By Denis Jjuuko
A friend recently posted on Facebook wondering why Ugandan tomato sauce brands should share the shelves with superior American brands. His argument was that there is need to protect Ugandan products, as they wouldn’t compete on a level ground.
A lot of comments on the post argued that they would love to buy the Ugandan product but unfortunately, it is of very low quality. One person even said that she had bought five litres of a Ugandan tomato sauce and many months later, it was almost still full. She was thinking of throwing it away so she could use the container for something else. In the meantime, she was buying the American brands.
Some Ugandans have been pushing the Buy Uganda Build Uganda (BUBU) campaign calling upon people to embrace Ugandan brands. Of course, people embrace Ugandan brands but only those of high quality. Just visit a supermarket that has run out of Jesa Milk — there might even be a riot. The Jesa scenario shows that the reluctance by Ugandans to buy Ugandan brands lies essentially in the quality of the products.
But how can Ugandan brands be able to compete with foreign brands? The answer lies in Research and Development (R&D). Most Ugandan producers don’t have enough resources to embark on R&D, which is essential in coming up with products that are innovative and sometimes cheaper. Ugandan entrepreneurs usually just go into manufacturing a product. This isn’t because they don’t know the importance of R&D. It is because they cannot afford the cost.
If somebody has money today to set up a business, that is all they have and in most cases it is not even enough. So they cannot spend some of this little money on R&D. Mostly, they only do preliminary research on pricing, where to get the raw materials and whether a market exists and then they are good to go. Uganda being a virgin market, the business case (if conducted at all) for most products shows that the product would have a market. Indeed, I doubt if there is any manufacturer in the country who has produced anything and failed to find a market for it.
However, because of almost zero investments in R&D by small companies that are the majority anyway, the products they put on the market are sometimes of low quality and at a high price. Yet R&D enables a company to produce a high-quality product at a low and competitive cost. Alternative products or ways of producing a product are sometimes identified during R&D processes. Other times, companies are able to identify new businesses and find something that gives them that competitive edge.
So as we push the BUBU campaign and ask people to produce products for export or add value on our raw materials, what are we doing as a country to enable these companies carry out R&D? Remember that we have a very high cost of money. If you are a small company, it is suicidal to borrow money for R&D.
A study by UNESCO shows that the biggest spenders on R&D in 2016 are actually developed countries yet R&D is most needed in less developed countries. The US, China, Japan, Germany, and Korea are the top five biggest spenders on the UNESCO R&D list. It doesn’t come as a surprise that they are the biggest innovators and manufacturers in the world. The US alone spent 457 billion dollars with 70.6% of it coming from businesses. Netherlands, which was in the 15th position, spent 16 billion US Dollars. Needless to say, not a single African country is on the list.
Our universities should increase the number of research graduates. Yet most students who claim to do research today simply submit plagiarized theses or those done at secretarial kiosks that dot university campuses. It is through research and innovation projects that industrialization and economic development is catalyzed, a case in point being our very own Kiira Motors Corporation that has evolved from a co-curricular activity at Makerere University to a mainstream program for Automotive Manufacturing in Uganda. It doesn’t come as a surprise that the biggest companies in the world today started as projects in universities. Google, Facebook, and Microsoft come to mind.
There is need, therefore, to ensure that businesses that carry out R&D are supported. In the US for example, up to 20% of a company’s expenses on R&D are tax deductible. And they have the option of taking this as a lump-sum deduction in one year or to have it spread over a period between 5-10 years. That partly explains the higher number of patents registered in developed countries. Such tax options enable companies to spend money on R&D.
Companies with R&D components also easily attract funding because investors have a study to rely on to make decisions. So to attract investment here, the country can make a fund available where small companies can apply to get money to carry out R&D activities. Alternatively, consultants with R&D experience could be hired so that they help companies do R&D for them and help them establish such departments.
That way companies won’t have to produce inferior products that won’t compete on the shelves with foreign ones like the tomato sauce we talked about. And we will be able to add value to our raw materials, create the much-needed jobs and increase our exports.
The writer is a media consultant and businessman. djjuuko@gmail.com
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