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THE LAST WORD: Uganda’s declining growth

 

Why we need to think of how to develop national capacity to manage our economy

By Andrew M. Mwenda

Uganda is going through the worst economic performance since 1987 when the government of President Yoweri Museveni began liberal economic reform. In the first quarter of this financial year, the economy contracted by 0.1%; the second quarter it grew by 0.8%, far below projected growth of 5.5%. Given a population growth rate of 3.12%, per capita income has contracted by 2.3% between July and December, the reason The Independent last week reported that Ugandans have grown poorer.

Evidence of distress is everywhere. Last year, Uganda’s fourth largest bank, Crane Bank, went burst. The real estate market, an important measure of economic vitality, is sluggish. Non-performing loans as a percentage of total loans have increased from 5.29% in December 2015 to 10.47% in December 2016. Because the real estate market that underwrites loans is in distress, banks are stuck with collateral they cannot dispose off to recover their money.

Outside of the banking sector, many companies are saddled with unsold inventory while others are suffering declining sales. Some are laying-off workers. I am aware that most people don’t care about the statistics I have outlined above in large part because they are just numbers. However, behind these numbers are important factors that foster economic wellbeing of people. So what has happened to Uganda’s economy that has run a good 30 years marathon at an impressive average growth rate of 6.74%?

Before government critics can jump on these numbers to score points, let us note that across the board, African economies are doing badly. This is because of the slowdown of economic growth in China and continued sluggish growth in Western industrialised nations all of which have led to a decline in the demand for commodities that constitute most of Africa’s exports. According to the IMF Regional Economic Outlook for Africa of October 2016, the best ten growth performers for 2017 were projected to be Ivory Coast at 8%, Ethiopia at 7.5%, Ghana at 7.4%, Tanzania at 7.2%, Senegal at 6.8%, Kenya at 6.1%, Rwanda at 6%, Burkina Faso at 5.9%, Uganda at 5.5% and Mozambique at 5.5%.

But even from these figures we can see a problem. Seven years ago, the economies of Ethiopia, Rwanda, Tanzania and Ghana were growing at a rate of 8% and above; and Uganda was close to that figure. So the current IMF projections show a significant decline in the performance of Africa’s best performers as well. And for Uganda’s perennial skeptics who argue that growth figures are cooked, this is a reminder that public institutions like Uganda Bureau of Statistics, in spite of their weaknesses, still do a good professional job.

Uganda’s growth, however, has been made worse by a draught that hurt agriculture. Secondly, there has been a significant reorientation of the budget towards greater development spending and reduced spending on consumption. While spending on huge infrastructure projects like roads and dams as Uganda is doing is a great thing, our problem is that most of the contracts are going to foreign firms with little or no enforcement of local content rules. Thus foreign contractors, especially the Chinese, import large numbers of semi-skilled workers and other inputs. And when paid they repatriate their profits back home. This imposes a severe strain and drain on our foreign exchange.

22 comments

  1. AMM, good to bring back this seriously wanting issue, does the NPA ever plan for this country? Is the newly constituted think thank able to stand the reinventing of the economic wheel in government? What has really gone wrong with the concerned ministries?

    • technology in the world has advanced and it’s available and cheap for us to tap from. Shall we live in backwardness in the name of promoting local production. Those countries endured poor quality local products during the time when the world didn’t have much to offer. I think we should consider the law of comparative advantage and concentrate on what we do best, not trying to imitate production of what other countries have already mastered and are already enjoying economies of scale. The same applies to services. In addition the economics of local production do may not make sense.

      • Dr. Eng. Kant Ateenyi

        Teri dear,
        That comparative advantage economics of yours is part of the problem. Truth is that today there is almost NOTHING you comparatively do better than other people you trade with. Not in Agriculture; not in mining; not in trading; not in manufacturing; not in knowledge creation; not in tourism —–. Does this mean you should ‘disappear’ from the face of this earth? NO NO NO. You must work hard to improve on what you can do now for yourself and what creates the most value for you. That is what being HUMAN means: always seeking to seek improvements in whatever we do. Nobody – not the Westerners nor the Far Easterners nor the extreme Northerners on this globe were made with special skills. It is simply hard work and a realisation to use the brain to continuously improve on what is possible at the time that is responsible for the disparities we notice. For tiny Uganda, this means several things I cannot easily enlist here – but certainly – motivating local development of capacity is one of them. If you think you will always buy technology from outside without developing your own capacity, you are greatly mistaken because you will find yourself needing to buy the maintenance as well, thereby economically enslaving yourself to the owners. I’ll start a newspaper series on these thoughts soon. I hope we can progress the debate there.
        Meanwhile, stay well – and work hard brother/sister.

        Inventor Dr. Eng Kant Ateenyi – Cape Town

  2. Atleast There is a lot of sense in this. will you extend this to the president or its for readers?

  3. Mr mwenda I would like to agree with you but one thing you need to know is it’s an African mentality coupled with africa’s administrative class that has let down Africa. we tends to think that only Europeans and foreigner are capable of doing a good job. Sometimes they forget that same campanies employ Ugandan or Africans for this matter. Take an example of the industry am in but would not like to disclose, there is on going work right now and believe me or not, in my opinion this work is creating future market and eployment for the foreign industries in teams of spare parts and future expertise services to rectify or improve what is being done right now. I dont understand the lack nationalism in africa it seems to me that we do not like ourselves. we like and enjoy what we see when we travel or go abroad but the moment we return home, we look beyond our nose for quick bunks. So there is alot that needs to be done but I think even if we were to started today, me and you Mr mwenda would not be around to see the out come. As my grandma said before she passed on a year ago, “am lucky i was’t around during the stone age but equally would not like to be around to see tomorrow social”.

  4. The government needs to think more about building internal capacities of her nationals. Universal ties churn out doctors, engineers, social workers and the like each year but we still look to the outside for specialised skills. Are our people not qualified enough to do this work? African was never selfish, we have just started being so. We lookedout for each other, fee and nursed each other but not today. Mindset change starts with me and you. Let us do things differently.

  5. I’m not a Ugandan but I’m an African. This mentality has to change. I support the idea that we have to use our own for the development of this continent but still at the level at which we are, we have yo accept that we always disappoint the government once given a contract.corruption and Selfish benefits is killing us. Every one wanna have a good car, House, easy money, to mention but a few. #change_0f_mentality_first.

  6. Why Ug’s economy is hitting a snag;

    1.The issue of awarding contracts to Ugandans( local content)rather than the foreigners in the construction industry is a lame excuse for thinking that its partly the cause for the decline of the economy i know we think interms of of capital flight which is wrong. 90% of the workers in the construction sites are Ugandans the Chinese workers on site are the technical ones i hear Ugandans exaggerating the situation by claiming that the truck drivers are Chinese how many Ugandan men can drive trucks with 7 gear boxes?most of them are ridding bodabodas was it the duty of the Chinese to 1st train drivers or the govt?2ndly who needs the roads is it the Chinese or Ugandans?3rdly there is nothing much we can do while negotiation for funds for the big projects(Those are some of the prices you pay for bring in the 3rd world) What do you do when a 1st world finds that your cement or steel is substandard?
    2.Ugandans are cheats all they care is how to make quick bucks they dont mind about the repetition of their businesses. We all know how we have been exploited.I once went to some saloon with branches in all the big malls(in Ug) to treat my hair imagine i was paying about 70k but the lady was rationing the treatment as if she was doing me a favour,recently i was in the middle of some business and needed to get a photo copy of my passport the guy photocopying had the nerve to tell me that each copy cost 1000k .I have money but i just dont pay faaa)
    3.There is alot of competition in the hospitality sector. In Ug foreigners are giving Ugandans a run for their money .Ugandans who love exotic cuisines eat from good places like Piato,Faze 3 and Chinese Restaurants .( I was once served rotten food from a Uganda restaurant instead of apologizing to me the manger had the nerve to request me to pay i told him to take me to police or shot me)
    4.Land and Houses have become the worst form of collateral security for loans 1st of all the valuers either over value or undervalue the property deliberately so that they also gain some bucks.( Crane Bank is the best case study)Salary Loans have become the most secure security for loans coz salaries of workers never go down.(I always ask myself who does not own a house in Kampala why would i own so many houses?
    5.Who told govt that taxes levied on businesses should be high?coz of the high taxes there is alot of tax evasion that is affecting the economy.(How does govt benefit when it closes down a business)Cant they see that they are also causing unemployment.
    6.There are so many good practices and economic policies that the 1st world countries have but coz Africa has so many social,economical and political challenges,they think we dont deserve 1st world polices.They are more concerned about OUR rights,the sex we don’t love, and governance yet Trade is the only avenue that can uplift us.
    7.Govt workers pay local govt tax they should also pay tax for the poor.

  7. Matsiko Arthur Mugumya

    Though i agree with you bro, you should know priorities of our government Uganda today. Your write up looks good to the eye but someone in NRM will question you or will try to think further than you in terms of how does developing local capacities keep the NRM in power forever!!!!! That’s priority number one. When you answer “”well” this question, you will be a hero and will be awarded a medal on the next public holiday as the second person in Uganda to have “”a vision.””

  8. NSUBUGA EMMANUEL KAAYA

    Unfortunately, in case a firm fails during its early stages and the government intervens with aid for more than two times with aid, the public trust in the government funding lowers.
    We need to help set up the following projects with home best capital probably oil cash.
    Steel plant to process our iron ore such that the cost of steel lowers. Ensuring that the existing so called steel plants improve their quality such that they have the ability to supply good enough raw materials for future projects like dams, railways, bridges, street light poles etc
    We need a railway system
    We need local fertilizers plants to supply cheap fertilizer for our farmers
    We need cheap and realible electricity for both domestic use and industrial use
    We need a bitumen plant to reduce on the cost of road construction
    Ugandans will need cheap gas from their oil and this will in combination with electricity will reduce on the rate of deforestation.
    We shall need home refineries for our minerals and factories that can change the refined products into product that can be used according to local demand. E.g irrigation systems, home appliances etc
    We shall need recycling plants for the wasted products
    We need more pharmaceutical plants
    With such projects, we can be on rapid development
    Am here in south korea, Ugandans need to know that lacking sanitary pads is not the worst, but rather selling all ur assets and getting loans to be a slave in another country so as to fullfill the dreams of other country men. We can sacrifice some things for the future of our country to be better in case we together say lets do it.

    • We need a railway system……THERE WAS AND IT WAS UPROOTED
      We need local fertilizers plants to supply cheap fertilizer for our farmers….WE HAD TICAF IN TORORO BUT IT WAS RUN DOWN BY INCOMPETENCE
      We need cheap and realible electricity for both domestic use and industrial use…THIS IS ATTAINABLE IF CORRUPTION IS PENALISED SEVERELY
      We need a bitumen plant to reduce on the cost of road construction…..THAT WILL COME
      Ugandans will need cheap gas from their oil and this will in combination with electricity will reduce on the rate of deforestation…….THIS TOO IS COMING SOON
      We shall need home refineries for our minerals and factories that can change the refined products into product that can be used according to local demand. E.g irrigation systems, home appliances etc
      We shall need recycling plants for the wasted products……THOSE ARE NEEDED INDEED
      We need more pharmaceutical plants…..CIPLA IS ALREADY EXPORTING ARVs
      With such projects, we can be on rapid development
      Am here in south korea, Ugandans need to know that lacking sanitary pads is not the worst, but rather selling all ur assets and getting loans to be a slave in another country so as to fullfill the dreams of other country men. We can sacrifice some things for the future of our country to be better in case we together say lets do it…..AMONG THINGS TO BE SACRIFICED AND TOTALLY FORGOTTEN IS DEMOCRACY. A GOOD BENEVOLENT DICTATOR WITH A TEAM WOULD TRANSFORM UGANDA IN 5 YEARS FASTER THAN ALL DEMOCRATICS DID FOR 50.

      • Hey Rwasubutare, kajambo. I see your Sister Winnie hasn’t improved even a bit. Mundabire

        • Musinguzi i love Economics so much.

          Thanks for being honest and acknowledging that Economics gives you headache.the best you can do/say is say Kajambo.Musinguzi and Rajab Foreign Portfolio investment is when foreigners/off shore investors invest in a country’s stock market or Bonds.(I know your wives cant tell you this)

          Ugandans always complain about capital flight but this should not worry us coz foreign owned companies like MTN,Stanbic,Barclays Bank,Shell,Coca Cola,Total ,Pepsi are the biggest pay tax payers and they employ 98% of Ugandans dont you think we are asking alot from them when we demand that they retain a certain % of their profits?

          African Economies are prone to Capital Flights coz of their weak currency and unstable govt.

          I would have prefered Medh Hasan to have interviewed M7.You could see that the guy who interviewed M7 on Aljezeera was so biased his qns were not well researched as if it was Besigye asking them.

          • I agree, those journalists call our leaders names they can’t dare use on western ones, that said, M7 easily came off unbruised, if not victorious, not in the message but the way he handled himself

          • Musinguzi, Ugandans especially activists and opposition diehards like you and Adhola feel good when they see M7 being interviewed in the international media they get starstruck.

            Mohammad Vall looks like a ruthless person he thought he would make M7 fumble Aljezeera chose Vall to scare M7 but he failed how come we have never seen Vall on Aljeezra?.

        • There must be something seriously wrong with you if you expect Winnie to improve.

  9. One has to look at own domestic household economics to see the reality of Uganda’s economic meltdown/ down-spiral. E.g inflation is wiping out everyone’s meager income. Two weeks ago I was going thru my old and expired documents like Driver’s License/Permit (DP). I could not believe that I paid Shs.6,000 (six thousand only) to renew my DP valid for 3 years. In other words, by the time I renew my DP in 2018, I don’t know how much it will cost. Because tax revenue is dwindling fast, and the government gets desparate; probably we may have to Shs.300,000 (three hundred thousand only) to renew DP.

    Another example, at Shs.5,000 how many Ugandans can afford sugar today? Only the Devil knows. That means the local manufacturing industries are in big trouble. We are heading to Zimbabwe, with a Z$.50,000,000 bank note.

  10. “When the Americans, British, Germans, South Koreas and today the Chinese were building their roads, railways and dams, they used their own companies and people. Why does Africa rely on foreigners to build her infrastructure? ”

    Foolish Africans are not at the same intellectual level as the British, Germans and Chinese. Time has come for the Chinese to use their numbers and technology to develop Africa.

  11. James jones bantu

    Guys, I like your comments however I see a lot of naivety in most comments. Last mwenda described uganda’s economy as” increasgly fake” never the less some ugandans still believe that uganda’s economy is robust and not fake. I gree with that notion that the economy is fake, economistS will reffervescent to such economy as unsuitable, meaning it can boom and burst any time. So uganda’s economy is a baloon waiting for any foreign object to pieces it, and all the air will flow out within seconds. I have argued before and I still stick with my argument that uganda need own knowledge to lead the way, but depending on foreign aid, exporting security guards and the army is just uganda’s top earners of foreign exchange, no other vital exports. We know that investors are good to come and invest in uganda, however the problem is that when they come they occupy critical, sensitive and lucrative parts of the economy and this means ugandans will be workers while investors are the owners. So to avoid this to happen we need knowledge that will break the enatia. If not uganda will be under an constant threat from locals rioting, and attacks on investors will increase as locals get more poorer and investors richer.

  12. James jones bantu

    So guys do some you still buy the idea of uganda joining the middle income status in 2020?
    I think this museveni’s dream is under threat as long as things don’t change soon, there is no silver bullet on museveni’s table apart from calling investors to rescue him.
    My concern is that the possibility of uganda’s sale out is becoming real, intervention is required sooner than later. Local knowledge need to be developed for uganda to shine. Uganda’s economy is poorly managed culminating into poor regulation which lead to masive levels of corruption,hence a major threats that uganda face today.

  13. James jones bantu

    So guys do some of you still buy the idea of uganda joining the middle income status in 2020?
    I think this museveni’s dream is under threat as long as things don’t change soon, there is no silver bullet on museveni’s table apart from calling investors to rescue him.
    My concern is that the possibility of uganda’s sale out is becoming real, intervention is required sooner than later. Local knowledge need to be developed for uganda to shine. Uganda’s economy is poorly managed culminating into poor regulation which lead to masive levels of corruption,hence a major threats that uganda face today.

  14. When I read this, I was really concerned because it was not your usual tone…thank goodness, since then, the real Andrew has been back…

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