Ugandan manufacturing is not in a great place. High electricity prices and poor infrastructure have stymied investment, leaving the sector languishing behind at just 9% of GDP.
Yet Uganda is not too different from its neighbours. Manufacturing may be bigger business in Kenya, but Tanzania and Rwanda are relative laggards. If Uganda wants to develop, it can’t continue to coast along. It needs to build up its manufacturing base to transform its economy.
Fortunately, companies in Uganda aren’t just sitting back and waiting, they’re actively seeking out manufacturing opportunities. I visited one such company on a recent trip to Uganda, Simba Automotives, which makes the brilliantly named ‘UG Boss’ motorbike.
Anyone who’s been to Uganda knows how important motorcycles are in the country. They are not just a key means of personal transport. The (in)famous boda bodas – or motorcycle taxis – offer a cheap, convenient way to dodge traffic on busy roads. With 120,000 registered in Kampala alone, boda bodas provide a living to many people in the capital and beyond.
Despite its small economy, Uganda’s bike market is sizeable. In 2014, motorcycle imports were valued at $58 million and the country ranks among the top 40% of global importers. But rather than ship them in, why not make them at home?
Making it big in the bike business
To promote domestic manufacturing, the East African Community (EAC) – the regional economic community that brings together six East African nations – grants a 15% tax waiver to manufacturers who import bike parts to be assembled in the region. The exemption is granted on the condition that producers source some parts from EAC members.
EAC policies aside, manufacturing businesses are doing all they can to build themselves up. In a small factory in Kampala, around 20 staff at Simba Automotives assemble motorcycle parts from India. For now, only the chassis is manufactured in Uganda, but the plan is to gradually source more components from within the country’s (or region’s) borders.
Importing and assembling parts is not as common as it could be in East Africa. While labour is relatively cheap, transportation and utilities are so expensive that assembly is not always profitable.
Motorcycles are a good example of this. Even with EAC measures in place, motorbikes made in Uganda are still more expensive than imports. Intent on not just surviving but growing, Simba is overcoming this challenge by adapting the UG Boss to meet the particular needs of Ugandans. The bikes feature phone chargers and GPS tracking, helping convince buyers to pay more. Such features might seem unnecessary, but they cleverly cater for the Ugandan market. Boda boda drivers need their phones charged at all times to be reached by customers, and motorbike theft is a common occurrence.
Simba Automotives is also expanding into the corporate market by offering branded bikes, repairs and business rates. So far, this strategy is paying off. Simba has grown, amassing 28 active dealers across the country since its establishment in 2014. However, the road ahead won’t be smooth. UG Boss will need more features, better fuel efficiency and lower prices to win a larger share of the market.
Fuelling a manufacturing boom
So why all this talk about bikes? The reason is domestic production could signal a new and potentially transformative step for Ugandan (and East African) manufacturing. History is dotted with examples of countries that successfully built up manufacturing industries by finding their niche. Vietnam’s motorcycle industry was virtually non-existent two decades ago, but now employs thousands of people, generating annual exports of over $400 million.
With the second youngest population in the world, Uganda desperately needs what manufacturing can bring: jobs, skills, production and exports. Uganda’s workers are predominantly engaged in agriculture, but as mechanised farming increases, labour-intensive manufacturing offers the best chance of generating jobs.
Motorcycles are simple enough (especially when assembled from parts) to be readily produced, but complex enough to allow workers to develop new skills. Motorcycles and similar goods could also increase Uganda’s resistance to shocks by reducing its reliance on exports of raw materials, like cocoa and coffee.
Tax waivers will only go so far in building up firms to drive such a transition. To elevate the state of manufacturing in Uganda and East Africa as a whole, companies like Simba will need to double down on increasing competitiveness and decreasing prices to make inroads into neighbouring markets. This will take time, but it can be done through a combination of companies’ efforts and public policies – take the UG Boss as proof.