By Dr Geoffrey A Onegi-Obel
An August of significant events and worldwide economic slowdown is washed out by politics
The Uganda Securities Exchange All Share Index which stood at 1,852.00 at the start of week two of September gained +6.00points at the end. But to put it simply – elsewhere the world slowed down to take a long breath. It was a sequel to the months of June, July and August (the August Quarter) – which served up worrying economic indicators –not just for Uganda, but the EAC region and the world.
Markets tumbled across the world as the Chinese train which has been pulling the rest of the world with its seemingly insatiable appetite for the world’s raw materials – slowed down for some stocktaking – literally. Time had come for the Chinese domestic market to change gears to a more stable and sustainable pace.
However, the August Quarter also came with other significant developments; the African Development Bank Africa 2015 Report, the Inaugural East Africa Manufacturing Summit, the launch of the Uganda Securities Exchange’s Automatic Trading System-ATS, and oil remained below $45 per barrel.
But true to our character as Ugandans, it was the opposition Forum for democratic Change (FDC) internal flag bearer debate which hogged all the headlines. Neither the moderator, nor the candidates of the debate bothered to raise or recognise that when all is said and done it’s all about the economy – and the jobs imperative.
It appears in Uganda we wake up to politics and go to sleep on politics. The state of the economy, which by and large preoccupies all households on a daily basis, is not worthy of media attention beyond the cursory mention.
This lack of attention to important happenings in the financial markets can be likened to a Ugandan fisherman blissfully continuing to lay his fishing nets and listening to the Besigye /Muntu debate on his radio, even when he can see storm clouds bearing towards him on his leaky boat. The leaky boat is Uganda.
The fisherman’s reasoning could be that there have been storms before – and if he fails to catch any fish, maybe either Besigye or Muntu might soon pass by Pakwach in their campaigns and leave something behind.
So the China driven worldwide market correction which saw all economic indicators go south did not generate any red flags in Uganda – the pedestrian argument like back in 2008 when global markets crashed – being that Uganda is not yet that much integrated into the world economy – and will only be marginally affected.
Just like back in 2008, it is being argued that beyond the domestic balance of payments related turbulence in the forex markets; the Uganda economy is too remote from the world financial markets to be worried about the global market.
Something is not right
This argument should be a cause for concern, especially as the very people in charge of conducting economic policy – which integrates us to the world economy, are the ones making it. Have they given up on doing their jobs?
In Uganda and the EAC region, the decline of the local currencies was explained away by the usual and convenient balance of payments narrative – although we have always imported more that we export. So clearly something is not right.
As for China, the argument is that its days are numbered.
But China is not collapsing or ‘overheating’. No – China is not overheating or collapsing. The jobs and factories created over the last three decades in China are real – as are the roads and rail infrastructure and the overvaluation of the Chinese Yuan Renminbi (RMB) and the profile of China debt.
What happened in August and is continuing to happen is pricing – otherwise called a ‘market correction’
While other countries in the economic mainstream are fighting back by introducing productivity enhancement related measures – in Uganda we are yet to firm the strategy which shall place our economy firmly in the mainstream of emerging market countries.
Household concerns about jobs, homeownership, health and education cannot continue to be relegated to fringe discussions of a distinct minority who are worried about the lack of depth in financial services and products for the consuming households and the general public.
We need to act very quickly to become part of the world economy and forget the ‘safe haven’ of an underdeveloped economy with ‘potential’.