A setback for Uganda’s high quality jobs.

We have just concluded a conference on youth and those involved in research about unemployment and poverty are arguing that Uganda’s middle income status will come from value adding jobs rather than boda boda, chapatti making, taxi driving and sale of unprocessed agricultural produce.  The daily Monitor of June 21, 2013 reported that BAT was closing its factory in Uganda. When you look at this story in isolation, you may not know what the problem is. BAT has been scaling down its operations and transferring high quality jobs elsewhere as part of its global competitive strategy. It doesn’t make sense for them to process tobacco in Uganda. The unsaid reasons are Uganda is a high cost country, the cost of electricity, the cost of transport of course the cost of small things like a bottle of soda and any other locally produced product.  When compared to international markets, Uganda is very uncompetitive and to locate here, you must be attracted by either a tax incentive or the cost of importing what you produce being higher than what you produce. Uganda is very uncompetitive. Competitiveness is driven by productivity and productivity is determined by the ability to produce a product or service at a lowest cost possible. Today china is the lowest cost producer in the world for the manufactured products. China produces goods at an amazing low costs that is not easy to compete with. Japan was framed for importing iron and oil and producing low cost vehicles. This advantage has now gone to China. It is the world’s factory. China churns out different qualities of products for different markets. The lowest quality comes to poor countries like those in Africa. No wonder government is struggling with traders to see how best they can control the poor quality products that are coming in from China. Going back to competitiveness, one of the key determinants of competitiveness is labor and attitude of labor. Check out our attitude to work, we want big salaries, look for promotions in high places and yet nowhere to work. We are late for meetings, we are slow at doing things, we literally write ourselves out of the market through these lassiez faire attitudes which unfortunately make us lose out in international markets. The quality of our labor is another issue. It is not surprising that most international companies bring foreigners in key positions. In fact not only international companies but even local ones. They will bring in an expatriate to head various operations simply because Ugandans are not competitive.

For BAT, if they look back at the exchange rate, they see that Uganda has been slowly losing its competitiveness through the depreciation of the shilling. If BAT was importing goods to Uganda, they would hang in here because for what they would lose through exports they would gain through the import system but this has not been the case. Many local companies who have cat flower export businesses, sale abroad and use that money to bring in other goods and in that process make money. BAT did not have opportunity and therefore had one choice, to get out of Uganda, cut their costs before they completely burn their fingers. Their departure is a tragedy for Uganda. Uganda’s economic growth is going to come from improving productivity in agriculture, creating higher quality jobs through value addition in agriculture which will then spur production of manufactured products for an increasingly wealthy nation. BAT jobs have been such type of jobs, we should therefore cry as we see our middle income status go away from us. This is a setback because those are some of the few jobs that the country has relied on, what lessons do we pick from this? How do we increase our productivity, competitiveness? How do we return such jobs where we have had a competitive advantage to the country? My proposal is very controversial and next to impossible but there it is. I don’t believe in government owing and running businesses but Uganda produces tobacco, the factory producing tobacco can only be located in Uganda to retain the high value adding jobs. At this moment in time, the multinational company like BAT cannot have a factory in Uganda because in the BAT headquarters wherever it is located the decision to continue operation depends on the bottom line contribution by BAT Uganda to the BAT global operations. Our planners should get back to the drawing board.