As poverty rises, can Uganda attain middle income status?

There is nowhere Paul Ssemwogerere would rather be than in the village rearing animals or tilling the ground for food to sell. But after the income crisis that hit his wallet, the vendor would rather remain on Kampala streets and play hide and seek with Kampala Capital City Authority (KCCA) law enforcers.
“I do not know what has made money scarce but I think it is Togikwatako (age limit war),” Mr Ssemwogerere laughs as he calls out pedestrians along Luwum street to buy his handkerchiefs at Shs500.

“This government has frozen the money,” he adds. Three months ago, the 32-year old father of two was selling second hand clothes in down town Kampala. But the clothes became too expensive and he abandoned the trade. He believes Kenya’s political instability is to blame.
His Shs12,000 budget would cater for food, transport to work and run his business. Now he says, “There is no money for transport anymore; I walk to and from my home in Kamwokya every day. I can only afford a mixture of beans and maize at Arua Park at Shs1,000 and cheap water at Shs300.”

Compromising
Because he is compromising on his earnings, the family that once afforded breakfast, lunch and supper, is only treated to a meal of porridge at breakfast and lunchtime, and at sunset, a meal of posho and silverfish.
On a good day, he makes Shs10,000 from the handkerchiefs but he cannot save any of it. Even with a Shs30,000 profit from the Sunday market, he struggles to pay Shs100,000 rent and school fees for his child in primary one. He plans on enrolling her in a fully government school to keep up with the cost of education.

A working wife would alleviate the situation but Mr Ssemwogerere’s is a housewife. He thinks she cannot manage tussling with KCCA and would rather look after his children. Like some Ugandans, he is opting to go into agriculture next year as a final resort but says, “I have been looking for capital, but what capital do I invest now?”

Chronicling stories such as Ssemwogerere’s has become a “thing” in Uganda. When Uganda’s top chief executive officers met in Kampala for the 8th annual edition of the CEO forum in October this year, the need to accelerate inclusive growth and the middle income status by 2020, remained high on the agenda.

The day’s conversation largely highlighted views relating to whether Uganda can be able to attain middle income status in three years while its people slip back into poverty.

According to the World Bank, middle income countries are nations with per-capita gross national income ranging between Shs3.7m and Shs45.4m. Uganda’s target is to attain lower middle income status by 2020 with an annual per capita income of Shs3.7m according to National Development Plan 2(NDP2). This means that all Ugandans including children who are not working must be earning Shs3.7m per year.
At the forum, the National Planning Authority signaled that per-capita gross national income was targeted at Shs3.2m by 2016/2017 but remains at Shs2.5m to date.

The middle income goal is anchored on household earnings which should translate into inclusive growth-in terms of health, education, access to land, access to emerging opportunities and capital. However, Mr Wilberforce Kisamba Mugerwa, the executive chairperson National Planning Authority says the economy is growing but leaving some Ugandans behind.

Poverty
About two months ago, poverty statistics were thrust into the news headlines indicating a rise to 27 per cent up from 19 per cent in 2012/2013. This meant that about 10m Ugandans are surviving on less than Shs4,500 and cannot afford basic needs, not even three meals a day according to economists.
For instance, resorting to budget cuts is Mr Ssemwogerere’s way of surviving.

“I leave Shs4,000 at home to cover daily expenses and I also have to feed on that money at supper time. I used to leave Shs7,000 and my wife would save something, not anymore now,” he says.
NPA’s roadmap to achieving middle income status noted that it would be achievable if the NDP2 is implemented to the dot.
However, government has not implemented the required policies, drawing Ugandans under the poverty line, Mr Mugerwa says.
Vulnerability levels
Ms Jennie Barugh, head of office department for International Development says, the poverty data for the last 10 years shows high levels of vulnerability and particularly attributes the current poverty levels to drought.

“In 2009, when the number of people living under absolute poverty had fallen below 20 per cent, over 40 per cent of people were living on more than $2 (Shs7,271) a day. 40 per cent of the population was incredibly vulnerable to falling back below the poverty line. What has happened in this data is that many of those people have actually fallen back below the poverty line. Last year was an incredibly hard year with drought, it seems that vulnerability is what we are seeing in this data,” she says.
With the Eastern region struggling the most at 42 per cent, poverty reduction is not happening across the country, Ms Barugh says.

Mr Augustus Nuwagaba, a senior economist who points the statistics to a decline in general economic activity says all efforts in place to reduce poverty have encountered challenges mainly emanating from organisation.
“Most of those interventions have not had significant impact. The Youth Livelihood Programme performance is very low; Operation Wealth Creation has faced tremendous challenges in distribution of say seeds. Seeds come late, farmers don’t find where to sell the produce and all this has combined into falling of incomes,” Mr Nuwagaba explains.
He notes that it is very difficult to attain middle income status now because Uganda should have had a persistent growth of about 7 per cent instead of the current 3 per cent. More so, population growth rate of 3 per cent per year is discounting all efforts.

Private Sector Foundation Uganda’s executive director Gideon Badagawa questions the country’s certainty on getting everyone to earn Shs3.5m every year when it is doing Shs2.7m even after rebasing the economy.
With an economy that has a tax-to-GDP ratio (ratio of tax collected compared to national gross domestic product) of 13 per cent, 60 per cent informal economy, 68 per cent of households not in the money economy and less than 40 per cent having bank accounts, Uganda has slim chances of attaining middle income, Mr Badagawa warns.

For now, poverty remains confined to common men like Mr Ssemwogerere who envisions a hopeless situation while the affluent and educated concern themselves with a middle income status.
“No one can save you from this poverty,” Mr Ssemwogerere says as he wraps up his handkerchiefs at the sight of a KCCA law enforcer.

“Government cannot help us. I will not lie to you. You have to sacrifice, cut your budget by a half. If you have been using Shs10,000 a day, it should reduce to Shs5,000,” he says.
Per capita income growth is behind target and Ms Barugh says Uganda needs per capita growth of 8 per cent per annum between now and 2020, which is a challenging target.

‘Wishful thinking’
Mr Badagawa says Uganda has to revise its targets or do something magically to get into the middle income bracket.
He says: “We need to revise our targets and give ourselves 10 more years to get into the lower middle income because Uganda has since human history until now done $700 (Shs2.5m). You cannot in two years have added another $400 (Shs1.5m). This is wishful thinking.”
Uganda needs to invest more in human capital as the 8 per cent growth is impossible with an unskilled population.
“If we are going to have productivity, we have to ensure that the people we are taking to school gain vocational education as an integrated part of the formal schooling. Everyone must have something productive they are doing and innovation is critically important,” he says.

Recommendations
Mr Mugerwa believes action on poverty will involve strengthening implementation, effectiveness and efficiency of public service mechanisms.
“The funds we have in the national budget could deliver better services if properly utilised but we have a problem where funds are spent where they should not be spent and even where they are spent, they are spent inefficiently. We are slow in decision making which makes projects very expensive and a project which would have been implemented in three months is done in five years,” Mr Mugerwa says.
About 80 per cent of Ugandan derive livelihood from agriculture but the sector is performing miserably due to lack of agricultural education, Ms Victoria Sekitoleko, the founding chairperson Uganda Agribusiness Alliance says.

“Uganda is an agricultural country. If we are going to skill the 70 per cent, we should not be put in the same group with engineers so please skill us where we are needed and it should start in nursery school,” she says.
Ms Sekitoleko wants inclusive alternative financial solutions for farmers to expand agricultural credit.
Increasing productivity in a sector where more than 70 per cent of Ugandans are stuck will be a tough task. Mr Nuwagaba says people should get affordable credit, government must increase access to land, access to affordable agricultural inputs and change people’s mind sets.

Investment in irrigation infrastructure will be a quicker win.
“You can do some quick wins by working on drought; making sure food production is high and controlling it through irrigation. Then creation of markets so that what you produce, you can sell and producing it at a lower cost through low interest rates,” he says.
Mr Nuwagaba believes if the above actions are taken, Uganda can reduce her poverty from that 27 per cent to 10 per cent.”

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