The executive director of Uganda Manufacturers Association, Daniel Birungi, interviwed about the effects of the coronavirus pandemic on the manufacturing sector.
What impact has the coronavirus pandemic had on manufacturing?
We are still recovering from production shocks caused by supply chain disruptions, limited access to materials, repayment of loans with no production, shifting production patterns due to disruption of timetables for factory work, cost of transporting staff and safety measures undertaken by staff, and above all, a reduction in the addressable market for manufactured products. There has been easing of a number of movement restrictions although the curfew limitations and significant traffic snarl-ups mean that operations at factories are still adjusting to the new normal. And since most countries still have restrictions in place or closed borders, there have been delivery delays of externally sourced raw materials and machinery.
What Covid-19 occupational safety and health workplace measures has UMA put in place to protect its members as we get into a new normal?
UMA worked with the Health ministry to develop Standard Operating Procedures for factory level mitigation of the Covid-19 pandemic. These measures have since been passed and are a key component of readiness for resumption of full-scale operations. We have developed a Covid-19 Occupational Safety and Health Workplace Readiness Assessment undertaken by a multidisciplinary team of the Ministry of Health and the UMA. The team is also tasked with carrying out workplace readiness training to ensure safety of members.
The Secretariat is leading by example by transferring operations from physical to online and providing support and training for our members on the use of online tools in their operations. This is a key to limiting physical interactions to reduce the pandemic spreading.
Supply and demand disruptions highlight the urgent need for better railway and water transport systems as cheap alternatives. What say you?
The UMA is firmly pro-water and railway transport as long as the cost of utilising these does not exceed the current costs on road transport. We are on record supporting developing our latent capacity in these two areas but also that they remain optional for individual manufacturers. This will then ensure cost (price and efficiency) competitiveness is maintained as a key driver for switching rather than coercion.
UMA has cautioned that prices of locally-produced goods will rise in the coming months should the pandemic restrictions persist. Is this so?
Yes. The 78-day long lockdown has seen many companies face challenges and with the lockdown, an increment in the final product prices is inevitable although we are working with our members to address the cost drivers resulting in this price uptick. Our position has been and remains that of discouraging any new tax and administrative measures that could worsen the situation. It is time for measures to stimulate production through significant reduction in the cost of factors of production.
What is UMA’s position on’ bank loans in this low production period?
Manufacturing is by nature a highly capital-intensive endeavour often financed by bank loans given the limited individual liquidity in Uganda. Loans are a key source of capital and to mitigate the current low productivity, we have lobbied government to rationalise the Central Bank Rate (CBR) and the Financial Institutions Act and to lower the CBR by at least three per cent to stimulate private sector credit growth.
Has the government shared conditions for applying for the stimulus package for industries facing constraints?
We are aware of a stimulus package providing funding to the Uganda Development Bank for manufacturers. The other measures such as deferral of payment of statutory dues are already in the implementation phase and our members have been engaging the relevant institutions to take advantage of these. The challenge, however, remains in the duration of deferrals with members indicating that the 90-day period is too short and not alive to the significant challenges faced by the sector during the 78 days of lockdown.
That sector players will also be required to comply with their obligations effective July 1, 2020 is also at odds with reality. The UMA is, however, optimistic that our concerns on the stimulus and our suggestions will be taken into consideration and hopefully the incentives are only the first step in a wider discussion on driving competitive industry.
What lessons has UMA learnt from this pandemic on the country’s industrialisation policies?
We need to develop local capacity. The UMA has been campaigning for a policy on import replacement to ensure our economy is resilient against shocks. The pandemic has proved us right and shown the importance of fast-tracking discussions on measures such as the four-band Common External Tariff that protects domestic industry.
The importance of developing whole value chains has also been made abundantly clear. We are optimistic that infrastructure development and primary industry investment can also be considered for public-private partnerships.
Uganda Manufacturers Association