Thursday October 11 2018

Independence: Uganda was a much richer country then

Karoli Ssemogerere

Karoli Ssemogerere 

By Karoli Ssemogerere

Now that the Finance minister, Matia Kasaija, is officially seeking answers on what has gone wrong with our economy that has become the sick man of the region, it is time to offer some prescriptions, but first the diagnosis.
In 1958, the Uganda Protectorate had a financial surplus of £ 8 million or about £ 200 ($300) million today (adjusted for inflation) from the sale of just coffee and cotton, which were predominantly grown in Buganda and Busoga. In 1986, Ugandan coffee exports primarily from the districts of West Buganda, Mengo and East Buganda were $400 million. Cotton exports had fallen drastically due to shift from labour intensive cotton, collapse of crop finance and wearing down of cotton ginneries. In 1958, the Uganda Protectorate was home to just six million people. In 2018, Uganda is home to nearly 40 million people.

Most of Uganda’s official economic data suffers from three major defects. First, The Ministry of Finance prefers using the local Shilling, which has undergone three major devaluations, the last one in 1987, where government “confiscated” old currency and replaced it with a new currency. This financial engineering moderated the true cost of dislocation of industries, privatisation, and acquisition of foreign debts, which in theory are repaid from printing domestic currency. Second, government has gotten away for too long often with support of institutions like the IMF and World Bank with avoiding data that is deemed politically insensitive.

This column has for 12 years consistently asked why government does not have reliable unemployment data. Yes unemployment data avoids a major cost, unemployment insurance and compensation, but presence of unemployment insurance moderates Uganda’s unsustainable dependency ratio. It was a breath of fresh air two months ago when Children minister Florence Nakiwala Kiyingi in an official broadcast, admitted that government had failed to tame unemployment.
In perhaps a sign of more desperate times, President Museveni is attempting to give out stimulus in a combination of political mobilisation, largesse or mere philanthropy. This is likely to have minimal effect. Donor funds like Youth Livelihood Fund have been mixed up with the mobilisation budget, yet the majority of the unemployed are in the rural areas rather than Kampala.

Third, government is struggling to find an answer to Uganda’s deteriorating terms of trade. In 1961, the DP government allowed Africans to directly export coffee and cotton for the first time causing a major quadrupling of domestic resources. President Obote largely continued this policy. In 1965, global coffee prices fell to just US Cents 0.45 lb. President Obote faced a lot of pressure that his government was eating up farmers’ money and set up the Coffee Marketing Board to reduce distortion and exposure of farmers to volatility in world markets. In 2018, two decades after open trading was introduced, coffee attracts just US Cents 0.65 lb. Production is up from three million bags in the 1990s to five million bags, but its storefront value (Free on Truck Value) is rapidly falling. The list of exporters licensed by Uganda Coffee Development Authority (UCDA), is now mostly multi-nationals purchasing a cheaper product without any regulation.

In recent remarks, Education minister Janet Kataha Museveni mentioned that Uganda’s labour markets are constricted by the free labour provided by women. Ms Museveni stated that early childbirth ensured that the majority of women remain beasts of burden on whom the burden of subsistence fell. She may have added that 20 years after the introduction of Universal Primary Education, Uganda’s illiteracy rates are growing. As the schools minister, she also knows that many government schools or government-aided institutions, are facing declining enrolment as the school system is no longer seen as a solution to unemployment.
The impact of the new reverse journey is felt mostly in critical sectors like agriculture, fisheries, tourism and minerals. Our young people barely educated cannot harness technology. China this, China that, is actually a national embarrassment.
Mr Ssemogerere is an attorney-at-Law and an advocate. [email protected]