Thursday June 19 2014

EA budget speeches: Outdated ritual laced with new dreams

By Karoli Ssemogerere

I have spent the last one week spoiling myself on last week’s edition of The East African, that captured the details of the region’s budget speeches read last week. Uganda, Kenya, Tanzania and Rwanda’s budgets were profiled.

Noteworthy, the budgets cemented the status of Kenya and Tanzania as the region’s large power-houses with robust economies. Kenya’s budget reached $20 billion a score, which would put it in the top one third league of states in the United States, while Tanzania lost a few steps after it came in at $12 billion, just a tad smaller than the budget of the US state of Maryland. Uganda and Rwanda had much smaller outlays; $5 billion and $2 billion, that puts them in the league of minor city-states such as Delaware and Washington D.C.

The economic policies in all four countries don’t deviate much; the old ratio of 70:30 ratio of recurrent to development expenditure that dominated the budgets of the last two decades is gone through the window, replaced by a more forward looking 50:50 ratio. All the major East African economies are investing more in infrastructure even though the similarities probably stop there.

Kenya, after years of building its backbone along the Mombasa-Uganda corridor, is shifting tact by spreading its economic ambitions in the 47 counties, some of which were such economic backwaters that newly-elected Governors had to commence their duties in make-shift Abim District style bereft of the trappings of their offices.

Uganda is going over some buyer’s remorse over its highly fragmented system of administration that has not had the redistributive effect projected by the World Bank and other donors who, for two decades, promoted decentralisation over federalism. Kampala’s share of national economic output continues to grow. Seventy per cent of national taxes are now collected from metro-Kampala, a factor that may have informed new strategies of bringing the agricultural sector in the tax fold.

Our southern giant Tanzania seems to have gotten one or two things right, by focusing on building its mineral sector and improving external trade links. Tanzania in due course is likely to overtake Kenya as the region’s largest economy for three other reasons. First are abundant water resources. Second is its strategic location astride two important economic blocks EAC and SADCC.

Third is the premium it is harvesting from decades of social stability. Politicians in Kenya’s opposition seeking to upend Uhuru-Ruto must study their southern neighbour. As the reluctant warrior, Tanzania is likely to continue extracting concessions from either side like the United Kingdom regularly does from the European Union for its strategic benefit.

Long touted for its financial prudence and lavished with attention by the donors and a heavy PR machine, Rwanda still has its work cut out. The economy, after a decade of moving full speed, is starting to slow down and in a cautionary note for Uganda, shows evidence that a ruthless tax collecting regime has a downside on both discretionary spending and foreign investment.

Uganda still has the option of keeping a small budget alongside a smaller government. You only have to travel to Mbarara and Bushenyi to witness firsthand the carnage of waste visited upon costly district buildings that are now mostly empty. Bushenyi District headquarters are too big to become a five-star hotel.

Finance minister Maria Kiwanuka and her team must also congratulate themselves for reaching a new fiscal milestone; financing 81.5 per cent of the National Budget from domestic resources. This is a risky but worthwhile path. By cutting spending rather than imposing new taxes, this number can improve to great benefit of the economy.

From the regional perspective, the biggest deal in town will be execution of the Single Gauge railway linking the northern corridor. Railways cost a lot of money. The East African presidents must devise a passenger strategy. Passengers are the most important political constituency of railways. This is one point Mr Kagame, Mr Museveni and Mr Kenyatta should have emphasised on budget day.

Mr Ssemogerere is an Attorney-at-Law and an Advocate.