Guidelines for local content contracts launched

October 26, 2017 in Business, Policy by Editor

October 26— The government has officially launched the guidelines in a reservation scheme under the Public Procurement and Disposal of Public Assets (PPDA) Act, which is expected to promote local content in public contracting for goods and services.

At least 30% of the total contract value above UGX45billion (about $12 million) won by a foreign firm must be reserved for local suppliers in a move intended to rope in Ugandan companies and complement the Buy Uganda Build Uganda (BUBU) policy.

“I believe that we have enough capacity here to supply high quality goods and services, comparable to the ones we are getting from foreign suppliers. Therefore, in order to boost our own human capita development, create jobs, boost production for local consumption and export, and chase poverty away, government will reserve 30% of the value of works during procurement to local suppliers,” Matia Kasaija, the finance minister said during a news conference in mid-week.

Kasaija said the new guidelines are expected to direct the procurement of works through local sub-contractors for such items as uniforms and clothing material, voltage cables and selected medicines.

BUBU is a centrepiece of the trade ministry’s aims to support domestic manufacturing and industry. It was launched earlier this year by Prime Minister Dr. Ruhakana Rugunda to promote consumption of local goods and services as well as create awareness among consumers about the advantages of buying ‘Made in Uganda’.

All contract works worth UGX10 billion (about $2.7 million) and below have been reserved for Ugandan firms, as part of efforts to raise local capacity. The new measures come after surveys have shown that more local firms are gaining capacity to undertake works contracts in recent years.

Statistics from PPDA indicate that more than half (57.7%) of government contracts awarded in the financial year 2015/2016 went to local contractors. Benson Turamye, the Director for Performance Monitoring at the PPDA encouraged partnership or joint ventures between local and foreign firms as the best way to ensure both benefit from the new measures.

Although the new guidelines do not specify penalties for firms that don’t follow the new rules, Turamye said PPDA will nonetheless take action against those who do not comply.

“If foreign firms are found not to be reserving the percentage for locals, we can recommend disciplinary action or ask the Secretary to the Treasury to withhold their funds,” he said.

The finance minister said supply of military, police, prisons and medical uniforms and clothing materials has been ring-fenced for local companies that are certified by the Uganda National Bureau of Standards (UNBS) and registered on the PPDA Register of Providers.

“If we do not ring-fence some of these areas for our local people, we shall not achieve our objectives of stimulating the growth of industry, creating jobs, chasing poverty away, boosting production for local consumption and export, and human capital development which are emphasized in the National Development Plan II and the Vision 2020,” Kasaija said.

Kasaija said procurement of electrical cables and conductors by the energy ministry, the Rural Electrification Agency, electricity transmission and distribution companies and the Kampala Capital City Authority shall also be sourced from local manufacturers.

He said any medicines and medical supplies that are manufactured locally will no longer be procured from foreign entities.

Simeon Wanyama, who chairs the PPDA Board, said the promotion of local content will lead to increased access to business growth opportunities, stability and diversity of markets, as well as higher productivity and use of new technology. “The wider benefits for the country include increased foreign investment, knowledge transfer and foreign exchange,” he said.

He said the preferences will improve the capacity of local companies to produce and supply products that meet the requisite quality and standards, formalize medium and small scale enterprises and increase their capacity to tap into  government procurement.