In something of a desperate appeal, and not for the first time, Capt. Mike Mukula, politician-cum-entrepreneur, recently complained about the limited sales for their fully certified syringe-making factory.
This is despite the government’s Buy Uganda Build Uganda (BUBU) policy designed to support local manufacturers make deeper inroads in the local market for goods primarily coming in from abroad.
Located in the Kampala Industrial and Business Park Namanve, Mahathi Medical Industries Limited (MMIL) is reputedly one the biggest producers of disposable syringes and other devices used in the healthcare sector.
However, Capt. Mukula said efforts to persuade bulk buyers, particularly the National Medical Stores (NMS), had proven to be frustrating. This leads him to conclude the government is merely giving lip service to BUBU.
He was quoted in the media as saying, “We need a deliberate protective incentive to regulate the importation of specialized items, such as medical products. The biggest challenge we face is production. We have a lot of stock in our stores, including raw materials, but we are unable to sell because products from China, India and other countries are flooding the market.”
He then went on to say their venture was at risk due to the tightening financial constraints, threatening jobs and ultimately leading to the possible closure of the factory.
Capt Mukula is correct in saying the exponential growth seen in south East Asian economies during the 1980s and 1990s was directly due to protectionist policies, although the main goal then, was to ramp up export capacity rather than close off the domestic market to outside competition.
His call for protection behind tariff barriers will not go down well with our Chinese and Indian friends. Since 2015, Uganda has been a beneficiary of the Indian government’s Duty-Free Tariff Preference Scheme. In 2022, China also removed all taxes on 98% of Ugandan goods entering the Chinese market.
Evelyn Anite, the state minister for investment in the Ministry of Finance, has promised to look into Capt Mukula’s complaints, but another question is what percentage of MMIL’s raw materials are sourced locally?
There is also some irony in this situation. Capt Mukula is complaining about Indian products when their own business is affiliated to the India-based Mahathi Group which by the way has a division that also manufactures disposable syringes.
Given the rapidly climbing figure for the government’s domestic arrears, now topping UGX10 trillion, one wonders why Mukula is kicking up such a fuss. Why join the list of the many dejected government creditors?
The answer is that the Ministry of Health runs just over 6,000 public health facilities across the country, and NMS buys, stores, and distributes essential medicines and other medical supplies to these facilities. A procurement contract with NMS could help MMIL maintain manufacturing at scale, which means lower per-unit costs.
That makes the government the most preferred customer, also keeping in mind that at present the average capacity utilization of Ugandan manufacturing companies remains low at 54.4%. In other words, almost half of our factories’ machinery and equipment is lying idle. This is reason enough for Capt Mukula to make plenty of noise.
On the other hand, the Uganda Health Federation (UHF) has a membership of just over 4000 private medical facilities. Are we to assume the owners of these hospitals and clinics are also not buying these syringes?
Apart from seeking state interventions, by walking up and down the corridors of power, Capt. Mukula does tell us about their efforts to exploit the wider regional market, which incidentally was a leading motivation for setting up the factory.
Consumer choice is a fundamental of the marketplace and like or not, these choices may not always align with BUBU. Syringes are a leading consumable in the healthcare sector. The challenge for MMIL is to convince the sector why their syringes are the best.
You have to work at winning people over with appropriate marketing strategies that appeal to them. More of: ‘Our products are really good, because of this and that; why not give us a try!’ rather than ‘You’ve got to buy our products because we are Ugandans!’
That said, the government is in a sticky position. As envisioned 10 years ago, BUBU specifically wants to encourage the consumption of locally produced goods and services. The policy goals include greater use of local materials in the production process and at the same time, complemented by an affirmative action program in government procurement.
Unfortunately for all the good intentions, and taking into account the huge amounts of money involved, BUBU was always bound to run into the headwinds of vested interests. These can involve any number of factors and people whose main concern is that things are done their way or there is no way.
For years, local manufacturers have queried government procurement procedures. They are often perplexed by the costly bidding process, the frequent lack of transparency, and payment delays. The Uganda Procurement and Disposal of Public Assets Authority (PPDA) has been trying to address these issues with various levels of success, but too often politics trumps laid down procedures and systems. The bigger the tender, the more hush-hush everything becomes.
Soon after taking over as PPDA Executive Director Benson Turamye in this statement for the Authority’s 2021/22 performance report said, ‘Whereas the performance of the public procurement system is still wanting, several efforts are being made to improve it. These include, but are not limited to the rolling out of electronic Government Procurement, strengthening the contract monitoring system, and improving the PPDA staff capacity.
In early March, the PPDA hosted senior officials from the first 36 government entities that have been on-boarded on the new Electronic Government Procurement (eGP) system. This is not likely to appease Capt. Mukula’s current challenges, but a significant step in the right direction towards greater transparency in government procurement.
A big disadvantage of BUBU is that it makes the government a hostage to its own goodwill towards local manufacturing and industry. Yes, it wants to support Ugandan businesses, but the owners should not use the policy as a crutch and then take swings at the government when things happen to go wrong. How then do you judge the competitiveness of the business if getting a government contract is a make-or-break issue?
