The year has come to an end. If you are like me it has wheezed past so fast, you wonder whether you will accomplish your life goals before your time is up.
Fortunately Uganda will be here long after we have exited the stage and a year is but a drop in the vast ocean of time.
But as a nation what we do today triggers off a sequence of events that determine whether we will continue to be a basket case long into the future or whether we will come to the turn in the road to prosperity sooner rather than later.
So it would be interesting to look at 2008 as a springboard for 2009.
The year started with a bang literally, with the post election violence in Kenya. Following Kenya’s presidential election last December, irregularities in announcing incumbent Mwai Kibaki the winner, sparked off an orgy of bloodletting which accounted for about 1,300 people.
The single event cut off the Kenyan hinterland causing fuel and other commodity shortages for the better part of January. The chaos put the breaks on the Kenyan economy, which up to this point was roaring along after years of little or no growth. The chaos disrupted crop production in the affected rift valley and western provinces and severely dented tourism.
Apart from the shortages Uganda now has the highest inflation rate in 15 years. Forced to fill the gap in regional food supply that came with the disruption of the crop in Kenya’s Rift Valley, food prices have shot up as we compete with regional demand for food.
And almost a year later we continue to suffer lingering fuel shortages that are sustaining inflation rates above the government’s five percent target.
Still reeling from the Kenyan induced crisis, the global credit crisis, which had been simmering since the second half of last year, exploded.
The crisis was a result of mortgage loans gone bad in the US banking system. A situation that infected Europe and other advanced economies that had backed these loans. The nationalization of British mortgage lender Northern Rock in the last quarter of 2007 was the signal that the crisis was imminent.
While putting a halt to oil prices gone wild – a barrel of oil peaked at $147 in July but is now trading at under $40, the flip side was the appreciation of the dollar to 2,000 a level which did not help our inflation woes as our imports became more expensive.
Out of these two events will come some of the major challenges and opportunities for 2009, while exposing the shortcomings of our economic model.
It has been sang over to us like a mantra from whenever I could remember; Uganda has the potential to be the region’s food basket. But we continue to suffer from the curse of unfulfilled potential.
Our inability to take full advantage of the regional demand situation points to fundamental weakness in our agricultural system. When the National Resistance Movement came to power Uganda’s agriculture had lapsed into subsistence farming a situation that persists to the present.
Initiatives such as the setting up of farmer groups, the revitalization of the co-operative movement and the warehouse receipt system will go along way in alleviating the situation.
The government through its agriculture ministry needs to wake up to the potential for the agro-processing industry to be market for our farmers and as spring board to take advantage of the American Growth Opportunities Act (AGOA) and Europe’s Everything But Arms. We can only blame ourselves for our inability to take advantage of these initiatives for lack planning.
We have already felt the global credit crunch in a higher dollar rate and fewer shillings floating around during this Christmas season. The gentlemen and ladies at the finance ministry tell us we will see the effects in lower foreign direct investment, a fall in aid flows and a fall in remittances, “kyeyo money”.
The fall in share prices on the Uganda Securities Exchange and the rising yields in Treasury Bills and bonds points to a lower demand for securities. Industry sources while pointing to the absence of National Social Security Fund in the market also say foreign investor flight has been a major cause of falling asset prices.
In the New Year expect this to continue and to extend to official donors – who like Sweden and the Netherlands last week did to Rwanda, will find reason to nip a dollar here and a dollar there off their aid pledges.
Anecdotal evidence suggests that Kyeyo money has already fallen off sharply this year compared to last year when at $700m was some supposed to have been received by Ugandans.
In the absence of these, government and personal budgets will be constrained. Our capacity or incapacity to mobilise internal resources will be key in jumping this hurdle.
The government has to be more proactive in raising our savings rates from the current 5% of GDP into the more respectable double digits. In a difficult business environment government will be cutting the private sector at the knees by raising taxes.
The next year will show our economy for what it really is one totally dependant on aid and unable to function without or one with an underlying strength buoyed by an underappreciated informal sector and resilient enough to see the global crisis through.
Published December 2008, New Vision