A strategic view of Uganda’s proposed new cities

Uganda is a services dominated economy. According to the Uganda National Bureau of Statistics’ abstract for the year 2017/18, services accounted for 47.6% of GDP. The rest of the economy fell between agriculture and industry at about 24.2% and 19.9% of GDP respectively. The residual balance was attributable to taxes on products. The online CIA World Factbook put Uganda’s economy at 52.3%, 24.5% and 23.2% between services, agriculture and industry for the year 2017.

Service driven economies are knowledge intensive and benefit a lot from agglomeration effects and knowledge spillovers; the synergy that accrues from firms that are doing similar businesses clustering together in same places and the accompanying wide sharing of useful information. Developed urban centres normally attract the most skilled labour force in big numbers, have the best infrastructure and other business inputs and enablers that facilitate production. Research in developed jurisdictions, such as United Kingdom, indicates that agglomeration effects and knowledge spillovers are best maximized through urbanization and that this works both in large and small cities. Related studies also reveal that cities with populations higher by a comparative 10% offer business opportunities that have capacity to pay 0.2% to 1% higher wages to their workers.

A service motivated economy is likely to realize a lot of growth from investing in the advancement of urban centres, running on the above advantages. Uganda therefore could register significant returns from assigning resources to upgrade towns to cities, if this step is as extensive as government actively influences flow of investment into the cities. Media reports indicate that government is set to do that, with some ministries planned for relocation to new cities. The likely favourable impact that will originate in an enhanced services sector will as well positively influence agriculture and industry, as these latter two are necessary support pillars for services to be delivered and utilized.
Presently, skilled work in Uganda is concentrated in Kampala. According to the Uganda National Bureau of Statistics, in the year 2014/15, 55.1% of all jobs advertised in Ugandan newspapers, with designated workstations, required staff to be stationed in Kampala. The implied economic advantages and strengths of urbanization highlighted above therefore mainly get felt only in Kampala currently.

Kampala is highly congested. Initially designed for a population of less than a million, its resident population stood at 1.5 million by 2014. During working hours, four million people purposefully mill around the city every day. The World Bank estimates that by 2050, Kampala will be home to 12 million people. The city is both the country’s commercial centre as well as administrative capital and the entire country relies on it as a source of most tradable commodities while all arms of government are headquartered there as well. Accordingly, any development that happens in the country directly and significantly contributes to the growing congestion of the already clogged city.
The central business district is encircled by mushrooming and some long existing residential structures and commercial buildings, many of which are of a grade that might be lower than what can be simply co-opted into the central business district in any expansionary initiative.

These structures have come up as a result of the need for accommodation and business ventures of the growing city population. They are privately owned. To expand the city into these spaces would necessitate huge compensation budgets on the part of government to pay off owners of the relevant properties or extensive capital requirements from prospective investors to displace current dwellers. It might even come with adverse socio-political consequences. Decongesting Kampala, which is an urgent matter for the country, may therefore only be feasible through alternative city setups elsewhere.
According to the information available so far, new cities will result in additional constituencies that require representation in parliament, and needless to say will also create other centres of political authority.

Success of the new cities will depend on the balance that will be attained between economic and political priorities. Whereas both are important, the politics is likely to overtake the economics because, among other reasons, the former will require declaration of new constituencies and other political offices and the full-scale political drill will start to play. Realizing economic gains on the other hand will demand painstaking and time-sensitive work. It will take high level strategic compliance with the laid down plan. There is likelihood that sight of the economic objectives can be lost to politics.

The writer is a Chartered Risk Analyst and risk management consultant.
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