Experts speak out on the state of Uganda’s economy

Dr Fred Muhumuza, Francis Kamulegeya, Prof Augustus Nuwagaba and Charles Ocici.

What you need to know:

In the build up to the 2012/13 budget day, KFM in partnership with ACODE, NTV and KCB hosted a national debate on the economy last week. We bring you excerpts from some of the issues that were addressed by the panel of experts.

Dr Fred Muhumuza—senior advisor to government on the economy

Does Uganda have the right infrastructure to propel business competitiveness in the region?

No, and here is the solution.
If you do not have enough infrastructure to compete favourably, the solution lies in doing massive investments to get that infrastructure in place.
If you are so much in deficit, it is like finding a malnourished person and you serve them a buffet. You will just kill them. We must find a strategy. We should not rush to fill up the infrastructure deficit which has been built over the years because that will kill the other aspects of the micro economics.
We should be concerned about how much money the government is putting into the economy but this should not be at the expense of the private sector that is supposed to actually use that infrastructure. Economic growth is an issue of the private sector, with government only a facilitator.
If we do not put up measures to support the private sector, then we will not have any higher growth.
Last year, we had to increase Treasury bills and interest rates to contain inflation. One of the causes of this inflation was constrained supply of the private sector.
The bottom line is that if you suffocate the private sector, you will not get adequate growth in the economy because supply will be constrained.
We should not be pointing fingers because we are the ones who have asked for many favours. We are putting too much pressure on the government and economy. We want the economy to provide for us everything. Instead, we should agree on what ideology will give the private sector growth. Infrastructure across the board and access to affordable credit for both the short and long term will be necessary.

Francis Kamulegeya- Country senior partner PwC

Does Uganda’s tax regime encourage compliance and support equitable service delivery?

Uganda’s tax regime; does it encourage compliance?
Yes. The nature of Uganda’s tax system is one which when you look at the global benchmarks conforms to what is widely acknowledged as the best principles. It is a simple tax system which can be compared to that of USA and UK.
Do we have voluntary compliance?
No. There is a very endemic culture of lack of compliance. It is reflected by the very low tax to GDP ratio (13 per cent) for the last decade.
People are not compliant because of perceptions they have with the tax system. Some believe that the system is not fair.
People are also asking the government to account for the tax revenue collected in each financial year, before luring them into paying more. The only problem with taxation is that you are obliged to pay the tax whether the government delivers the service or not.

Way Forward:
We need to expand our tax base but also improve compliance. People should know that failure to comply means we do not have any taxes to fund the public expenditure.
But, I believe that the people who have the power to unlock the tax base are the politicians and religious leaders because of their kind of following.
If a political leader stood with the commissioner general and encouraged people to register for taxation, chances are that they will have that big pulling power. For religious leaders, I will refer this to the 10 per cent tithe paid in church diligently and nobody asks how much one earns. If a religious leader told people that it is actually right to pay taxes, all that potential will be unlocked.
So many people out there are waiting for someone they trust to tell them that paying tax is good.

Prof Augustus Nuwagaba, senior economist, Makerere University

Is Uganda on the right track to poverty eradication and attaining the millennium development goals?

No, many people are living on the wrong side of money. Money generated is concentrated in hands of a few.
In 1997, we had the Poverty Eradication Action Plan (PEAP). Uganda was the first country to design a very comprehensive and wonderful poverty document- Poverty Reduction Strategy (PRS). But we failed to implement it.
The PEAP had four pillars. The first pillar; attaining micro-economic stability and economic performance that can bring good livelihood was partially achieved between 1997 and 2007.
Unfortunately, in the other three pillars, nothing was achieved.
In the social sector, we had no achievement.
Over 70 per cent of mothers still produce from their homes. 16 mothers die every day during the process of giving birth.
We have not scored in Education either. Why is it that the children of people who have some money are in private schools? Why aren’t they in public schools?
Recently, I was with the president and asked him why he has done so well in the Army but failed in the public service sector- among them education and health?
PEAP died because of three things. One, very high levels of corruption. We now lose 947 billion to corruption annually.
Secondly; the cosmetic address of problems. We focused so much on economic growth yet we lacked robust means of economic fundamentals such as production. We need high production so that even when the thieves eat some money, what remains can develop the country.
Thirdly, Agriculture continued to decline yet 76 per cent of Ugandans are still in this sector.

Way Forward:
When you have a problem, accept that you have a problem and then work on addressing it. Don’t tell lies because it is the truth that will set you free.
We need production and financial prudence. Part of our problem is monetary versus fiscal policy issue. Up to 2007, the central bank was doing very well until the government management of the fiscal policy became a problem.

Charles Ocici, executive director Enterprise Uganda

Tips of building and sustaining a business

Uganda is faced with a crisis of unemployment. Some reports put unemployment at 83 per cent. Many of those unemployed are the people we have invested in so much money to attain education. Even those employed are getting low salaries. For example for many of the jobs, the average salary is Shs 300,000 which is very little for one to survive and also save.
Far still, many businesses keep coming but also disappearing after a short stay. By the look of things, starting is easy but maintaining the business is hard.

Recommendations:
We need people who can create their own destinations and directions; people who will be able to employ themselves. Young people should stop considering employment as ‘an address away from home.’ It is a very wrong perception because you can successfully work from home.
Additionally, let us be guided by the 2Cs: Competition and Choice.
As you set up your own businesses, you must be able to compete with the very best. Secondly, we should know that people have the right to choice. They chose the very best. No one will buy from you unless you have the best quality at the best price.
There is need to change our attitudes: Everyone should have a mindset of an investor.
It is also important that we impart more practical skills to the young generation. Whoever is finishing University needs to undertake a short course in business set up and management.
Lastly, it is very important that we return the SMEs. Much more support should be channeled to our SMEs if we are to address unemployment.

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