Tuesday , September 26 2017
Home / COLUMNISTS / Andrew Mwenda / Uganda’s stalled transformation

Uganda’s stalled transformation

Kyankwanzi Museveni 5

THE LAST WORD: By Andrew Mwenda

Why Museveni has not transformed agricultural Uganda into an industrial economy and what can be done

President Yoweri Museveni’s stated objective is to transform Uganda from an agrarian to an industrial nation. He has been in power for 30 years, the period South Korea took to achieve that goal. Yet 80% of Ugandans still depend on agriculture for a livelihood; 68% as subsistence farmers. It seems realistic to blame Museveni for this as I used to do when I was still young and intelligent.

Now I have grown old and stupid. So I wonder: If Museveni is the reason manufacturing in Uganda has grown at a snail’s pace, what explains its failure across the rest of Sub-SaharanAfrica’s 47 countries? With the exception of Ethiopia, Africa is de-industrialising. Recent growth has been sustained by high commodity prices and services. There are more manufacturing jobs in Vietnam alone than the whole of Sub-Saharan Africa combined.

Museveni took power when our country was at three critical junctures – one domestic, the other regional and the third international. Locally, after a series of military coups and civil wars, the state and economy had nearly collapsed. Consequently, the state could not perform even its most basic function of ensuring basic law and order; leave alone finance public goods and services like electricity, clean water, health and education.

Regionally, Sub-Saharan Africa, with the exception of Gabon, Zimbabwe, Botswana andMauritius, was suffering negative growth. Poverty was on the rise. Globally, the world was shifting from state-centered economic growth models. The IMF and World Bank had gained ascendance over policy in Africa and were ramming Structural Adjustment Programs down the throat of every poor country. Their policies sought to roll back the state and “unleash” (the word is not mine but World Bank’s) markets.

Museveni needed money to reconstruct Uganda. The Soviet Union and her satellites were no longer able to help. Western donors said they could only give Uganda money if it reached an agreement with IMF. The IMF and World Bank could only give aid on condition that Uganda accepts their free market policy prescriptions. They were supported by bureaucrats in the ministries of Finance and Planning led by current Central Bank Governor Emmanuel Tumusiime-Mutebile. Museveni yielded to these demands out of desperation rather than out of conviction.

Beginning in 1987, Uganda began a long process of economic reform, rolling back the state. Uganda agreed to control inflation, eliminate licensing requirements, remove price and foreign exchange controls, privatise and liberalise the economy, reduce the size of the civil service, and withdraw subsidies from areas like health and education.

Over the years, these policies proved very successful as they put Uganda on a long term trajectory of growth. Over the last 30 years, Uganda’s GDP has grown at an average rate of 6.74% (the 17th fastest in the world), with per capita income growing at an average rate of 3.5%. Outside of East Asia, few nations have achieved this feat historically, certainly no country in Western Europe and North America over 30 years. Therefore, Museveni has been exceptionally successful.

Yet, in spite of this stellar performance, Uganda has remained a peasant society. The economic policies which have ironically sustained GDP growth at an impressive rate have not stimulated transformation. I will criticise the president and his economic bureaucrats with humility because for many years I was an inconsistent supporter of these policies. Although Museveni accepted free market reforms out of desperation, he was eventually converted and became their most fervent believer.

Today, the President is reluctant to use the state aggressively to promote industrial growth. However, it is not Museveni alone. Across Africa, the free market ideology captured the soul of economic bureaucrats and political pundits. Yet aggressive state-driven industrial policies have been the basis of transformation in every single country that has transitioned from agriculture to industry. Without growing a strong and dynamic manufacturing sector, Uganda can say kwaheri to transformation.

Free market reforms were what Uganda needed in 1986 because the country had suffered deep institutional and economic atrophy. It was not possible for the state anymore to run many public enterprises, to try finance a large basket of public goods and services for everyone. Rolling it back from its ambitious post-independence posture was the best option. And it worked wonders.

However, today Uganda stands at a new critical juncture. We now know that no amount of growth based on exporting primary agricultural commodities and services can transform us into an industrial nation. We need to bring the state back in – not just as an adjunct to private enterprise but even as a transformative agent in its own right. The good news is that contrary to opposition slogans, state institutions under Museveni have recovered their institutional integrity and competence (even with all their weaknesses) to work successfully.

In 1990 when Uganda began privatising, state owned companies were in disastrous shape. Public sector losses were $200 million on a budget of $600 million.

Today, nearly all of them are performing well. Housing Finance Bank, National Water and Sewerage Corporation, Pride Micro Finance, National Social Security Fund, New Vision Group, Post Bank, etc. are some of most profitable enterprises in Uganda and out-competing their private sector rivals. Free market policies have given us short term allocative efficiencies. But they do not tackle the challenge of structural transformation that lies at the heart of development. It is impossible to transform a poor country without industry.

The lesson from Uganda’s stellar growth is that a poor country cannot transform by relying on primary commodities and services unless it has a rich mineral that it manages well. East Asia transformed by exporting manufactured goods. A market driven economy tends to replicate rather than transform our structural weaknesses – a small enclave of a modern economy with high incomes surrounded by a sea of peasant agriculture and poverty.

I think the time has come, indeed is long overdue, for the state in Uganda (and Africa) to consider an active and aggressive industrial policy. Uganda needs to mobilise funds to act as long term cheap credit to stimulate manufacturing growth. The state also needs to organise subsidies, tax waivers, trade protection, and other incentives to manufactures such as cheap electricity and other transport infrastructure like roads, railways and airports.

Given Museveni’s personal reluctance to have the state perform this role, and the ideological bias of his economic bureaucrats at Finance and Bank of Uganda, I do not think this is possible. Sadly his opponents also have no clue of what Uganda needs.

****

[email protected],ug

5 comments

  1. Finally, finally, Mwenda is conceding that the state has a role to play in matters of the economy, which is a far cry from his usual rhetoric of “free market forces.” Over the years
    ‘education’ has evolved and so have the adjectives about personality. In the past, the not so gifted ‘learners’ were being referred to as “stupid, silly, dense, weak and slow”, such phrases have since seized, and now they are being referred to as “time takers.” I don’t know whether this is a descriptive tag Mwenda would humanely accept, given the many fits and starts he has had to endure? I do find Mwenda a stubborn writer but the fact that he’s
    also reflective, is not farfetched. Besides his surliness, he will pick a thing or two from his critics and I also know that one day he will come off his shackles and honour my contribution towards his thinking.(Inshallah).
    Not so long ago, Mwenda was up in arms against the electricity subsidy the Ugandan government had accorded its citizenry. At the time, Mwenda argued that the subsidy was “nonsensical” and that it was full of “populist” undertones than “economic frugality.” His
    contestation was that the subsidy covered only a small number of Ugandans who were connected to the national grid yet this small category also comprised of the “wealthy” who could take care of themselves. His article which appeared in ‘the East African’ (15th January,2012) was widely criticised as “simplistic”, notably among them was a one ‘Ndinawe’ (The monitor, 22 February, 2012). “To argue that because currently there a few connections
    to the national grid while a small number of household in Uganda consume electricity is to simplistically ignore the input of electric power in industrial and consequently national development, both today and in the future, as well as its impact on the prices of locally produced goods.” Mwenda was clearly oblivious of the mosaic relationship between what he considered the “minority rich” and the “majority poor”, a reality that even if it has taken him long, but he has finally become so familiar with. Ndinawe further argued that, “The increment of electricity tariffs would increase the price of maize-milling, consequently increasing the price of maize flour, which price would be pushed to the poor consumers.

    It is a clarity that Mwenda has finally gained, he has come out of the muck and he is now able to connect the patches of development together. It is important for one to realise that development is heterogeneous and it is characterised by diverse patterns, processes and scales. In 2012, Mwenda was to observe, ” Uganda’s chattering classes are as corrupt as the government officials they are wont to criticise”. Let me hope that Mwenda’s newly found station is not a ploy to bail out vandals who acquired state properties under the privatisation policy in the early 90s but have since run them down and are again lining up their pockets for state money (renationalisation?) (Someone has been overheard promising to “rejuvenate” Uganda Airline.) I have always maintained that Mwenda is the “Chief Chatterer” and for him to concede to what “we” (the chattering class) have always known, I have been vindicated. Very soon (but much later than most of us), he will also realise that President Museveni has/had a strong and long hand in our snail paced economy.

    Lastly, I wish to relate Mwenda’s “advisory role” to the Islamic teachings of the Quran; Surat Yusuf (Verse 43 -47). The Surah talks about how little known Yusuf was able to interpret a King’s dream. The king had had a dream in which he saw seven lean cows attacked and devoured seven fat ones and seven green ears of corn with seven dry and withered ones spiralling around the former made them useless. He then turned to the interpreters and asked them for their opinion about the dream. They said the dream was confused, and that they did not know the interpretation of (such confused) dreams. By this time, Yusuf was still under prison walls, busy perfecting himself and guiding the prisoners around him. Until this matter which not only changed his destiny but that of the entire people of Egypt and those around it. His interpretation went: ‘You shall sow for seven consecutive years and that which you have harvested you leave it in its ear, except a little whereof you eat’. In a clear and thorough manner he outlined the strategy of preparing for the coming drought with a defined program of food rationing and stockpiling surplus production. The lessons we get from this Surah are; 1). Do not try to justify your ignorance. When the dignitaries of the king’s court did not have any knowledge of interpreting dreams accurately, they said that the dream was confused and lacked coherence. 2). Tasks that require skill must be left to those who are capable. An expert would interpret a dream correctly whereas the non expert would claim that the same dream is confused and non interpretable. This Surah corroborates with what we find in the Bible (Genesis 41: Joseph interprets the King’s dream). In Africa’s history, we have had “Presidential Advisors” whose “advice” make their “masters” stand on their heads. Ironically, they do not expect their masters to “spin on
    their heads” but instead make a “goose march.” Interesting. And then, they are quick to question ‘why is failure a common template in almost 47 Sub-Saharan African countries?’ Maybe before we can celebrate Africa’s successes, we need to first dismiss all the “Presidential cheer leaders” and employ the viziers of old?

  2. Well said Mr Mwenda;

    Permit me though to observe that a balance between the “Young and Intelligent” Andrew, and the “Old and Stupid Andrew”, is the progressive Mwenda that we need in these perilous times as a nudging voice to push us out of the comfort zone we have politically and economically settled in as a nation. The distinctive sarcasm and disdain with which you hold both your critics and the spirit of the nation to which you seek to appeal, is a reality of the awareness you have yourself undergone. This awareness can only transcend into enlightenment if you find your voice once more. There is philosophical value in this transcendent voice; the kind absolved by time. The reflective humility with which you have withered your own transformation should be the drive with which we navigate from the impending past of clueless alternatives to forge the generational change required to drive us towards ‘what can be done.!’

    In my humble view, i would exhort Ugandans to appreciate that while President Museveni had the desire to transform Uganda, the core challenges of his generation were the restoration and integrity of the State in as far as state leadership, guarantee of security, and the Pan-African pursuit of African sustenance. These values, born of a post-colonial need, have driven the leadership style of President Museveni through the decades – across national borders. This State restoration is evidenced in Uganda, Rwanda, Somalia, South Sudan, Burundi and DR Congo.

    The extent to which those states have progressed or regressed does not take away the fact that President Museveni’s guiding ideology of State restoration and Pan-African sustenance was at play. One may say he has hit a point of diminishing returns and that that ideology may have been overtaken by the realities of power and the changing expectations of both a state and the people that pledge allegiance to it; placing the entire region at risk of collapse in the very component of validity of the state as witnessed in the Arab Spring and the tensions simmering throughout the Great Lakes Region. . That can be the only explanation of why Uganda is not only at par with the other African nations in terms of the strength of the state but has superseded expectations to create a sort of continental powerhouse for geopolitical solutions.

    The fact that the development agenda has eluded him, alongside the other African nations, goes back to the generational challenge in terms of expectations of the masses from the state, and the capacity of the state to play a transformation role in actual growth and development of the nation. While the mindset of export led growth coupled with FDI did indeed manage to pull us back from total economic collapse and provide the basis for a market economy, it has been debunked by the South Sudan Market – in the immediate aftermath of their independence – by which it provided our biggest trade volumes. The issue with this is we were not exporting to a sophisticated market with requirement for high end manufactured products but rather to a simple market that could absorb our agricultural products and traded goods; albeit with purchasing power. Purchasing power of the South Sudan Market was thus the drivinf force for Billions of dollars in export of simple goods like eggs, beef, food, diary; in addition to goods traded in the construction industry.

    Our core traders – as witnessed in their UPDF escorted withdrawal when war broke out – were not the sophisticated manufacturers utilising tax breaks and high tech machinery, nor were their goods the kind that required intensive capital for value addition. These were ordinary Ugandans selling produce to Ordinary neighbours who could afford to buy their produce and this was money actually going into the pockets of Ugandans from the produce of their gardens or products traded for Kikuubo etc. That is the missing link between growth figures and wealth creation. They Key is therefore the nature of the Market. Ugandans need to trade more with themselves and their immediate neighbours – in goods and services available to them and needed by them. There should be no reason for Ugandan to fail to afford to eat eggs and beef simpley because there is a more lucrative market in South Sudan. Ugandans too need to consume eggs and beef, Diary and construction materials etc. We must utilise the 35m domestic market and evolve our manufacturing.

    It is for that reason that rubbishing the increment of salaries and wages of Ugandans from oil revenues, in preference of “Infrastructural Development” is erroneous. We do not own the factors of production for Infrastructural Development and would thus be setting aside national resources to develop the economy of China and Europe just so we can have the infrastructure to export less manufactured goods to Europe than South Sudan. Our experiences with the capital distribution of recent mega-infrastructural projects should give us point to reflect – Energy, yes but for crying out loud put a lid on the corruption driven road projects and divert resources to salaries of public servants. Let them have the demand for more diary,eggs and beef. Let them have increased demand for Housing and auto mobiles so you don’t need to export Kayoola or Kiira EV, or, bailout companies in the construction sector and banking industry – The public sector demand drives the private sector economic activity . The point is that it is all in the mindset. We must begin to look at Ugandans as a market. That entails boosting their incomes and by extent purchasing power to consume and produce. As we urbanise more and more, that means less and less land to farm to feed the growing millions. Such a need organically requires the evolution of agro-processing to better preserve food and the competition that drives branding, packaging, etc.

    Sure enough, this seems simplistic, but only if one belongs to the generation that is a stumbling block to our core aspirations. It is not Pan-African to believe that 200m Americans or 300m Europeans should constitute the development model of Uganda or East Africa, by which we lay down infrastructure and pursue manufacturing to export our inferior goods to their market, while importing their superior goods, never mind that we are competing with three other continents to supply the same markets; all the while while we ignore our domestic African Market of 35m Ugandans and 200m East Africans – all with need for goods and services, the latter for which we can provide at comparative advantage. Whenever in doubt, ask what we would need to replicate 3 South Sudan Markets and what that would do to our stalled transformation as we seek better and more efficient ways to feed 3 South Sudan Style markets. The truth is that manufacturing and production – like life itself – are an evolution. We must evolve our manufacturing by focusing on our domestic market. If Uganda has a vibrant domestic market, it would counteract the need to import or export to distant markets. A little imports coupled with a vibrant domestic market and lucrative regional markets would grant us more than favourable balance of payments – above all, it would be money going in the pockets of actual Ugandans and thus matching growth statistic to wealth creation and standards of living; For Once!!

    Mr Mwenda, balanced progressive voice must keep nudging us on. The opponents of the regime must begin listening to understand that mere shift for change in power is mere bankrupt ambition. The powers that be too must determine at what point satiety and diminishing returns transcend into regression and anarchy. The challenges of the past generation led to the opportunities for state stability. The challenges of this generation must be addressed by a transformation. The powers that be can lead the transformation or be swallowed by history which wont be kind to their incapacity to listen to the spirit of the nation. There ought to be space for reason to prevail in our national politic.

  3. To be useful and sustainable, transformation in Africa should, needless to say, be people-centered, not merely market-driven. As such, for the state in Africa to reclaim its role in transformation, it must democratize the socioeconomic and political space, and support public agency to function effectively and efficiently through vigorous support of sectors such as education and health that yield long-term dividends. The suggested aggressive industrial policy must therefore go beyond economic models that are guided by profit considerations, and be tempered with robust policy considerations that aim to improve the plight of the people. This is to underscore the fact that social welfare cannot be left to the whims of the private sector, as Mwenda has suggested many a time, but the state has to make cautious and strategic policy investments that are not necessarily guided by economic gains but long-term human transformation gains. As long as the economy remains under the grip of the minority political and intellectual elite, the resultant transformation will remain more cosmetic than real. What we need is real and sustainable transformation.

  4. 1.The economy is currently at large.
    2. Why has Ug’s economy stalled? its coz we climaxed so soon we did some many things at once.
    3.I have always had doubts on the kind of farming we need to engage in e.g most of the land farmers use are too small to generate good yields(ii) Are we targeting both the regional or international market if yes dont we need uniformity in the seedlings we plant?(iii)We need to zero down on key profitable sectors like Tourism,Minerals and oil(iv) Naads hit a snag coz those who attempted to benefit from the scheme like Musinguzi thought farming was easy e.g they thought chicken just grows without food and medication they were surprised that they had to vaccinate them on the thighs,butt and put put some vaccine in their eyes.
    4.Most nations embraced privatization with the aim of transforming the economy mainly coz of the 1980 recession e.g Britain’s Margaret Thatcher also fell for the free market idea. A number of Britain’s companies were privatized e.g Royal Mail,British Telecom,Jaguar(its now under Taata of Indian)there was the famous “Tell Sid “campaign urging British to buy shares in the privatized companies.
    5.The challenge with privatization is that naturally there is that attachment citizens have for their companies e.g Ug Airlines,Food &Beverages UCB etc.( But for Uganda’s case i doudt that attachment coz when M7 took over power we we so desperate any thing would do.
    6. These are views on the Kasiwurika case:There are many criminal defense strategies for a good Defense Attorney e.g an Attorney finds out what the prosecutor is planning (ii) A Defense Attorney carries out a mock interview with his client(iii)He can go to the crime scene for better demonstration.
    7. Justice Wilson Musene did not do Justice to the Kasiwukira Case there are many qns this case has raised; (i) Was Kasiwukira killed by some else?(ii)Was Nakkungu Kasiwurika’s concubine otherwise where did she get the nerve to hatch such a plan?(iii) Why didnt the State Prosecutor do some background check like retrieving her phone contacts?(iv) Why would someone sale a car to someone who is to accomplish such a mission i thought she would just give that car for free especially if the mission is well accomplished?.(v)The Judge gave a light sentence coz he also had doudts in his mind.

  5. @ Adhola the former Editor In-chief of the People Newspapers during the UPC regime thanks for being so committed to the ideology of UPC(back in ug we have moved on UPC is gone) you have indeed confirmed that most media outlets are not shy to support political parties of their choice e.g CBS in USA supports the Democrats and ESPN(ABC) supports the Republicans.Naturally,your sense of judgment is biased so never pock your nose in NRM business.(How could you critique M7’s presentation in Kenya recently?you think those who chose him to present a paper did not know his worth?

Leave a Reply

Your email address will not be published. Required fields are marked *