TRALAC - Trade Law Centre

Uganda: Local Textiles Spinning to a Halt

Tuesday, 23 August 2005

Source: The Monitor (Kampala)

Two decades down the road since they were laid off, former workers of the Uganda Spinning Mills Ltd Lira finally received their terminal benefits.

The Divestiture and Reform Implementation Committee (DRIC), a top decision making body of the Privatisation Unit (PU), last month completed the exercise of paying the last balance of the over 1,500 workers' terminal benefits.

The first payment of Shs1.3 billion was done in 2000. This second payment of Shs4.6 billion brings to Shs5.9 billion in total terminal benefits.

But even as the former workers walk away with their benefits, USML still has a long way to ensure that history does not repeat itself.

Formerly Lira Spinning Mill, it was closed down in 1984 following the collapse of the cotton sector. The collapse also dealt a blow other sector players like the defunct African Textile Mills Ltd (ATM) Mbale, Nyanza Textile Industries Ltd (Nytil) Jinja and the Uganda Garment Industry Limited (UGIL). Once, the biggest foreign income earner, cotton was hit hard by the setbacks such as fluctuating world prices. Ginners closed shop in the cotton growing areas of eastern, northern and western Uganda.

Govt Policy

Most industries were privatised and sold off after being designated as non-performing assets. Consequently UGIL, which was synonymous with Yamato shirts, bounced back under a new brand name of Phenix Logistics Uganda Ltd.

Nyanza Textile, closed down in 1992 under privatisation, re-emerged as Nytil Picfare in 1996 and later changed to Southern Nyanza Range Ltd.

Liberalisation

While price fluctuation still remains the sector's biggest problem. It is against this background that, the government set up the Cotton Development Organisation (CDO), to regulate the cotton sector.

Recent reports indicate that Southern Nyanza Range Ltd has injected over $5 million (Sh8.75b) in machinery to boost the company's production volumes and quality. The investment will mainly facilitate the manufacturing of knitted items like knickers, male underpants, sleeveless T-shirts among others.

According to the company Managing Director, Mr Viren Thakker, over 50,000 pieces of T-shirts would be produced per day by the end of next year. Chinese investors, who took over Lira Spinning Mill, injected $13m to revamp it.

AGOA

The introduction of African Growth and Opportunity Act (AGOA) brought a new impetus to the textile industry. The initiative provides African countries with the opportunity to export goods, mainly textiles, duty and quota free into the US market.

Although Uganda qualified for the apparel provisions on October 23, 2001, by year-end 2002 it had not yet exported any goods under this rule.

It was until 2003, when President Yoweri Museveni flagged off the first consignment of shorts made by the Tri-star Apparels to the US. Agoa reports indicate that, Lesotho, a country of only 2 million people, last year exported $320 million in apparel products to the United States, over 99 percent of it under Agoa.

Unlike Lesotho, Uganda has seen a significant increase in its trade as a result of Agoa. Phenix expects to start exporting their Yamato shirts and other local fabrics to the US. Phenix Logistics Managing Director, Mr Yuichi Kashiwada, said that Phenix would soon access the Agoa market when it starts full production. He says the factory has not reached full production capacity. Early this year, the government announced a Sh7.5 billion subsidy for the cotton industry following a decline in cotton price on the international market.

Statistics from the Cotton Development Organisation (CDO) indicate that in the 2004/05 crop, 220,000 bales of cotton lint worth $37 million were exported. Export earnings, according to the figures, shot up to $58 million in 2003/04. The rise was a result of the government intervention on the cotton price that went up to Shs600 per kg.

CDO's principal marketing information and monitoring officer Mr Hans Muzoora says the production trends and earnings have been going up since the liberalisation of the cotton sector. Despite the above, the textile sector's contribution to GDP still remains low compared to other sectors.

Losing out

While addressing the United Nations meeting of Economic and Social Council in New York, USA on June 30,the Minister of Tourism, Trade and Industry, Mr David Migereko, said least developed countries like Uganda are losing out of the foreign exchange market due to unprocessed goods. He said Uganda should start adding value to products like cotton by spinning, weaving and producing apparels.

He said cotton goes for $50 cents compared to cotton yarn, which is $3-3.50 per Kg.

With the collapse of the textile sector, domestic industries have to ensure that they produce goods with value addition if they have to cope with the current competitive edge from the western world.



“AGOA Latest AGOA Trade Data currently available on AGOA.info


Click here to view a sector profile of Uganda’s bilateral trade with the United States, disaggregated by total exports and imports, AGOA exports and GSP exports.


Other regularly updated trade statistics on AGOA.info include: (click each link to view)

  • AGOA-Beneficiary Countries’ AGOA and GSP Trade Aggregates

  • AGOA Trade by Industry Sector

  • Apparel Trade under AGOA’s Wearing Apparel Provisions

  • Latest Apparel Quotas under AGOA

  • Bilateral Trade Data for all AGOA-eligible countries individually.