Matia Kasaija did not read last week’s budget for the first time in a decade. Arguably Uganda’s most colourful finance minister in his presentation, seen by his permanent place on social media, the achievements of his tenure may be lost in the humour.
When in thiscolumn I wrote about labour productivity in 2011, Uganda's challenge seemed
straightforward.
We were working
hard but producing too little.
The argument then was that Uganda's poverty was not primarily a result of laziness. Rather, our workers lacked the capital, technology, skills and organisational support needed to turn effort into output. A farmer with a hand hoe could work from sunrise to sunset and still produce less than a mechanised farmer elsewhere. Productivity, not effort, was the missing ingredient.
Fifteen years
later, and ten years after Matia Kasaija became Minister of Finance, we have
enough distance to ask a simple question:
Did Uganda solve
the productivity problem?
The answer is
both yes and no.
The
"yes" is impressive.
When Kasaija took
office in 2016, Uganda's economy was worth roughly $27 billion. Today it is
approaching $70 billion. Domestic revenues have risen from about Shs11 trillion
to more than Shs45 trillion projected in the latest budget. Exports have grown
dramatically, from around $4 billion annually to well over $13 billion.
Electricity generation has expanded. Roads have improved. Financial inclusion
has deepened. Mobile money has transformed commerce. The tax-to-GDP ratio is
projected to rise to 15.9 percent.
By almost any macroeconomic measure, Uganda is a bigger, more sophisticated economy than the one Kasaija inherited.
More importantly,
the latest budget demonstrates a clear understanding that growth alone is not
enough.
The emphasis on
commercial agriculture, tourism, minerals, science and technology reflects an
appreciation that the next phase of development is about raising productivity
within sectors where Uganda enjoys competitive advantages.
In many ways, the
latest budget reads like a practical application of the argument this column made
in 2011.
Productivity
creates wealth. Wealth creates revenues.Revenues create fiscal independence.
The projected 28
percent jump in domestic revenues is therefore more than a tax story. It is
evidence that larger sections of the economy are becoming monetised and
productive.
That is the good
news.
The less
flattering part of Kasaija's report card is that Uganda has not fully
translated economic growth into economic transformation.
The most obvious
evidence is that the same productivity questions raised in 2011 remain relevant
in 2026.
Nearly three
quarters of Ugandans still derive their livelihoods directly or indirectly from
agriculture. Yet most remain smallholder farmers operating on tiny plots with
limited mechanisation, weak market access and low productivity.
The economy has
grown.
The average
farmer has not transformed at the same pace.
This is why
government now talks endlessly about agro-industrialisation, value addition and
commercialisation. These are not new ideas. They are admissions that the
productivity challenge remains unfinished.
Even more
revealing is what the latest budget does not say.
The loudest
silence remains domestic arrears.
A government genuinely focused on productivity would view unpaid suppliers as an economic emergency...
When a contractor
waits years for payment, capital is trapped. Businesses borrow expensively to survive.
Banks inherit bad loans. Investment slows. Jobs disappear.
Productivity is
not only about producing more.
It is also about
ensuring resources circulate efficiently through the economy.
In that regard,
domestic arrears represent a major productivity failure.
The contradiction
is striking.
Government wants
farmers to produce more.
It wants
manufacturers to expand.
It wants SMEs to
create jobs.
Yet it
simultaneously withholds liquidity from businesses that have already delivered
goods and services.
That undermines
the very productivity gains government seeks to achieve.
The second
unresolved challenge is corruption.
Again, viewed through the productivity lens, corruption is not primarily a moral problem.
It is an economic problem.
Resources that
should finance investment are diverted into consumption. Talent is redirected
from productive activity into rent-seeking. Capital is allocated based on
connections rather than efficiency.
The result is
lower national productivity.
One of the most
encouraging aspects of the latest budget is its recognition that revenue growth
cannot indefinitely come from squeezing the same taxpayers. The PAYE threshold
adjustment, though modest, signals an appreciation that economic growth
ultimately depends on households and businesses retaining enough resources to
remain productive.
The Treasury will
forgo about Shs96 billion in revenue.
That is a small
price to pay for acknowledging economic reality.
If there is one
lesson from Kasaija's decade, it is that infrastructure was the easy part.
Roads can be
built. Dams can be commissioned. Power lines can be erected.
Transforming
behaviour is much harder.
The next stage
requires changing how farmers farm, how businesses compete, how government
spends and how institutions function.
That is a more
complicated challenge than pouring concrete.
So how should
history judge Matia Kasaija?
As the minister who successfully managed Uganda's transition from a low-income economy dependent on aid towards a more self-financing and increasingly diversified economy...
But also as the
minister whose tenure ended with the country's biggest challenge largely
unchanged.
The productivity
problem identified in 2011 has evolved but not disappeared.
Uganda has become
richer. Government has become bigger. Revenue collections have become stronger.
Exports have become more diversified.
Yet the central
question remains remarkably familiar:
How do we help millions of Ugandans produce more value from the same effort?
The latest budget suggests government finally understands that this is the question that matters....
Whether it can
answer it will determine not only the legacy of Kasaija's successors, but
whether Uganda finally makes the leap from growth to transformation.
That, more than any revenue target or expenditure figure, is the real test of the next decade.
