Lessons from Chinese State-owned Firms for Uganda

By Denis Jjuuko

As Uganda smarted itself from a long protracted war of the 1980s that had left many of Uganda’s state owned businesses either dead or in intensive care, a theory emerged that government can’t and shouldn’t do business. Business, we were told, was the business of the private sector.

Privatization of these businesses became a priority of government. The people who acquired these assets at a song were either not interested in the business or where very incompetent. Stories are told of people who bought machinery so they could sell them as scrap at steel mills instead of refurbishing them to produce some product.

Not all state owned businesses were potatoes. A company like Uganda Grain Milling known for its TipTop bread, Drum Wheat and other household brands was profitable and well run. It collapsed once it was under the incompetence of the private sector player who bought it.

At the same time we were bonding off our state assets at the price of tomatoes, the Chinese state owned agencies were rising.

Today, Chinese state-owned companies rule the world. If they are not building Africa’s expressways or ports, they are busy laying internet cables in the ocean for our connectivity. The issue isn’t that government can’t do business, it can if we put in some work, hire competent managers and give them the necessary tools to work.

Over the last weekend, I visited Jinja where Kiira Motors is building its vehicle plant with the main assembly facilities complete and construction is commencing for the paint shop and road worthiness tests. The construction is being carried out by the UPDF’s National Enterprise Corporation (NEC), the business arm of the Uganda army. Kiira Motors is a government entity. Almost 200km away, in Nakasongola, the same NEC facilities are being used to build buses for Tondeka Metro, a company that wants to change’s Kampala’s public transport.

The vehicle is the most complex consumer product that the majority of people anywhere in the world will ever own and if we can start making them here, it shows the potential for other businesses that can feed it with automotive parts.

Thousands of people working in this industry will, in the future, be able to set up factories of their own that provide services to the automotive industry chain.

However, looking at how the Chinese have excelled with their state-owned enterprises, we could learn a thing or two. Key strategic industries shouldn’t always be given to the private sector. The government can run them.

I have heard that in the energy sector, government agencies are running Isimba Dam and will operate Karuma too. I believe a dam like Karuma is a complex operation but not too complex to be run by ourselves.

This brings my attention to the coffee industry and the revelation that the preferred investor given a litany of concessions had no interest or knowledge in the industry and was being asked if she could help.

Instead of looking out for the connected foreign individuals, what about government using the example of NEC and even Uganda Grain Milling Company (UGMC) before it to do the coffee value addition itself?

There are competent Ugandans who aren’t even corrupt to run these agencies. All they need is to be empowered to work with capital and freedom to hire the people they think are competent. That would also mean freedom to fire those who aren’t aligned.

Salaries must be competitive to match those in the private sector so that state agencies aren’t training grounds or a haven of people willing to work for little official salaries knowing that there are opportunities to dip their fingers in the public till.

Again, like we have seen in China, the state doing business won’t curtail the growth of the private sector. Privately owned businesses can supply government agencies but they can also compete.

What the private sector would need is access to affordable credit and an enabling environment to thrive. Africa must find a way to provide manageable credit.

Lending at 16.5% annually or more is problematic for growth. Again, government can go back and set up banks that can provide affordable credit over a long period of time.

Of course, we need to provide more sustainable jobs with predictable income so that we can grow a real middle class with enough purchasing power. If we are to roast our own coffee, how do we ensure that a significant percentage of it is consumed here?

The writer is a communication and visibility consultant. djjuuko@gmail.com