OF UGANDA’S GROWING DEBT BURDEN AND OTT

This week African leaders trooped to Beijing, China for the third edition of the Forum on China-Africa Cooperation (FOCAC) .

FOCAC is aimed at strengthening relations between the world’s latest super power and our continent.

A relationship that has accelerated the development of infrastructure – energy, transport and communications on the continent but which has drawn a lot of criticism from the traditional development partners who argue Africa is being sucked into a debt trap.

In the same week, the Uganda Revenue Authority (URA) reported that had collected just under sh30b in the month of July from the new mobile money and social media taxes – sh22b and sh4b respectively.

The two events are related and have caught our loudest commentators in a contradiction.

"The reason China’s influence is growing on the continent is because of the seeming bottomless purse they carry around to finance multi-billion projects in the aforesaid sectors. Projects, which it is in little doubt are badly needed, if the continent is to transition to the next stage of development...

To illustrate it is expected that the new National Cement Ltd and Hima plants in Tororo will require between themselves an additional 20 MW to power their operations. The Osukuru Industrial complex in Tororo, which will house a phosphate fertiliser, sulphuric acid and steel manufacturing plants will need at least 12 MW. Power we scarcely have now.

This is before you factor in that only about 20 percent of the population is connected to the grid.  To connect at least half the population you have to at least double our existing generating capacity of 850 MW.

Similarly in roads we have about 5000 km of paved road but need at least three times that number to catch up with next door neighbour Kenya. And they too have a deficit of paved road.

This great need set side by side with our low revenue collection in relation to our GDP, about 14 percent against a Sub-Saharan Africa average of 16 percent makes it clear that to the extent that our revenue collections are lacking we will have to borrow to finance the things we must do.

The challenge of this government, and many on the continent is that their economies are largely informal, with most workers and businesses outside the tax bracket.

"Seduced by easy donor money – it is easier to fly to western capitals to sign up loans (per diems all around) than to negotiate with population to pay tax, African government have paid lip service to widening the tax base...

And for good political reason.

The recent uproar – concentrated on social media about paying OTT, is a good example. And so have attempts to levy taxes on property, held by a few urban elite. And any attempt to collect more tax for that matter.

Given a choice between antagonising certain constituencies and negotiating loans, governments often choose the latter.

Critics argue of course that the taxes they pay are being swindled by pudgy fingered officials, who then proceed to enjoy their ill-gotten wealth right under our noses.

There is no doubt that corruption is a blight on this government’s record, no matter the pragmatic reasons for letting it run rampant.

But simple arithmetic suggests that we pay so little tax and government in its attempt to do everything, spreads these little monies so thin as to not be effective at doing anything.

The sh32trillion budget this year comes down to spending about sh800,000 per Ugandan for the whole year. When broken down even further the government will spend sh57,000 on each Ugandans health needs and sh53,000 per Ugandan on security.

And that is even before the thieving officials have curved off their pound of flesh.

And how much do we Ugandans contribute to this princely sum in taxes? Sh400,000 per person per year.

"Interestingly the critics of increased borrowing from China are most probably the harshest opponents of any tax changes. They are keen to eat their cake – pay as little tax as possible, while demanding first rate services from government, that is, have their cake....

My two cents on the subject. We don’t want government to tax us more because even with corruption service delivery will improve making it hard to unseat them. And we oppose the increased borrowing from China for the same reason. Other racist sentiments aside.