved efficiency, innovation, and adherence to high-quality standards.

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