Over the last thirty years the government’s adoption of liberalised economic policy has resuscitated an economy that was all but buried.
The key pillars of the shift in economic thinking were the privatisation of parastatals, the liberalisation of produce marketing and foreign exchange trading and removal of all price controls.
The truth be told, Uganda did not adopt these donor prescriptions willingly. The reality of empty coffers and a gutted productive sector, necessitated the shift that would have been political suicide for a new government trying to find its feet.
"Resistance to the changes were based on the fear that the “commanding heights of the economy” would be taken over by foreigners, that the shift would be painful and drawn out, and that it wold make an already poor foreign exchange situation worse...
As it turned out all these fears came to pass.
Today the biggest companies in Uganda, easily nine in ten are foreign owned; it is true that we are still working through the repercussions of the imposed austerity measures. While we see more and more repatriation of dividends by foreign companies, we are also seeing the revival of the export sector, growing income from tourism and an explosion in remittances from Ugandans living abroad – at last count this was about $1.2b (shs4.3trillion) or about four times the annual coffee receipts.
However the realisation has been growing for a while now that this growth – we averaged above five percent per annum over the last three decades, fuelled by donor money is not being felt across the length and breadth of the population and therefore it must be broken or worse fictitious.
It is not difficult to see why this has been so.
Most of the growth during the period has been in the services, construction and industrial sectors which account for less than a third of all Ugandan workers. In agriculture where at least seven in every ten Ugandans derive a living the story has not been as rosy with growth stubbornly in single digits through the period.
The logic is simple, that the biggest beneficiaries of the NRM economic boom have been mainly the urban elite. This group has seen their income jump in leaps and bounds, as the service and industrial sectors have found their feet...
However this buttered minority, while they have had it good, own very little of the wealth generating assets – the businesses and factories, that have been dragging this economy along by the boot straps.
So their affluence while not illusory, is transient and can be scuttled by the slightest distress to the economy.
Seduced by the easy picking of the aid fuelled growth they have chosen to mostly sock their money in real estate rather than the productive sectors of the economy – agriculture and industry.
This is not surprising as building an agricultural or industrial enterprise requires disciplined and diligent work and sacrifice over years, even decades.
While they have argued that the main impediment to going into business was the high lending rates that have been a feature of the last three decades, the main challenge is actually a lack of organisation.
Over the last few years as economic growth has slowed, a hunkering for the days of the state enterprise is beginning to rear its ugly head. Proponents of this solution to what ails our economy say that this will help create jobs and retain more of our hard earned currency.
They argue that profit should not be an end and that a loss making enterprises – as all of them will inevitably be, will make up for this with jobs and services. When you ask them who will pay for the losses; Point out that these will mean cuts to health, education and infrastructure to plug the holes, which would mean poverty for the majority, they shrug and continue with their spluttering ranting.
They clearly did not learn or do not know the reasons, that drove the previous parastatals into the ground.
There is no doubt that a robust, vibrant local capital class is important, even critical for this country going forward, the question how to seed, nurture and grow it.
"Idi Amin thought he had the solution. He bundled off the biggest portion of Uganda’s business class, gifted his cronies their confiscated assets and hoped that with this single stroke he would have resolved the issue. The failure of these indigenous businessman, totally obliterated 40 years later, was not because they were not businessmen, conscientious workers or even intelligent, but there is a process to growing a business class that cannot be shortcut by populism...
You do not promote a P1 kid to P7 because you want him to graduate faster and start making money for the home.
So what do we need to do?
We need to get it into our heads that the journey is long and success is not guaranteed. That government hand outs, while they will put money in a connected individuals pockets instantaneously, will not build us the business class we want, no, the business class we need, to take this country to the next level.
And most importantly that our businessmen need to get more organised – in their businesses and among themselves, as a solution to the problems of high interest rates, “unfair” competition from abroad and to break into regional and foreign markets.
Happy NRM day!!!