President Museveni has instituted an operation to strengthen security around all Industrial Parks and factories in the country amid fears of possible economic sabotage.
“I have ordered for an ‘Army Ordered Operation’ in all Industrial Parks,” said Museveni.
“All security organs, including local security guards, will generally be treated like soldiers. If one loses a gun, he/she will have to face Court Martial. And the penalty is either seven-year imprisonment or execution,” he said.
He said that all factories will be installed with CCTV cameras pending the installation of centrally commanded cameras around premises.
The President was Wednesday speaking to a delegation of over 120 Chinese investors at State House Entebbe to calm them over the scare prompted by the spate of robberies and thuggery attacks in the localities of their investments and factories notably around Kampala City Industrial Parks, Mukono and Luweero Districts.
Some investors have been killed while others had their possessions including money worth millions of dollars stolen.
This came against the backdrop of a negative social media campaign with suspected criminals threatening the lives of Chinese investors.
Amid this crisis, the Chinese embassy asked President Museveni to arrest the situation.
Speaking at State House Entebbe, President Museveni re-assured the Chinese investors that as some of them have lived in Uganda for a long time and appreciate the country has been peaceful and will remain peaceful.
He said the Chinese should not worry about the recent wave of colluded robberies and attacks where money has been robbed.
“To me, this is a simple problem to solve. It is not the problem we used to have in the past citing terrorism, rebel invasion in the Rwenzoris, insurgency in Northern Uganda and Karimojong cattle rustling,” said Museveni.
“It is a problem that requires to be handled with technical devices to see, hear and smell, speed of getting to scene of crime and quick communication that can help to yield quick results,” he said.
The economy would suffer if the Chinese chose to pull out their investments worth billions of dollars from Uganda.
In Tororo, Museveni recently commissioned the first phase of the Sukulu Industrial town which has an annual turnover (the value of the products from there per annum) of US $500 million.
This industry is expected to stop the annual imports of fertilizers of US$ 50 million, steel products worth US$ 403million and create 3,500 jobs after the final phase.
Barring a recent slowdown, Uganda has achieved robust economic growth over the past decade; with positive per capita GDP and a higher average growth rate than that for sub-Saharan.
Whilst, this positive economic performance is mostly attributed to domestic factors such as sound macroeconomic policies and strengthened institutions, Uganda’s growth trajectory has also been strongly supported by increased economic engagement with China.
For example, China’s insatiable demand for raw materials which created a global commodity boom, served not only to improve Uganda’s terms of trade, but also led to higher export volumes.
Still, Uganda’s deepening economic ties with China have not come without controversy; with criticism abounding on the exploitative nature of China’s relationship with Africa and recent protests in Kampala on issues ranging from poor working conditions to competition from Chinese entrepreneurs.
Nevertheless, the relationship holds many potential long term benefits, such as the relocation of manufacturing value chains from China to Uganda which has an abundant supply of labour, access to alternative forms of development financing that centre on formerly under-financed sectors such as infrastructure and energy, and increased trade and FDI.
China’s model of growth has since generated huge demand for energy and other natural resources (e.g. petroleum, iron, copper, and other metals) and resulted in upward pressure on global commodity prices.
Uganda, similar to most sub-Saharan economies that are primarily commodity exporters, gained significantly from this windfall, which saw the percentage of raw material exports to China jump drastically from 17% in 2007 to well over 50% by 2015
Additionally, apart from trade and investment, another key facet of China’s engagement in Uganda, has been infrastructure finance, owing to the fact that a key binding constraint to Uganda’s economic growth and integration with the global economy has been its deficient infrastructure.
For Uganda, this deficiency in infrastructure spans roads, ports, energy, water and sanitation. In fact, according to a recent IGC Growth Brief, only 17% of Uganda’s national roads are paved, only 25% of the country’s railway network is operational, and its quality of trade and transport-related infrastructure – as measured by the World Bank’s Logistics Performance Index (LPI)- is far below the sub-Saharan African average.
Mindful of this situation, both the Ugandan government and external donors have now prioritised the removal of this constraint to growth; as reflected by the increase in infrastructure development, as well as the surge in external financing of infrastructure projects.
Most of the financing to the transport and energy sector takes the form of state-to-state, non-concessional deals and comes from the Export-Import Bank of China (China Exim Bank).
Examples of the major state-to-state deals signed with China Exim Bank in Uganda include: US$1.4 billion and US$483 million for Karuma and Isimba hydropower dams as well as US$350 million for the construction of the Kampala-Entebbe express highway.
Notably, these infrastructure projects, funded by China Exim Bank, present a mixed blessing for countries like Uganda.
On the one hand, they facilitate the low-cost production of large-scale infrastructure projects, without the relatively lengthy and bureaucratic processes that traditional multilateral development banks would normally require.
However, they tend to take the form of “tied contracts” with provisions that offer a clear advantage to the funding country, such as preference to Chinese construction firms (often selected through a non-competitive bidding process, in stark contrast to projects financed by multilateral banks like the World Bank).
For countries like Uganda, the Chinese migrant workers bring missing skills, cheap and efficient construction of infrastructure, and useful links to the world’s second-largest economy.
At the same time, Uganda faces a rapidly growing population that will require the creation of nearly 1 million jobs per year.
It would thus be mutually beneficial for Chinese firms operating in Uganda to employ and upgrade the skills of the local labour force.
The transfer of skills is expected to prove even more important once these projects are completed and the operation and maintenance is handed over to local authorities or firms.
The final trade-off associated with China’s external financing of infrastructure projects, is rising debt vulnerability especially for countries with low domestic savings and without good institutional or policy frameworks in place (this is because producing growth dividends from project investments depends as much on institutions and policies, as it does on finance).
For Uganda, which has so far committed up to US$ 2.3 billion in contracts with China Exim bank and is soon to take on more debt for projects like the Standard Gauge Railway, debt sustainability is a growing issue of concern; underscored by the fact that the country faces a low tax-to-GDP ratio relative to its regional peers and significant public investment challenges.
Uganda’s debt as a percentage of revenues has risen by 54% since 2012 and is expected to exceed 250% by 2018, raising calls for caution and improved public investment management from various policy circles including the IMF, World Bank and Moody’s, which downgraded Uganda’s long-term bond rating in 2016 citing deteriorating debt affordability.
To guard against a resurgence of unsustainable debt levels (as was experienced with traditional donors in the 1970s and 1980s), experts have since urged Government of Uganda to ensure a careful sequencing of its debt obligations to China as well as guarantee that the current infrastructure projects yield both growth and revenue dividends.
These risks and trade-offs notwithstanding, China’s increased engagement with Uganda is mutually beneficial and presents several opportunities for growth and development, including: the re-location of manufacturing value chains from China to Uganda; an alternative to traditional development financing and increased trade and FDI linkages.
However, to effectively harness these prospects, Uganda must put in place the right policies and incentives.
For example, it must ensure a conducive investment climate with reliable power and transport links – a pragmatic approach to achieving this, while taking into account the government’s constraints and limited capacity, is through the active use of industrial parks and special economic zones (SEZs).
The success of C&H Garments in Rwanda’s Special Economic Zone, which took off in 2014, and was shipping clothing for export by July 2015 is just one example to show the potential that such a targeted approach can have for Africa’s industrialisation process.
Mr. Museveni noted that if the Police can be very vigilant and react to the criminals, it becomes a disadvantage to the thieves.
He, however, cautioned the investors not to keep money in the factories’ premises.
“My suspicion is that there must have been internal collusion in these related incidences,” he said.
He advised that if it so happens the investors ought to deal with the nearest police immediately using the quickest possible means of communication.
Mr. Museveni further assured the investors who have fallen prey to robbery of their cash, that the Police are seriously hunting for the criminals using all methods of detection to uproot the criminals.
He thanked the Chinese investors for choosing to come and invest in Uganda.
“Prosperity means two people. The producer and buyer of goods and services and becomes progressive and if the two key elements are big in numbers. The Chinese population of 1.3 billion people and the African population of nearly 2.5 billion people, will be good prosperity in partnership in the future,” he stressed.