Monday, December 19, 2011


Aga Sekalala Senior is easily Uganda’s largest agro-industrialist.

Over more than 30 years of deliberate, painstaking work Sekalala has built a multi-million dollar operation that processes animal feeds, chicken, fish, vanilla and its derivatives and extracts plant oils.

Tucked away in Namulonge, off the Gayaza-Zirobwe road, his industrial estate employs more than a hundred people while providing income for hundreds more local out growers, suppliers and retailers.

But the reclusive Sekalala, more likely to be found overseeing his enterprise in overalls and gum boots than decked out in a power suit and poring over revenue projections, is not a happy camper these days...

In the space of two months the shilling has appreciated nearly 20% from the September low of sh2,900 to the dollar, threatening to decimate his margins and forcing him to wonder aloud about the priorities of the country’s economic planners.

People respond to incentives -- factors that enable or motivate a particular course of action, or counts as a reason for preferring one choice to the alternatives. That is as much an economic truth as a universal truth.

This year’s economic crisis – a delayed reaction to the global meltdown that kicked off in 2008, should force us to take a hard look at our own economy and the incentives we provide.

Inheriting empty coffers in 1986 the National Resistance Movement, under pressure to generate revenues fell in line with the World Bank, IMF-led donor community.

This entailed reining in government spending, privatizing inefficient public enterprises and allowing the free flow of capital into and out of the country.

Subsidies for production were frowned upon under tightly prescribed spending plans, which were flaunted at the risk of losing regime-propping aid.

"The net effect of this is an economy, which subsidises the urban elite at the expense of the rural masses by cutting government spending in agricultural extension, health and education to a bare minimum while keep exchange rates stable, allowing for importation of luxury goods to stoke the insatiable appetite of the urban wannabes...

In all fairness, that is the price we as a country had to pay to stabilize the economy up to this point.

Now that we are generating up to a thousand times more revenue than we did in 1986 a rethink of the way we do things is long overdue.

A budgetary shift away from consumption towards production would be welcome. Support for big agricultural concerns that incorporate local farmers in their plans, in the way of tax breaks, infrastructural aid, concessional loans, a focus on research and marketing assistance for exports would be useful.

I shudder to suggest a discretionary process overseen by our local technocrats because it can easily succumb to corruption, politicking and mismanagement, but the point is government needs to step up its game if we are to become a middle income country in our life time.

It has taken 25 years to stabilize the economy, we can expect that a properly designed and executed incentive program for our productive sectors will probably take just as long and cost as much to show sustainable results.

This year government has ear marked about sh350b in interest payments, largely to service its treasury bill and bond obligations, which are issued to manage inflation. So the cost of supporting our industries is not one we would be unfamiliar with.

The point is that if Sekalala and company identify an opportunity to produce fish feeds say, because local and regional markets demand them, he should be able to go to government with a well prepared business plan and government formulates a way to meet him part way.

"As it is now when entrepreneurial spirits have an idea, their last port of call is the government. Government technocrats are clueless about what it takes to do business (forget their little village ranches subsidised by office imprest) and worse still a request for concessions is always viewed with a jaundiced eye....

It is a no-brainer. Supporting agro-industry has the greatest potential to raise rural incomes, mobilise savings and jump start another surge in tax revenue growth.

This is all text book economics with numerous case studies in western economies, Asia and even on the continent. So why aren’t these things happening?

One, because as suggested earlier the government technocrat is not wired to create wealth but to allocate already present resources, the diametrically opposite mindset to that of an entrepreneur.

And secondly, our industrial base is still small and disunited – with each businessman suing for his own selfish interest, oftentimes subverting the general good.

Regardless, the writing is on the wall the sustainability of future growth and the very existence of our nascent producers will depend on whether we starting paying more than lip service to the producers of our economy or not.

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