Monday, July 27, 2015


Around 2000 or thereabouts Zimbabwe started a crude land distribution that dispossessed white framers of their land and handed them over to black farmers – mostly supports of the ruling ZANU-PF.

This had the desired short term effect of ensuring yet another ZANU-PF victory at the polls and the undesired long term effect of crippling the once vibrant economy to the point now that the Zimbabwean dollar is officially no longer legal tender in that country and the country, once the breadbasket of southern Africa, is now living of food handouts from its neighbours.

At the time the white farmers were hounded out of Zimbabwe they owned 70 percent of all arable land, a scandal in itself but the greater scandal is the colonial legacy that set up this unjustifiable imbalance of a key resource.

"The need for land distribution in principle is undeniable in former colonies like Zimbabwe, South Africa and even neighbouring Kenya. Zimbabwe chose the populist way of redistributing land where a more pragmatic solution, which recognises the economic importance of the existing players would have been taken into account...

The difficulty for economics is that it is difficult to carry out experiments like in a lab, but when countries like Zimbabwe come along they confirm or negate economic theory, unfortunately at the expense of the citizens of that country.

The main lessons that come from the Zimbabwean experience are that in trying to redress economic injustices uprooting the productive players needs to be done systematically so as not to disrupt the economic engine you hope the disadvantaged will benefit from.

Ugandans need no lectures in this as the uprooting of the Asian commercial class in the 1970s set the country so far back to the point that even 30 years of consistent economic gains have not repaired the damage.

And secondly when political expediency wins over good economic sense the consequences will be such that the political gains will only be a pyrrhic victory.

The chicken have come home to roost. It was reported this week that Harare is now making open overtures to the banished farmers to return and take back their properties. Lands minister Douglas Mombeshora last week said a select group of farmers will be invited to take over farms with “strategic economic importance” and that black beneficiaries of the redistribution will start paying compensation to the about 4000 farmers dispossessed almost two decades ago.

Only in Zimbabwe can a politician make such an about turn and survive.

In Uganda we are currently grappling with a shilling whose fall has only be stalled after determined action by the central bank.

The dollar has risen to sh3300 against the shilling from around sh2600 at the beginning of the year.

With our huge import bill – we import almost twice as much as we export in value, one can see why such dramatic movement would cause an uproar.

Essentially the local currency is falling through the floor because there is too much shilling chasing too few dollars.

Officials say a lower export receipts, specifically the collapse of south Sudan market, the slowdown of investment into the oil sector and reduce donor inflows are affecting dollar supply. Demand for hard currency is being fuelled by our huge investments in dams, roads and railways.

It is this delicate balance that we need to look to for a solution to our tanking shilling.

Either we put a hold to our infrastructure projects, which is out of the question as they are critical for future economic growth or produce more for export, which will take a while as, for example, expanding the acreage under coffee may take a few years to see results.

"The long and short of it is that it may take a while – weeks, even months, before pressure on the shilling is lifted...

The quick fix would be to decree that the central bank of Uganda defends the shilling at all costs, which would bring temporary relief. But once our reserves are drained the shilling would collapse way beyond the sh4,000 to the dollar mark we so dread and send the economy into reverse.

The moral of the Zimbabwe story, which can become our own if we succumb to populism, is the economy has laws which you subvert at your own peril.

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