Uganda has a steadily expanding manufacturing sector with Kampala, Jinja, Tororo, Mbale, Mbarara, Arua industrial towns.
The sector has contributed much of the country’s GDP increasing from 6.5% to 15% majorly depending on agro-based industries of breweries; cigarettes (BAT) grain milling, textile, bakery, tea factories like Igara, etc.
It should be noted that these industries are small and produce less output and this is due to the following problems
Limited capital to invest in the sector and there is limited access to credit facilities which becomes a setback to expansion and establishment of new investments in Uganda.
Inadequate skilled labour force to operate industrial activities like in Kakira and Lugazi sugar industries, cobalt mining industry in Kasese, etc. most of Uganda’s industries rely on foreign expensive expatriates which increase production costs and prices of manufactured goods limiting their competition for market.
Fluctuating and expensive power supply to industries which affect industrial production. Power load-shedding has limited development of heavy industries like steel rolling in Mukono, Uganda Bati, Mukwano group of companies, etc. the limited power calls for use of diesel generators increasing the cost of production.
Political instabilities in Uganda since 1970s in addition to 1972 economic war have scared foreign and local investments in the sector. Wars have also destroyed supporting infrastructure and drained government budget thus limited funding to the sector.
Shortage of market of manufactured goods mainly due to poverty among locals and competition from imported products which are cheaper than the locally produced, foristance Kakira sugar, textiles from southern range Nyanza have faced a lot of competition and limited market.
Inefficient transport facilities especially the railway network and water which limit raw-material, labour and goods mobility thus industrial stagnation. Some roads are impassable during rainy seasons leading to high transport costs.
There is a problem of dumping manufactured goods by industrialized countries of China and Europe, such commodities are cheaper and out compete local products limiting industrial development.
High taxes imposed especially on imported raw-materials and manufactured goods. Industries like steel rolling in Mbarara and Mukono which imported raw-materials have faced this problem, increasing production costs and manufactured goods prices.
There is severe smuggling of manufactured goods in Uganda especially around boarders of Busia from Kenya and this undermines the market for locally manufactured goods.
High costs of production emanating from high cost of utility facilities such as electricity, water, communication, high taxes, imported skilled labour, etc. these makes manufactured goods prices high thus less market demand.
Un supportive government policies in relation to protection and promotion of local industries against foreign competition. This has increased dumping and smuggling. The privatization verses nationalization also scare local investments.
Corruption by ministry officials has led to failure of national industries such as Tri-star Apparel garments in Bugolobi, Tororo fertilizer industry all collapsed due to corruption.
Inadequate raw-materials like iron ore, copper and other chemicals to use in the industries foristance Roofing steel rolling mills depends on imported raw-materials which is very expensive to produce iron sheets. Also agro-based industries are affected by climatic changes like Southern Range (textile) which use cotton and BAT which use tobacco.
Inadequate modern technology necessary for industrial development. It should be noted that the imported technology is very expensive and this led to closure of a salt plant at Katwe and a fertilizer factory in Tororo.