What EAC Companies Must Do to Partake of the Integration Projects [opinion] (allAfrica.com)

In the wake of the impending Northern Corridor project implementation, the private sector in the region has rightly expressed their readiness and willingness to participate in offering services at the various levels of input. First, it was the East African Business Council (EABC) and the Ugandan private sector in Kampala; the latest is the ICT Chamber at the Private Sector Federation in Rwanda.

True, for integration to have meaning and impact to us the citizens of the EAC, we need to partake of it beyond the sentimental level of ‘citizen engagement, stakeholder participation and minority involvement’, as one school of thought holds it. But what will it take to achieve this?

Perhaps Uganda’s experience in the oil sector, with local content participation as oil multinationals started operations, is very instructive. There was a national outcry against the ‘discrimination’ in mid-2011 against local companies, even in supplying the basic mundane of services.

The anger and rage drowned what would otherwise have been an eye-opener into the implications of the new economic developments.

You see, the oil industry by its nature is a global business and entails international transactions at the various vertical levels and horizontal stages in a given value chain.

Why exactly did Ugandan companies lose out? Not even transport companies, with all the tens of thousands of trucks in the country?

The answer lies in the very nature of Uganda’s SME sector, where the majority of local companies fall. Founded and run as family enterprises, the majority are yet to graduate to standard corporate governance, where ownership and management are separated.

Policies, business strategies, daily operations are still determined by the owners, in most cases who remain owner-managers.

I have known a huge transport company, with a fleet of trailers, tucks and omnibuses, owned and run by three brothers, who literary ‘walk with the company in their pockets’, as one employee once put it. No systems, no structures. Consequently, the SME sector has remained informal, unstructured. Yet small is not synonymous with informal.

The nearest our SMEs approximate to corporate practices is legal and regulatory compliance: Rwanda Development Board/Uganda Registration Services Bureau registration, VAT registration, income tax clearance, trading licence and related issues, mostly to win government contracts.

When it comes to quality assurance, governance and other soft infrastructure systems and compliances, this is where indigenous companies lose out.

How many companies are ISO certified? Do we really understand the various ISO certification standards and their meaning? Have we grasped such issues as Conformité Europèenne (CE)-marking? CE is used to indicate that goods bearing this mark meet quality standards of the European Union. ISO, CE, and other marks that we read on containers are not mere labels.

They are not decorations. They carry specific information about a product and its quality.

These are the basic indicators a foreign company looks for while seeking suppliers.

Besides Tullow, in the case of Uganda, how many local steel manufacturers qualified to supply reinforcement bars to the Bujagali hydro-power project? How many food processors can comfortably qualify to supply snack components for in-flight services on international flights?

Despite the presence of over 8,000 welders in Katwe (Kampala hub for jua kali), none can qualify to do welding work on an oil pipeline. This is because to us, welding is a craft job, for school drop-outs. Yet this is a professional skill, with a global certification body for welders. What explains this?

One analyst has attributed this to what he terms our satisfaction with mediocrity: many businesses still think issues to do with quality and standards are for whites, not for us.

But reality is catching up with us. We cannot seek to compete globally while we keep doing things kiturage.

The respective standards bodies in the region (RSB, KEBS, UNBS, OBN, TBS) have done a great job in developing standards, but these are yet to be universally taken up by most SMEs.

Quality certificate is voluntary, thus most SMEs do not consider this important. And this is where the champions of the corporate world in the region, have their task cut out for them. EABC, PSF in Rwanda, PSFU in Uganda, KEPSA in Kenya, TPSFU in Tanzania, and their Burundi counterparts must take the lead initiative in getting the business world here catch up with global standards and practices. No excuse of being small. This is how industry and professional associations elsewhere protect their markets.

The Tyre and Ream Association (TRA) in the US, for example, sets standards and quality control for tyres, rims, valves and related accessories.

Our professional bodies, such as the respective Institutes of Professional Engineers have an equal responsibility in matters of quality and standards.

Labels such as SAE 40, API 120 in petroleum products are developed by industry professionals and used to ensure quality and standards. These provide lessons for us to emulate.

The author is a partner at Peers Consult Kampala and CET Consulting, Kigali.