Major productions and industrial units
Manufacturing in Uganda mostly focuses on agroprocessing. This comprises processing of foods and beverages from agricultural foods, manufacture of leather and leather products from livestock skins and hides, manufacture of textile fabrics and garments from cotton.

The Textile and Garments sub-sector:
This sub-sector was once a thriving industry in Uganda in the 1960s. However, it declined during the civil wars of 1970s and 1980s. Uganda’s produced cotton is all exported in unprocessed form. Investment opportunities exist in processing of cotton. There are presently 3 textile fabric industries in the country. One of them, the Bugolobi-based Apparels Tri-Star, is exporting its products to the United States under the African Growth and Opportunities Act (AGOA) initiative.

The Foods and Beverages sub-sector:
This sub-sector is essentially for processing and preservation of foodstuffs and drinks. There are limited fruit processing industries in Uganda. The processing is confined mainly on the extraction of juice from mangoes, pineapple and passion fruits. Extraction for purposes of preservation is still limited.

Meat processing industry:
Meat is processed in small quantities in Uganda. There are so far only 3 processing units in the country namely:
• Lubowa Investments Limited, Seguku, Entebbe Road.
• Meat Process (U) Limited, Ggaba Road, Kampala.
• Uganda Meat Industries Limited, Port Bell, Kampala.

Diary Processing:
A lot of milk still goes to waste unprocessed. Uganda produces over 1,000 million litres of milk per year. There are however few diary processing units that produce pasteurized milk, yoghurt, cheese and flavoured milk.
Other major productions and industrial units include plastics manufacture, aluminum products manufacture, animal feeds production and leather tanning.

Economic importance
The manufacturing sector is presently one of the main sources of revenue to government through taxation. Industrial production and trade in locally manufactured goods employs about 5% of the labour force in Uganda today. The sector also provides a ready market for locally produced agricultural products such as cotton, milk, pineapples, mangoes and passion fruits.

Performance of the sector
The manufacturing sector registered growth estimated to be between 5-8% in the 2003/04 FY. The main areas of growth were textiles, cigarettes, sugar and telecommunications. However, a big cloud hung around the sector to the uncertainty about the Customs Union. Being the least developed economy of the three East African countries, manufacturers say the proposed Customs Union will make or break the country’s industrial set-up. Although they support the CU proposal, they believe that five years is the minimum period for investors to adjust to the upcoming competition. Other factors like power rates, falling value of the shilling, high interest rates, increased inflation and the Kony war also affected the manufacturing sector in varying proportions.

The Uganda Manufacturers’ Association (UMA) continued with its role in policy advocacy in various areas notably budget submissions. Revenue from the association-organised trade fairs went up by 16%.

Government policy in terms of privatization
The Public Enterprises Reform and Divestiture (PERD) Statute was enacted to provide the legal frame-work for the privatization programme in Uganda. The statute was amended in January 2000 to clarify the roles and responsibilities of the various parties involved in the privatization process and to streamline the decision making process, including the role and composition of the Divestiture and Reform Implementation Committee (DRIC).

A total of 117 enterprises have been divested leaving a balance of only 31 since the privatization policy was implemented in the early 1990s. During the 2003/04 FY, Nile Hotel International and the Uganda Electricity Distribution Company Limited have been concessioned to the private sector. Government officials say Ugandans have been the main beneficiaries of the privatisation process, buying 47 public companies or 60% of the firms put up for sale.

Before the end of September 2004, government will have offered the remaining shares in the Development Finance Company of Uganda (DFCU) for sale, by way of initial public offer, through the Stock Exchange. During the 2004/05 FY, government will divest the following enterprises: National Insurance Corporation (NIC),

Kinyara Sugar Works and a 20 per cent stake of the New Vision Printing and Publishing Corporation through public offering of shares. In addition, a joint concession of Uganda and Kenya Railways will be undertaken. Government also plans to continue implementing actions designed to improve the performance of parastatals which are not slated for divestiture in the medium term.
In order to promote public participation in privatization, priority will be given to divesting the remaining well-managed public enterprises, through the public offering of shares.

Government incentives
Uganda’s fiscal incentive package provides for generous capital recovery terms, particularly for industrial investors whose projects entail significant investment in plant and machinery and whose investments are medium/ long terms. The incentives package includes:

Category 1 - Initial Allowances
The incentives covered in this category are capital allowances expenses which are deductible once from the Company’s Income.
Initial allowances on plant and machinery located in;

Category 2 - Deductible Annual Allowances
Depreciable Assets specified in 4 Classes (sixth schedule) under declining balance method;

Category 3 - Other Annual Depreciation Allowances
Normal depreciation allowances with the addition of a special 50% initial allowance on plant and machinery means that in the crucial early years of a project, the effective corporation tax rate is considerably less than the nominal 30% rate. The enterprise keeps a high proportion of its cash flow and income for further investment.

In addition to the above, Uganda offers a zero rate of import duty tax on plant and machinery as defined in the sixth schedule Chapters 84-85 of the HS Code as well as a uniform corporate tax rate of 30% which is lower than in most African countries. Provisions exist to allow for assessed losses arising out of company operations including the loss from the investment allowance to be carried forward. Such losses are allowed as a deduction in determining the taxpayer’s chargeable income in the following year of income. Uganda also has a fully liberalized Foreign Exchange regime with no restrictions on the movement of capital in and out of a country.

Challenges facing manufacturing
Uganda still faces many structural challenges accessing world markets. Even if President Yoweri Museveni has personally spearheaded the struggle to convince the developed countries open up their markets to industrial goods from developing countries, this is yet to result into tangible results. Billions of dollars continue to be doled out to farmers in Europe, United States, Japan and Korea, making them produce far more food than these countries can consume. The resultant is an excess production of food on the global market creating an artificial glut. The net effect is food flowing from the rich nations to the poor countries at far lower prices than the farmers in those countries are able to produce. This is seriously affecting the development of food processing and other manufacturing industries in Uganda.

Besides, Structural Adjustment of Uganda’s economy continues to pose great challenges as well as opportunities for manufacturers and indeed for all investors. Although inflation has been controlled successfully over the years, industrialists have had to face challenges poses by the instability of the shilling and retrenchment which has cost many people their jobs and incomes. Manufacturers have to accept this challenge to their competitive position and expansion into regional markets.