Debate on why the East is saving and West is spending

The debate on why the East is saving and the West is spending, is fast growing. The South is drawing on the savings of the East and adopting the spending style of the West. This is certainly very true for Africa!
How then can Uganda address this challenge?

Economics teaches us that growth of an economy is a function of aggregate demand, and how this demand is stimulated. Effective demand matters a lot in driving industrial output, employment and incomes. The 68 per cent we always talk about must be given the ability to purchase.

The Western world and now the East, have carefully followed this rule of thumb. Only the South and particularly Africa, is yet to appreciate this.
We can do infrastructure, policies, etc, but until we organise the producer groups, the firms and industry, we will not create the jobs!

This is what the economy is about. And this is where the Lead Firm Model that PSFU is advancing becomes of great value to ensure balanced and inclusive growth.
This is aimed at strengthening market driven value chains and supporting actors across these value chains to invest, create jobs and increase output.

This, however, calls for a high level of national savings. Unfortunately, governments in the Third World (and I hasten to add, the private sector) are too spendthrift with very limited sense of frugality.
Uganda, for instance is saving only 12 percent of its national income!

No economy has transitioned to middle income without a saving culture. We cannot stimulate demand of the lowest income bracket if we cannot save to invest.
Our rural economy should be stimulated, not through handouts as many politicians want to believe, but through economic empowerment.

These groups must be given the opportunity to earn. For now, the 68 per cent may feed, but they have nothing to take to the market and earn income. And they cannot earn if we do not invest (for jobs). But we cannot invest if we do not save as a country - public and private savings, voluntary and forced savings.

We cannot depend as country on aid and borrowings to invest. That is someone else’s taxpayers money!
Uganda is a country of 41 million people and only under one million people are saving with NSSF! - a mere Shs11 trillion in total long-term funds available to the economy?

But which is even not available for borrowing because of the structure of the economy. How can Ugandans Invest then? No wonder the Chinese who are frugal, have cheaper funds and are now subduing this economy.

Mr Badagawa is the executive director, Private Sector Foundation Uganda.