How does this happen for a country like Uganda?
First, create conditions for small-scale farmers to thrive by reforming land ownership and developing rural infrastructures. Economist Hernando de Soto, in his book `The Mystery of Capital’ estimates that Africa has land assets worth $5 trillion which are not brought into full productive use because ownership rights are not well established and, therefore, the asset is dead and unable to generate capital.
When producers own their productive assets, and they can process and deliver their produce to markets, then crop yields rise and this leads to agricultural surpluses. Farming suddenly becomes lucrative and attractive for the many young people who today flock towns to engage in riding of boda bodas as a business.
Second, we can then use the proceeds from agricultural surpluses to build a manufacturing base geared toward the export market. This needs knowledge-based interventions and not just a policy commitment to local value addition.
Product branding, positioning and promotion are more critical these days to attaining market share than where a particular product is manufactured. Ask Apple: their phones are designed in California but made in China. Intellectual property not bricks and mortar is the product equity of today and the future.
Third, when we nurture both small-scale farming and export-oriented manufacturing with venture capital, like China and the rest of the developed world does, our government then becomes an ‘entrepreneurial state’, unleashing private sector opportunities by protecting infant industries and culling those that remain inefficient even after support.
The notion that market forces can efficiently allocate resources to generate business and create jobs is not only ignorant but insincere and goes against the economic history of how the developed countries got to where they are, before they ‘kicked away the ladder’ of economic reason and sense.
In Uganda, the government has tried to generate jobs by focusing on Foreign Direct Investment (FDI) using the Uganda Investment Authority (UIA) as the institutional agency. Other initiatives include the Youth Venture Capital Fund (YVCF) and the Youth Livelihood Program (YLP).
UIA has not been very successful in generating jobs apart from some in banking and telecoms as is evidenced by their job conversion of licensed projects to actual jobs which is just one-third and most of these are low skilled and casual jobs.
The UIAs failure to spur significant job creation is premised on two things: one, the structure of Uganda’s economy is largely agricultural yet agricultural investment is relatively low and offers low productivity jobs. UIA is also urban biased and lacks a strategy beyond FDI.
When you look at the numbers and destination of FDI, you can see the challenge we face as a country. According to the World Investment Report produced by UNCTAD (2015), FDI to Africa in 2014 stood at $54 billion, similar to 2013.
The largest recipients were South Africa at $5.7 billion, Congo Republic $5.5 billion, Mozambique $4.9 billion (more than EAC combined), EAC $4.2 billion (of which Tanzania got $2.1 billion), Egypt received $4.8 billion and Nigeria $4.7 billion.
The picture is clear: most FDI targets the extractive industries which are not job intensive or job creating sectors.
Regarding the Youth initiatives, the YVCF and YLP started out with a combined capital base of $110 million and targeted the youth directly focusing on enterprise development, job creation and business skills training.
According to an in-depth analysis carried out by the Economic Policy Research Centre (EPRC) at Makerere University (2015), both programs while having some impact have failed to drive large scale job creation due to their urban and retail sector bias. Over half of the recipients were involved in retail trade- a sector that creates few jobs.
Again, according to the EPRC (2015), 61% of the youth recipients came from Kampala and the Central Region whereas over 75% of the youth reside in the rural areas. Also, whilst some gains have been made in enterprise development though organisations like Enterprise Uganda, in-depth business skills training, enterprise incubation and mentoring programs that lead to successful enterprise development are still lacking.
Operation Wealth Creation (OWC) has commendably and correctly placed the locus and driver of sustainable economic growth on the agricultural sector and specifically rural economic activity around specifically targeted crops and business initiatives.
By this, OWC is demonstrating what states are good at which is to mobilise and reframe the incentive regime in the marketplace, this drives positive outcomes. However, operational inefficiencies and execution difficulties with scaling the program still constrain this effort. If business associations were to rally alongside OWC as institutional delivery vehicles then there could be a wider and more sustainable impact.