Emmanuel Tumusiime-Mutebile: Contribution and development of
Uganda's private sector
Remarks by Mr Emmanuel Tumusiime-Mutebile, Governor of the Bank of Uganda, at late
Professor James Mulwana Open Business Symposium, Kampala, 26 February 2014.
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Honourable Minister for Trade, Industry and Cooperatives
Chairman, Private Sector Foundation
Chairman Uganda Manufacturers Association
Executive Director, Private Sector Foundation
Ladies and Gentlemen
I would like to begin by thanking the Board of Directors and the Management of the Private
Sector Foundation for graciously inviting me to speak at this occasion, when we remember
the life and career of Professor James Mulwana and the immense contribution, in multiple
fields, which he made to this country. I want to commend the Private Sector Foundation for
the initiative to celebrate the legacy of a man, who rose from humble beginnings to become
one of Uganda's leading entrepreneurs and most probably its greatest industrialist through
hard work and talent for business, combined at all times with honesty and humility.
James Mulwana served on many boards of directors and committees of various national,
regional and international organisations as Chairman, Member, Trustee and Patron, in
addition to being Thailand's Honorary Consul General to Uganda. He received many awards
in recognition of the leading role which he played in building the private sector in Uganda.
Few would doubt that both the nature of his success and the way in which it was achieved
are an inspiration to Ugandans, and especially to those who seek to pursue careers in the
world of commerce and industry.
James Mulwana was, first and foremost, an industrialist who established and built up several
successful industrial enterprises. There may be people in this country who had never heard
of his name, but it would be very hard to find anyone who has not purchased or used one of
the products from his businesses: the Nice pens; plastic products in our homes; batteries for
vehicles; and dairy products.
It was as an industrialist that James Mulwana made his most profound contribution to the
growth of the Ugandan economy and it is on the lessons we must learn from his endeavours
in this sector that I would like to dwell this afternoon. Unfortunately, the success which James
achieved in manufacturing and agro-processing stands out because it is so unusual. Formal
sector manufacturing in Uganda, which includes agro-processing, accounted for only
6.1 percent of GDP in 2012/13, a share which has only slightly risen since the start of the
millennium when it stood at 4.9 percent of GDP.
The formal manufacturing sector's failure to generate much faster growth over the last
decade is a major cause for concern, because in developing economies this sector plays a
crucial role in driving productivity growth and the structural transformation of the economy.
Average real growth of formal sector manufacturing over the last 13 years was a respectable
6.9 percent, but that is still far lower than the growth rates of the sector which are needed to
propel structural transformation.
The failure of the manufacturing sector to become the engine of growth of our economy can
be attributed, I believe, to both weaknesses which are internal to many businesses in
Uganda and to constraints in the business environment. I will briefly elaborate on these
problems.
Let me start with the way in which businesses are managed, because it is in this area that we
can learn so much from the career of James Mulwana. His businesses were successful over
the long term because he understood and put into practice the fundamental principles of
managing a successful commercial business in a competitive market economy. A successful
business must first and foremost, have sustainable profitability as its priority objective. It must
also re-invest the bulk of its profits in improving efficiency; if it does not it will lose out to more
efficient competitors. No business will remain viable if profits are instead taken out to fund
the conspicuous consumption of its owners. Most businesses need to borrow money from
banks or other lenders, but borrowing should be prudent and should only be used to fund
expenditures which benefit the business and can be repaid from the cash flow of the
business without disrupting its operations.
No business will be successful in a competitive market unless it employs modern
professional management, with the requisite qualifications and experience. A business which
is used to provide employment for the relatives of the owners will lack the necessary
expertise to survive. Finally, the sustainable success of a business requires building a
reputation among its customers for high quality and reliable products.
These principles are important for businesses in all sectors of the economy, but they are
particularly important for those in the manufacturing sector. This is because manufacturing
products are tradeable across borders, so markets for these products are very competitive.
In competitive markets, firms cannot afford to stand still. To thrive they must continuously
improve their efficiency which is only possible if they generate profits and then re-invest
these profits in the business.
Unfortunately these principles of modern business management are not universally applied
in the private sector in Uganda, which is one of the reasons why many companies fail to
generate sustainable profits, struggle to repay their loans, suffer from low levels of
productivity and cannot increase their market share. It is also one of the reasons why foreign
owned companies are more successful than many domestically owned companies. To be
successful on a sustainable basis, Ugandan entrepreneurs must learn from the success of
James Mulwana and adopt a modern professional approach to the management of their
businesses.
I would now like to turn to the overall business environment in Uganda. There is no shortage
of independent evidence of the shortcomings of the business environment in Uganda. The
World Bank's Doing Business Indicators for 2014 ranks Uganda against other countries in
the world on several different features of the business environment. Overall, Uganda ranks
132nd out of 189 countries, a fall of 6 places from 126th in the previous year. Uganda ranks
very poorly in several important facets of the business environment including getting the
relevant permits to start a business, the lack of reliable power supplies, registering property,
dealing with construction permits and trading across borders. The World Economic Forum's
2012 Executive Opinion Survey, which is reported in The Africa Competitiveness Report
2013, sheds further light on the problems facing the business sector in Uganda. The
Executive Opinion Survey asked respondents to select and rank the most problematic factors
for doing business. The respondents in Uganda ranked corruption as the most problematic
factor for business.
The quality of the institutional environment for business plays a critical role in determining
private investment rates. A poor business environment increases both the costs and the risks
of doing business. Weaknesses in the business environment are a serious impediment to the
mobilisation of private investment, an impediment which cannot be mitigated by offering tax
holidays. Uganda's private investment rates remain fairly modest at only 18.5 percent of
GDP in 2012/13, which is less than half of the private investment rates achieved by fast
growing developing economies in Asia. If Uganda is to mobilise the much higher levels of
private investment which are necessary if its vision of becoming a middle income country is
to be attained, the institutional weaknesses in the business environment and the other
constraints which raise the cost of doing business, such as the poor quality of infrastructure,
must be rectified.
The long term development of the Ugandan economy will only be possible if the private
sector is the engine of economic growth and if the manufacturing sector plays a prominent
role in the economy. The business career of James Mulwana demonstrates that the
Ugandan private sector can succeed, provided that it follows his example of applying modern
commercial principles to the management of business. The public sector must also play its
part in reforming the business environment in Uganda, so that it becomes more attractive to
private investment.
James Mulwana was an inspiration to Ugandans. May His soul rest in eternal peace.