Uganda ‘misses’ the fourth industrial revolution

Tuesday May 24 2016

Unemployment was a subject of the recently

Unemployment was a subject of the recently concluded presidential election in Uganda.  

By Mark Keith Muhumuza

Drawing comparisons between Uganda and Rwanda have become a cliché. But the latter hosted the World Economic Forum on Africa recently, a forum that hosted about 1,700 delegates who booked several hotels in Rwanda’s capital, Kigali. Uganda being a neighbour to Rwanda had a representation of about eight delegates, with only one coming from the government. Mr Keith Muhakanizi, the permanent secretary in the Ministry of Finance was the only Ugandan government technocrat who attended the conference. The plus side is that the drinks from PepsiCo – a drinks partner at the event – all came from Uganda.

The so-called fourth industrial revolution is described to an era when technology takes over the running of day-to-day activities using internet connectivity. It is said to be more efficient and potentially threaten jobs.

The topic in itself for the conference: “Connecting Africa’s Resources through Digital Transformation,” relates to Uganda’s plans considering the strong language used in the Second National Development Plan (NDP).

NDPII reads: “As regards to ICT, priority during this plan is an extension of the National Backbone Infrastructure (NBI), construction of ICT incubation hubs/ centres and ICT parks,” adding that ICT would make Uganda more competitive. The lip service paid to the ICT sector is seen in the sector allocation, which is expected to receive about Shs60b in the 2016/17 financial year as sector allocation approved by parliament.

In as much the host president Paul Kagame of Rwanda remarked that “The transformative power of information and technology is at the core. But ICT’s are not a magic bullet, there is a bigger context.” In essence, ICT cannot work in isolation.

If anything, the bigger context is what Uganda is dealing with at the moment. Muhakanizi in a discussion with the Daily Monitor on the sidelines of the meeting said it was understandable that Uganda’s top brass of economists and government officials skipped the meeting because there was a swearing in ceremony to deal with that also posed a logistical challenge to the country. That, however, does not take away the issues discussed at the forum that could have been beneficial for the economy.

Empty growth
Unemployment was an important sound-bite for almost every presidential candidate in the general elections conducted in February 2016. Uganda’s rising population is producing a generation of unemployable, underemployed or unskilled people posing a policy challenge to the government.

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According to the recently released National Population and Housing Census 2014, - 71.1 per cent or 24.5million - is engaged in agricultural production that specifically targets growing of food for consumption. That plays right into the discussions in Kigali that questioned the quality of growth on the continent and its inability to be inclusive. Uganda is one of those economies that has been growing at rates of between 7 per cent and 3.5 per cent in the last 10 years, but that appears to have left some behind. Recently, that growth has slowed in Uganda and the continent.

“We focus too much on economic growth figures. What we need to question more is the quality of this growth,” Ms. Winnie Byanyima, the executive director Oxfam International noted while appearing on the panel discussing growth in Africa.
“Growth in Africa has been delinked from poverty alleviation and tackling economic equality,” she added.

The other questionable aspect of growth on the continent has been the rising numbers of poverty and income inequality. The discussions around the forum could have enriched government technocrats on how some countries are making progress in fighting poverty and income inequality.

Fix education
Ms Graça Machel, founder, Foundation for Community Development (FDC), Mozambique, and a Co-Chair of the World Economic Forum on Africa, raised concerns about Africa’s education system being ancient. Uganda has also often been criticised for having an education system that trains “job-seekers” instead of “job-creators.” On top of that, the free education provided by the government is quantitative, rather than qualitative, leaving Ugandans with qualifications but no jobs.

More troubling, the industrial revolution that technology brings requires highly skilled professionals otherwise the country will lose out on jobs. She emphasised that education needed to change to match with the times.

“We need change now. We are very good at drawing up policies, but very weak at implementation,” she said.

Financial inclusion
Uganda’s financial sector is dominated by mobile money, SACCO’s and traditional banks. Mobile money moved about Shs26 trillion in 2015 alone but none of these is in the form of savings. Traditional banking and Sacco’s take the bulk of the savings but then Uganda’s savings ratio is still low. Uganda is further grappling on finding the finance model that fits SME’s in the country. This is not a problem unique to Uganda.

“To withstand economic shocks, the continent needs to ensure better financial inclusion and integration,” Mr Benno Ndulu, the governor Bank of Tanzania (BOT) told the forum.

Interestingly, there was no Bank of Uganda official at the forum. However, Mr Patrick Njoroge, the Governor Central Bank of Kenya (CBK) and Ndulu from BOT were all in attendance discussing how to deal with monetary policy in their respective countries.

On the sidelines of the meeting, Njoroge explained how the Kenyan market was making progress on financial inclusion through people saving and borrowing money using the mobile money platform. Kenya has pioneered an initiative called M-shwari where SME’s can borrow money using mobile money and pay it back even it in 24 hours.

“In Kenya, I can proudly say we have financial inclusion levels of 75.3 per cent especially with initiatives that come with mobile technology. With Mobile tech, the SME’s don’t have to submit a business plan or make a power-point presentation,” Njoroge.

In Uganda, a bank called CBA – from Kenya - wants to replicate the same in Uganda but it awaits approval from the regulators.
Also, Ugandan officials would have picked a leaf from another initiative known as M-Akiba. “Through this project, we’ll be able to have people buy $30 (Shs100,900) worth of government securities by using a mobile device. You do not have to go through a treasury advisor,” Njoroge adds.

The problems on the continent, especially with financing government projects are almost similar. There was an admission that capital markets on the continent were still underdeveloped yet countries are in need of long-term capital that doesn’t have to be sourced from foreign countries. The suggestion seemed to indicate that an economy won’t have inclusive growth if its financial services are not accessed by many.

Lots of talks
Perhaps Ugandan officials didn’t miss much from the forum. There is a lot of talking during the forum that it can be an information overload. However, engagement with some of the continent’s richest men, government leaders, international organisations, CEO’s and NGO’s may have exposed Ugandan officials to new ideas that could be used to push Uganda into the projected middle-income country. As Muhakanizi noted: “Sharing new ideas and learning from each other” in order for the continent to tap the benefits of the fourth industrial revolution.

Address inequality
Inequality is harming the ability of growth to reduce poverty and deliver shared prosperity in Africa. According to Oxfam International, with growth slowing in Africa, the need to tackle inequality is there. It is vital to providing the opportunities needed for the millions of young people across the continent. The IMF has calculated that if African nations were to reduce their inequality levels to the same as those seen in ASEAN countries, this would add almost one percent to GDP growth, the equivalent of closing the infrastructure gap between the two regions.

Intra-African Trade

Uganda is a landlocked country and staring at a future where it will continue to depend on its neighbours if the infrastructure plans pay off in boosting industrialisation. Potential export markets include Kenya, South Sudan, and Congo among others. At the moment, Uganda does a lot of informal trade ties with South Sudan but there is a considerable lack of genuine policy direction to boost those trade directions. Uganda, as part of East African Community (EAC), has been looking to tap the regional market to boost trade. A point of concern, however, remains the inability to grow exports as fast as imports, which is creating a trade imbalance yet there is African market to tap.

“This is an opportunity (the slowdown) for us to rebalance our economies. We can no longer just depend on international markets. We must begin trading with other and boost Intra-African trade. This is where the growth is,” President Uhuru Kenyatta from Kenya noted at the forum.

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