TAPPING INTO FOREIGN CAPITAL FOR UGANDA’S BENEFIT

(This was initially posted online as a Twitter thread)

In 1962 when Uganda got independence the British left us with 1500 km of paved roads. Today 57 years later we have just crossed the 5000 km mark. Why should we care?

"Using population as an indicator in 1962 Uganda population was seven million and today we are 40 million. If population is up fivefold shouldn’t the road network have followed suit? We should have at least 7500 km of paved road by now...

Keep in mind that the British did the bare minimum, creating infrastructure to extract raw materials and service their own needs so even the 1500 km they left us was well below our requirements.

But let us stick with the 7500 km. To bring is to this level we would need at least $2.5b at $1m per km of road laid. Using current exchange rate that would be sh9.3trillion or about a quarter of our planned budget for 2019/20. The proposed 2019/20 budget is for sh40trillion.

Last year's budget for the works & transport ministry was sh4.7trillion, which of course didn't all go to roads. I think roads got about sh3trillion of that figure. So if we were to bridge the gap it would take about four years at the current rate of funding.

The challenge is that in three years we will be 44million going by our population growth rate of 3.3 percent, so the 7500 km will still not have brought us at par with our Independence day levels.

But an average middle income economy has five times as much road as we do, measured by km per sq. km of the nation’s surface area. Our figure is about 16 km per sq km versus 88 km per sq km for an average middle income nation.

This means that we need at least 25,000 km of paved road to compete with an average middle income economy, an additional 20,000 km of road or about an additional $20b to finance this. Uganda’s GDP is $25b.

Maybe we should just go slowly, do what we can now and somehow things will sort themselves out?

There are two problems with this. One, we are already behind schedule and two, the population of Uganda is not going to stop growing.
to let us catch up, in fact it is the roads and the economic activity they will throw off that will slow Uganda population growth.

"Also the reason we are not creating jobs as fast as we should, is because we have deficits in everything from roads to power generation to human resource capacities, which all have to be addressed. Ideally simultaneously...

The question is where will the funds to bridge all these deficits come from?

URA is expected to collect sh20trillion or $5.4b and government will borrow another $3b locally, which falls far short of our requirements.

There is much scope for mobilising local resources -- our tax to GDP ratio is around 14 percent but should be above 16 pct; our savings to GDP ratio is just as dismal.

But in the meantime what do we do?

Some estimates I have seen show that there is at least $135trillion of investable capital sloshing around the world today looking for a return.

The question is how do we position ourselves to tap into these funds, create a funnel so to speak and direct them our way?

By adopting a liberal economy we have already done some of the heavy lifting. More still has to be done especially in shifting mind sets to recognise foreign capital, if understood well and can be used as a tool for change. The operative word is understood.

And the rules aren't any different from those needed to attract local capital, only maybe that foreign capital's returns are denominated in hard currency, whose movement we need to understand as well to leverage for our own benefit.

And we need not reinvent the wheel ... South East Asia, post-World War II Europe and even China has done it ... why cant we?

.... TO BE CONTINUED