By the time the NRM took over government the economy was on
its knees and a shell of its glory days two decades prior.
The economy had been so gutted that most of it had reverted
to subsistence and in our desperation to collect revenue, we were taxing coffee
exports, which accounted for nearly 80 percent of export receipts and revenues
to the treasury.
Faced with this reality NRM had very little room for
manoeuvre.
More than half a century prior, Europe was also coming out
of the Second World War. Their productive capacity was either all geared
towards production for the military or was destroyed totally.
In both instances there was little alternative than to go
pan handling abroad to find the resources to jump start their respective
economies.
And there the parallels diverge.
"While in Europe the aid was used to rehabilitate a previously strong industrial base, in Uganda the aid money was used mostly to rehabilitate infrastructure and revive social services under poverty eradication programs...
It can be argued that the needs in Uganda were so dire that
the alleviation of social distress was critical but the same can be said for
Europe.
While in Europe some resources were channelled to jump start
social services, more resources were targeted at reigniting the continent’s
industrial capacity. The resultant economic activity was then taxed to finance
improved social services and the welfare state
What if Uganda had gone the same route, what would have
happened?
For starters we kicked off at a decided disadvantage. Our
entrepreneurial class, the Asians had been expelled 14 years prior, so there
was no real capitalist class aside from the trading locals, who specialised in
importing and speculation.
While capital is important in helping businesses grow, what
is even more important even beyond the entrepreneurial spirit, is the ability
to run and grow business.
If an entrepreneur can’t grow his business, the enterprise
would be a black hole in which pumping more and more money would be an exercise
in futility.
But we see it all around us. How many local businessmen have
benefited from state largesse and where are they now?
Secondly our aid was channelled through do gooders, who even
at the end of the last century determined that our debt levels were
unsustainable and wiped out a sizeable portion of our obligation.
These same aid agencies found it easier to mobilise
resources for poor Uganda to build classrooms, kit health centers and provide
tap water, than to support local entrepreneurs develop capacity.
"The net effect of the coincidence of these two factors is an economy whose productive sectors – agriculture and industry are still crawling or dominated by foreign concerns...
The first is a challenge because we are running out of rope
in our bid to nail a tax on anything that moves and the second, because there
is an annual haemorrhage of resources which if they had remained here and
reinvested would help move the development needle much.
Some people have come up with the solution that government
needs to get back into business. They have derived this conclusion from the
faulty analysis that its only government that has the resources to support
major concerns of the types we need to create jobs, generate revenue and
trigger a ripple effect of economic activity.
Faulty because they think that the major challenge of
Ugandan business is a lack of capital.
So what to do?
We first need to vastly improve the business environment by lowering
the cost of doing business and follow a national strategy that goes beyond the
knee jerk reaction of throwing money at the problem or taxing existing players
to death.
That strategy should include a robust, nationwide program of
training our entrepreneurs to understand and do business; deepening the
financial industry, because as it is there are no products tailored to support start-ups,
small & medium enterprises and government support in the way of supporting
research and development.
In the meantime we can help the existing players – foreign
and local with incentives to produce for export rather than import
substitution. This is important because export led industries will produce the
much needed jobs we need in the economy.
And as a quick win, government need to lean more heavily on
our biggest companies to list on the exchange, in a way that ensures the local
middle class get first bite at the cherry. This important because not only
would it help develop a shareholding class – important for local resource
mobilisation, but also we can help retain some of those repatriated profits.
"Foreign controlled companies left to their own devices will not list. For one their capital requirements can be met easily by their head offices and secondly, opening up the company to new shareholders could adversely affect their growth plans as they may not be able to retain as much profit as they need to grow organically...
There are no shortcuts.
To move this economy to the next level we need to focus on
growing an indigenous capital class, but not through cronyism, and then manage
the fine balance between incentivising the productive sectors and ensuring they
leave more crumbs on the table.
