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September 10, 2018
Is Uganda China’s Next Big Conquest?

By Daniel Edyegu

(MBALE, Uganda) Michael Wangutusi drives an industrial grader with careful precision. The heat of the vehicle only adding to the warmth of the tropics, as Wangutusi clears ground for a-619-acre industrial park that will house over 50 manufacturing firms and employ more than
15,000 people.

“We started clearing the venue in April this year. We are leveling up the ground for construction works. We have already dug out water channels around the area and a parameter fence is also planned for the area,” Wangutusi says as he takes a break from his work to talk to a visiting reporter.

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Wangutusi’s work has global implications because he works for a Chinese firm called Tian Tang Group, which has received a lease from the Uganda Investment Authority (UIA) for the Mbale Industrial Park. The park in Mbale is one of the 22-gazzetted industrial parks in the country planned for establishment of industries, many of these, are being developed by Chinese firms. These include the Zhang’s Groups development of the Kapeke Lia-Shen industrial park in Nakaseke district, central Uganda.

From construction of heavy infrastructure such as the $1.7 billion Karum Dam project to the development of manufacturing sites, China is gradually taking a larger economic role in Uganda one East Africa’s largest markets.

Across Uganda the flag of the People’s Republic flies over new factories many of whose gates are guarded by Chinese dragon statues The new industrial parks are aimed at stemming youth unemployment in Uganda stands at 83%, and slightly higher at 88% among university graduates, according to the country’s 2016 national census report.

According to UIA, it’s projected that the two industrial parks alone will attract total investment of 1.2 US million dollars, with each projected to attract half the total value.

“The firms will be dealing in glass, furniture, machine manufacturing, agro and food processing, smart phone and car assembly and new energy,” said Paul Zhang, the chairperson Tian Tang Group,“We plan to make the industrial park a center of manufacturing for Uganda and export the products to the whole of Africa and even the world.”

Ugandan President Yoweri Museveni launched the park amidst fanfare in March of this year. Museveni applauded the Chinese investors stating the industrial park was a key part of its effort to curb rampant unemployment.

Photo - Chinese chart during the launch of Mbale Industrial Park in March this year. China is gradually increasing its presence in Uganda's economy. Photo by daniel Edyegu
“Chinese people have been working with us since the anti-colonial struggle,” said President Museveni at the ceremony, “When China was still underdeveloped, they extended solidarity to Africa by building as Tanzania-Zambia Railway (TAZARA) to open up Zambia and link the Southern Africa Regional transport to Eastern Africa’s Seaport of Dar-es-salaam.”

To sweeten the deal President Museveni offered China’s investors in this deal a 10 year tax holiday and has used a similar strategy elsewhere.

Other Ugandans have mixed hopes regarding China’s large role in the country. While some feel it’s a springboard for the country to reach middle-income status perhaps as soon as 2020, others feel caution must be held to avoid stumbling into irreversible economic effects.

China has ramped up its investment in other African nations as part of its “One Belt, One Road” initiative that focuses on partnerships with Eurasian and northern African nations that can provide logistical advantages to it for trade through their ports and roads. Land-locked Uganda is not part of their strategy but may signal an interest in expanding its regional influence.

China is financing a $12.8 billion dollar Standard Gauge Railway (SGR) project, which is the largest rail project in Uganda since the British colonial period but, it is also in keeping with China’s own strategy in Africa. China has invested in large railway projects in Sudan, Ethiopia, and Djibouti in recent years.

By close of 2017, China’s investments in Uganda were valued at $ 4.2 billion, according to the Bank of Uganda Report. Bilateral trade volumes between the two countries within the same period stood at $811 million.

Stephen Mungoma, an economist and resident of the Mbale district, explains that whereas the Chinese investments in the country are likely to create economic growth, caution must be taken by the government not to immerse itself into huge national debts from China which only hurt the country in the long run.

Mungoma and others are wary of China’s efforts in recent years to apply strings to loans and investments. One cautionary tale comes from Sri Lanka, where the Chinese took control a key port after the nation failed to repay loans China had provided  to build it.

“At times there’s a temptation to lap up more than the country can afford in terms of borrowing. This has a potential of increasing the country’s already bulging debt. If more money is spent on repaying external debts plus interest, it becomes a yoke on the citizens as it slows development,” Mungoma explains.

Uganda’s current external debt stands at 900 million US dollars and 10% of the country’s budget is allocated annually for clearing the debt.

 

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