Manufacturers have called upon the Public Procurement and Disposal of Public Assets Authority (‘PPDA’) to standardize the bidding requirements across all sectors of the economy to eliminate irregularities in public procurement. This request was conveyed in a meeting held between manufacturers and representatives from PPDA on 17th June 2020.
The meeting deliberated on hindrances to manufacturers’ full participation in the public procurement process and sought to identify actions through which PPDA could improve the local content in public procurement.
Globally, the COVID-19 pandemic has awakened economies to the importance of import substitution as they navigate through the shocks of the pandemic with public procurement emerging as a key vehicle for the economic recovery of countries through implementation of preference and reservation schemes that promote the utilization of local labor, goods, and services.
- UMA noted that the liberty given to MDAs, local government and other public entities to determine the technical requirements for bids was often abused to eliminate the local manufacturers and suppliers through unnecessary bidding requirements. For instance transformer manufacturers are required to have had their companies established for more than 10 years, a requirement that technically throws them out because the local transformer industry has been in existence for less than10 years.
- UMA called upon PPDA, as the regulator to determine the nature of bidding requirements against the reservation guidelines cutting across to all government ministries, departments, agencies and local government and highlighted the need for a robust PPDA armed with powers to enforce against errant accounting officers if the guidelines were to be respected
- Noting the successes arising out of the Reservation Guidelines thus far, UMA informed the PPDA team that new capacities had emerged that required mainstreaming into the Guidelines further proposing that a standard review process be instituted to ensure that emerging capacities were recognized and the sectors included periodically. UMA noted that sectors with emerging capacities included furniture, paint, transformers, steel, printing, mattresses and foam products, and tiles among others, and that UMA would formally engage PPDA to include these into the next reservation guidelines.
- Responding to a question on available local capacity to supply, UMA noted that capacity was a function of market access and that in light of the manufacturing operating at only 56% of installed capacity, existent capacity was expandable based on need. UMA noted that in the absence of orders from government for sectors such as transformers where government is the only procurer, it was unfair to expect sector players to demonstrate high levels of prior supplies as a pre-condition for bidding.
Remarks from PPDA;
- The Executive director of PPDA, Mr. Benson Turamye, pointed out that PPDA plays an oversight role of the procurement process to ensure transparency and fairness since the PPDA Act, 2003 decentralized public procurement and assigned the roles of procurement planning, bidding, award and implementation of contracts to Ministries, Departments and Agencies (MDAs) and Local Governments.
- The ED, PPDA presented a paper on the contribution of public procurement in the implementation of the Buy Uganda Build Uganda policy, and re-echoed PPDA’s commitment towards advancing the BUBU policy.
- He highlighted additional PPDAs openness to new sectors for inclusion in the reservation guidelines and tasked UMA to coordinate submit the areas of emerging capacity for consideration by the procurement body.
- He also urged the manufacturers association to clearly define what qualifies to be a locally manufactured product as they looked into adding more capacities to the reservation guidelines.
- UMA to develop a comprehensive document detailing the challenges faced by local suppliers with proposed interventions that are expected from PPDA.
- UMA to submit a formal request for additional sectors for recognition in the reservation guidelines with justifications for each emerging sector.
- PPDA and UMA to work together in exploring modalities of unbundling Engineering, Procurement and Construction contracts that served to lock out local capacities under the strict contract clauses.
- PPDA and UMA to work together to influence negotiated terms with development partners
- PPDA to enforce the implementation of the guidelines and ensure that action is taken against MDAs that fail to comply with the set guidelines.
- PPDA to revise the current reservation thresholds to create flexibility for emerging capacities that have evolved since the earlier reservation guidelines.
- PPDA and UMA to hold quarterly meetings to track progress on agreed points
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UMA’S Persistent Lobbying Yields Results
It is increasingly clear that government is appreciating UMA’s lobbying and advocacy through taking steps to make the ‘Buy-Uganda Build-Uganda’ mantra a reality.
Government recently announced the tax policy changes in the customs following amendments regarding customs duties and laws for the financial year 2019/2020 that saw an increase in import taxes of certain products that were causing unfair competition for local manufacturers as listed in the Downloadable document Here.
The changes that are expected to take effect on July 1, will incentivise local manufacturers by creating a levelled playing field against imports, while signalling investments into production of such goods which mainly take up local raw materials.
Manufacturers of products such as toilet paper, exercise books, toothbrushes, biscuits, shoe polish, sugar, carton boxes, iron sheets or steel wool, mattresses among others are some of the direct beneficiaries of UMA’s persistent lobbying.
In a bid to promote the growth of local manufacturers in the various sectors, UMA has been lobbying government through Ministry of Finance, Planning and Economic Development to make necessary tax policy adjustments specifically regarding customs duties as an offer of market space to the local industry. Such a move will allow suppliers of raw materials to get market, while industries expand, grow capacity and employ more people thus defining what industrialisation for job creation and shared prosperity is all about.
Even as we celebrate this milestone, we are unwavering in our commitment towards promoting and protecting interests of all manufacturers through coherent policy advocacy with focus on the mainstreaming of Local Content in all sectors; lobbying for sanctions against accounting officers who fail to adhere to the terms set out in the PPDA reservation guidelines with continuous lobbying of government to fast-track the local content bill which will facilitate the increment in procurement of locally produced goods.
President Yoweri Museveni has assured manufacturers that all of them, including small and micro enterprises, will get electricity at a cheaper cost. However, the tariffs reduction would be implemented in phases, starting with large industries that are getting electricity at five US cents.
The President said with the refinancing of the Bujagali power project, electricity tariffs have to go down. This was contained in Museveni's speech delivered by the finance minister, Matia Kasaija, at the opening of the 26th International Trade fair yesterday. The event is taking place at the UMA showground at Lugogo, Kampala.
"Unfortunately, affordable power for all manufactures was delayed by people who could not understand centrality in our transformation. As I indicated to you earlier, the cost of power shall continue to reduce until we realise five US cents per kilowatt hour for all manufacturers," said Museveni.
He added that so far, big manufacturers have accessed cheaper power. With enough power, the government will achieve its priorities in manufacturing under the Vision 2040, where the Government wants to ensure that 50 of Uganda's exports are manufactured goods. The President said that is why the Government is supporting the Buy Uganda Build Uganda (BUBU) campaign. He said he had already instructed the Public Procurement and Disposal of Public Assets Authority to work with manufacturers to create reservation guidelines that support local sourcing. Museveni said such a move would increase foreign earnings for the country and also create employment for the youth.
He pointed out that recently; he commissioned a Chinese manufacturing facility in Kapeeka, which will save Uganda $35m annually in addition to earning Uganda $15m in exports. Museveni revealed that a spinning mill would soon be established in Uganda, which will consume about 20 of Uganda's cotton that now stands at 150,000 bales.
"This means I need additional four such factories to consume more cotton and lint to guarantee a decent farm gate price for all cotton farmers now aggregating 2.5 million," he said.
The trade minister, Amelia Kyambadde, said from the time the BUBU policy was launched, a lot has been achieved in terms of creating market opportunities for locally produced products. She said new regulations are being developed on a reservation scheme that will make it mandatory for all government ministries, departments and agencies (MDAs) to procure products made in Uganda.
Through the BUBU policy,' Sinohydro Corporation Limited, which is undertaking the construction of Karuma hydropower project, is now procuring all cement and iron bars from local manufacturers.
Hima Cement alone has a contract to supply cement worth $5,667,056 (about sh20.7b). She added that in the last financial year, the government MDAs bought furniture worth over sh350m from the Uganda Prisons furniture workshop.
The furniture was purchased by State House,Equal Opportunities Commission," the finance ministry, works ministry and the Standard Gauge Railway project.
Furthermore, Picfare/Nytil has signed a contract with the Uganda National Medical Stores to supply uniforms to all government hospitals, Kyambadde said. In the services sector, through the Petroleum Authority of Uganda, local companies have supplied local products and services worth $37.24 m (about sh141b).
The supplies have been in form of food, beverages, drilling and production materials as well as construction materials. There also services such as catering, transport, security, land surveying, clearing and forwarding.