Tuesday, May 17, 2016


Our economy has been growing for the last three decades, but the constant criticism is that the growth does not seem to be shared equitably.

That shouldn’t come as a surprise as the growth has been mostly concentrated in services and industry, while agriculture, where about eight in ten Ugandans derive a livelihood is not one of the sectors that has mirrored the national economy’s growth.

"The net effect of his is that the benefits of the growing economy are being concentrated in a few hands to the detriment of the majority....

The question then becomes, how does government facilitate the process of ensuring more and more people become real beneficiaries of this continued growth?

It goes without saying that the growth has to continue.

That means keeping public expenditure under control and continuing with policies that facilitate  private sector led growth.

By keeping disciplined in our public finances we have kept inflation at bay – in recent memory one moment of madness in 2011 led to inflation hitting a 19 year high of 30 percent. Inflation distorts the business environment and discourages investment.

Government has struggled with creating an enabling business environment for investors. Of course the stable macro-economic environment, improved security and steady investment in infrastructure have been useful if not critical in spurring the recent growth.

The trick has been more on a micro level and in building institutions that work impartially and objectively in regulating the business environment and arbitrating disputes.

The World Bank’s last Ease of Doing Business report shows that Uganda jumped 13 places to 122 out of 169 countries polled.

The report measures the rules and regulations that affect the business environment. Despite our stellar growth record we are literally at the bottom of world rankings in terms of our business environment.

How do we turn this around?

We need to think like businessmen for starters.

What do businessmen look for when thinking about investing in the country? Market access and the probability of making a return on the investment.

Put another way what would stand in the way of recouping the sh100m I invested in Uganda? Or how long would it take me to recover my money? Obviously the faster I can get my money back the better.

A big plus is a big market where people have disposable income to buy my wares.

Low bureaucratic hurdles from visa acquisition, to getting the relevant licenses and permissions, to about quantity and quality are critical in getting the project off the ground.

"So as a government the number one issue is to lower or remove all together the bureaucratic hurdles that prevent businessmen from setting up or operating smoothly...

This is within government’s control, or is it?

So even if we get rid of these the businessman will still need to be incentivised to set up shop here. Just because you have high returns on investment doesn’t mean the businessman will opt for you over a safer destination like South Africa or Dubai, where they are at least assured of protection of capital.

A package of industry wide incentives would come into handy. Individual deals done with businessmen only serve to distort the sector and often don’t live up to earlier promise.

But what would revolutionise the attracting of investors to our shores would be the existence of a local business class with the capacity to partner with themselves or foreign businessmen to create the industrial complex that will spur job creation.

It is easier to attract ready made investors than build this indigenous business class, and that is probably why we really haven’t exercised our mind to create it.

"Businessmen prefer the company of other businessmen who have navigated the environment rather than government bureaucrats and their statistics but who have no real appreciation of what it takes do business in their own country...

Throwing money at local businessmen will not achieve this goal. In fact it is the surest way to failure. 

As an example businessmen who have benefited from government largesse over the last few decades, do not yet have a national presence despite the huge hand outs.

There is a place for hand outs and even bailouts, but that is not the key interventions that need to be made to jump-start a local business class.

Education and mentoring would be the place to start, so that when you start dishing out the cash and the tax breaks at least you have a safe pair of hands on the receiving end.

"For the reason that we don’t have a robust entrepreneurial class and sticky fingered officials, I hesitate to suggest that government should go into partnership with other businessmen...

They say what you focus on expands. Every first Friday of the month the US government releases the Non-Farm Payroll, a measure of the number of jobs that have been created in the economy in the last month.

We urgently need a similar number in order to focus our energies on the task.

No comments:

Post a Comment