How tangible is Uganda’s economic growth?

Tuesday June 11 2019

President Museveni greets Soroti Fruit Factory

President Museveni greets Soroti Fruit Factory employees after touring the fruits processing facility in April. He was accompanied by Trade minister Amelia Ann Kyambadde. Government has continued supporting agriculture by improving the agricultural value chain, thereby increasing agricultural production and productivity. PHOTO BY ISMAIL MUSA LADU 

By Ismail Musa Ladu

Service excellence exhibition, an accountability initiative spearheaded by the ministry of finance and Uganda Revenue Authority (URA) closed last week with the government parting itself on the back for a job well done in steering the country’s economy in the right direction over the years.
The event held at Kololo ceremonial grounds is a brainchild of URA. It is about ministries, departments and agencies of government providing evidence and showing accountability to the public who are the chief tax payers.
In addition, the purpose of the service excellence exhibition before it was taken up by the ministry of finance, was meant to enhance tax compliance, with particular emphasis channeled in expanding the tax base.
As a precursor to the budget speech that will be read this week on Thursday June 13, the ministry of finance, in its wisdom, declared fit the state of the economy, particularly over the last 12 months. The ministry which is also in charge the country’s planning and economic development also projected a clean bill of health in the next 12 months starting July 2019/2020.
According to the director economic affairs at the ministry of finance, planning and economic planning, Mr Moses Kaggwa, the economy grew by 6.1 per cent in 2018/2019, something that surpassed expectations. As for the services industry, it continues to leap ahead of other economic sectors, a development that worries astute economists such as Dr Fred Muhumuza and Dr Ramathan Ngoobi.
Of course the economic growth registered this financial year is lower than the previous financial year. But that does not seems to be an issue with the government.
In his remarks, the Prime Minister Dr Ruhakana Rugunda noted that the National Paved Road Network has increased from 3,050 Km (or 14.66 per cent of the national road network) in 2008 to 4,551 km (or 21.1 per cent of the national road network) in 2017/18.
He added that the energy sector, has also progressed with the total installed electricity generation capacity now over 1,200MW, with the coming on board of Isimba (183MW), and– Nyamwamba (9.2MW), Nkusi (9.6MW) and Waki (4.8MW) mini-hydro power plants.
This, he said, will contribute towards industrialisation and job creation as highlighted in the medium-term theme for the Budget: “Industrial for Job Creation and Shared Prosperity.”
With regard to social services, the health sector has increased universal health coverage with essential health and related services needed for promotion of healthy and productive life.
In the education sector, the premier said they have managed to universalise Primary and Post Primary Education.
Nodding in approval was finance minister Matia Kasaija, as the Premier stressed that the government has continued to support agriculture by improving the agricultural value chain, thereby increasing agricultural production and productivity.

Size of economy
In his state of the nation address, President Museveni said the size of the economy as of 2018/19 is at Shs109.7 trillion. The income per person is now equivalent to $800. Although this is below the level required to the attainment of the Middle Income Status, he noted that the renewed impetus of the economy and the large economic base is being created with a view to catapult the economy to prosperity within a short period in the future.
In his view, he declared that Uganda’s economic growth and development outlook is positive, with the economy projected to grow at, at least, 7 per cent in the medium term. But according to Mr Museveni it could even be higher given the fact that key constraints to growth are being sorted.

Caution
Irrespective of the above, economic analysts and policy experts weighing in on this matter were either cautious in their assessment of the state of affairs or simply said it as it is.

Cost of business high
When interviewed for this article, the Private Sector Foundation Uganda executive director, Mr Gideon Badagawa, said much as there has been some improvement in some areas of the economy, the fact is the cost of doing business in Uganda is still very high.
He also called for balance between infrastructure development and investment in human capital, describing the mix as crucially important for any economy to grow.
To manufacturers under their umbrella association, Uganda Manufacturers Association (UMA), the economy, it hasn’t yet triggered the kind of growth that it should have by now.
The cost of power is still exorbitant. The cost of borrowing is unfavourable. And they don’t like the tax regime on the grounds that it is more likely to tax them out of business rather than help them remain in business. As if this is not a handful enough, most of them believe they don’t get the right value for money with products being churned out of the country’s education system.

Economist
In an opinion published last week in the Daily Monitor tilted: “Who is fooling who on goodness of our economy?” Dr Fred Muhumuza, a development policy analyst committed to inclusive growth, wrote: “Truth of the matter is that politicking cannot override nor replace basic statistics and economics.
He continued: “…For example, a statement like “Uganda has recorded strong growth of 6.1 per cent,” loses meaning when compared with China’s worst growth rate of 6.6 per cent in more than 25 years.”
He was of the view that the bulk of the assumptions expected to support economic growth in Uganda are nothing but random events like rain, ‘sterile’ investments backed by corruption, low productive infrastructure and mining of oil/gas that remains elusive - 15 years since the discovery of the hydrocarbons.
He further argued that basing on survivor’s bias, Uganda has religiously pursued the path of industrialisation for growth, jobs and shared prosperity despite the evidence that the time for such economics is long past. Little wonder that after decades of investing in roads, energy, industrial parks, provision of free land, tax exemptions among others, the contribution of manufacturing to the economy remains below 10 per cent.
“While we take pride in the new factories created, we ignore several that close or struggle daily to “balance the boat.” Unfortunately for the economy, genuine investors (micro, small, medium and large) live with the realities and cannot be fooled by the randomness of politicking,” he ended his thought.

Some research work
According to PwC’s current report on the country’s Economic Outlook, there is a risk that the current surge by government in investment in public infrastructure may deny or undercut funding in the other growth-promoting sectors of the economy. This, the reports says is already evident by the fact that according to Uganda Bureau of Statistics’, most recent data, the percentage of people living below the poverty line has increased from 19.7 per cent in FY15/16 to 21.4 per cent in Financial year 2017/18.
Further, the concern around public debt levels is still big.
“Whereas we share the government’s optimism about the positive economic outlook, we are concerned about the risk of debt distress,” reads the report in part.
Uganda’s public debt burden has since risen to about Shs42 trillion and expected to surpass the 50 per cent threshold in the next two years if the government does not trim its borrowing appetite.

Where are the jobs?
The economic outlook for 2019 report is very positive thanks to a recovery in the agriculture sector, the sustained growth in services and the continued huge investment by the government into public infrastructure.
According to Uganda Bureau of Statistics’ (UBOS) latest data, the economy grew by 6.4 per cent year-on-year in the first quarter of FY18/19, continuing with the same momentum from the last quarter of FY17/18.
This was a major improvement from the 4.5 per cent growth that was realised in the first quarter of FY2017/18.
The projected growth will be driven mainly by the continued recovery in the agriculture sector. Although the economy is growing, it is not creating enough jobs.
One of the main reasons why the growth in the economy has not translated in massive growth in jobs is because, in the past ten years the growth has been originating mainly from investments in public infrastructure as well as the mining and oil and gas capital intensive sectors, rather than in traditional labor intensive sectors such as agriculture, manufacturing and tourism.
In his remarks at the services excellence exhibitions, budget policy specialist with CSBAG, Mr Siragi Magara Luyima, noted the economy hasn’t attracted enough quality jobs yet. And that the available one are more likely to be taken up by a foreigner than a local.

Where are the jobs?
The economic outlook for 2019 report is very positive thanks to a recovery in the agriculture sector, the sustained growth in services and the continued huge investment by the government into public infrastructure.
According to Uganda Bureau of Statistics’ (UBOS) latest data, the economy grew by 6.4 per cent year-on-year in the first quarter of FY18/19, continuing with the same momentum from the last quarter of FY17/18.
This was a major improvement from the 4.5 per cent growth that was realised in the first quarter of FY2017/18.
The projected growth will be driven mainly by the continued recovery in the agriculture sector. Although the economy is growing, it is not creating enough jobs.
One of the main reasons why the growth in the economy has not translated in massive growth in jobs is because, in the past ten years the growth has been originating mainly from investments in public infrastructure as well as the mining and oil and gas capital intensive sectors, rather than in traditional labor intensive sectors such as agriculture, manufacturing and tourism.
In his remarks at the services excellence exhibitions, budget policy specialist with CSBAG, Mr Siragi Magara Luyima, noted the economy hasn’t attracted enough quality jobs yet. And that the available one are more likely to be taken up by a foreigner than a local.

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