Depending upon when a survey was conducted and the nature of the sample, each set of firms ranks the most bothersome constraints differently. Malawian firms for example, rank tax rates the highest followed by the access to finance – a hardy perennial – followed by corruption, availability of land, shortage of electricity, trade regulations, and so forth (World Bank 2018). Smaller firms owned by individuals or families have a harder time raising capital compared to the large groups with deeper pockets and more diversified operations. In all three countries, industrialists complain about the inadequacy and unreliability of the energy and transport infrastructures that undermines their competitiveness. The shortage of managerial and technical skills is another serious problem and Rwandan firms controlled by large groups – and those in other countries as well – have had to import high priced expatriate managers and skilled workers from elsewhere in Africa and from Asia to run their firms, help to assimilate imported technology and do the necessary trouble shooting especially in the earlier start-up stage of production.

It barely deserves repeating that infrastructure gaps weigh heavily on manufacturing. Although plants can generate some or all their electric power and develop in-house logistics services complete with a small fleet of trucks, these add to overheads. Ugandan factory owners must cope with erratic power supplies and with relatively high tariffs and cost of fuel.<sup>83</sup> The cost of electricity in Rwanda at 20 cents per KWh is among the highest in the world as are transport costs (Hausmann and Chauvin 2015). Prolonged underinvestment has resulted in “serious inadequacies in the domestic transportation and logistics infrastructure (road system, storage, and ancillary facilities), which slow down the movement of high volume products” (Obwona et al 2016, pp. 25).

Although manufacturing may be a small part of the economy in all three countries, it still has a valuable role to play in creating jobs, generating exports and inducing the emergence of formal services. This is because some of the most productive services are intermediate inputs e.g. insurance, trade financing, engineering, consulting, logistics, R&D, design etc. Many of those support industries in the middle and upper income countries. In the absence of manufacturing development, business services have a harder time gaining traction. Hence, a deepening of the

> 83 Among African economies Uganda is one of a tiny number that levies electricity tariffs that cover the operational and capital expenditures. Rwanda and Malawi are among the majority that incurs quasi-fiscal deficits – amounting to 2.5 percent of GDP for the former and 1.0 percent of GDP for the latter (“the quasifiscal deficit is the difference between the net revenue of an efficient electricity sector covering operational and capital costs and the net cash collected by the utilities”). Kojima and Trimble (2016, pp. 7, 2) ascribe these to shortcomings that are widespread in Africa, “in operational efficiency, [coupled with] high costs of small-scale operation, and overreliance on expensive oil-based electricity generation [that] have increased costs of power supply, while the inability of many customers to pay for electricity services and underpricing have reduced utility revenues. One consequence of high costs and low revenues is the inability of utilities to meet demand and deliver reliable electricity—a deficiency exacerbated by years of `”` under spending on maintenance and expansion . <u>https://openknowledge.worldbank.org/bitstream/handle/10986/25091/108555.pdf?sequence=10&isAllowed</u>

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