There’s an empty pocket where Uganda’s middle class should be

Uganda’s middle-class is a paradox. Many monied people act poor yet many poor people act monied. Dollar millionaires downtown are to be found in basic eateries, the only give-away of their money the pointed crocodile-skin shoes peeping from under the shaky tables.

Yet many young men and women whose pockets consider the mountain gorilla on the 50k note an extinct species frequent posh establishments to nurse the odd soda and look for Instagram-worthy photo moments.   

This paradox has created an illusion of prosperity that has, over the years, fooled many naïve entrepreneurs into plunging head-first into the empty pool of local market segments. In purely rational terms, there is little reason to mourn British Airways ending flights to Entebbe. Where there’s demand, new players always rise, as Uganda Airlines will attempt when it launches direct flights to London soon. Nakumatt’s implosion is Carrefour’s gain. Africell’s customers will be fine. 

One problem is that demand is weak, especially in the middle-class segments. Walk around any neighbourhood and you will see a small corner shop with basic groceries which will never make the owner a millionaire, but somehow always remains in business. Yet the middle-class segment is migratory; when Garden City Mall opened it killed off Pioneer Mall.

When Oasis Mall opened, it killed off Garden City. Essentially the crowd merely shifted.

This is not to say that the middle class has not grown; the percentage of poor people dropped from 33 per cent at the turn of the millennium to 21 per cent by 2017. More households have white goods, more houses are connected to the grid, et cetera but the growth is from a very low base, and is fragile. 

For more than a decade the government preached the attainment of lower middle-income status in 2020 as the main goal but not only was this missed, it is very unambitious. A per capita income of $1,039 would meet the target but roughly work out to just 10,000 shillings a day in consumptive expenditure by each Ugandan, hardly the kind of numbers to get investor hearts racing.

Housing Finance, the biggest mortgage lender, has just over $100 million in that asset class, including in-house loans and sweetheart loans to government sitting tenants from 1994, fixed at four per cent. Assuming the average loan at $50,000, this would work out at only 2,000 mortgages, yet official data show 8.3 million middle-class Ugandans in 2016/17.

A low-wage economy, high interest rates, and the absence of affordable housing have put home ownership out of the reach of the majority in the urban areas. To own a home most people lock up, in brick-and-mortar, equity they could have invested or consumed in enjoyments. 

Not surprisingly, the average Ugandan struggling to finish building their house has a mental cement-price index for every consumptive expenditure; every 50k bottle of wine is two bags of cement forgone! Lasagne on a plate in a nice restaurant evokes tears and images of a slab “not poured”.  

The tacit use of corruption as a distributive mechanism has rewarded a few, punished many, and locked up badly needed resources. You cannot eat lunch twice just because you are loaded, yet many continue to go hungry. Now the rich own malls, but there are no shoppers.

The failure to invest in affordable social services – schools, transport, health facilities – imposes hidden secondary taxes on the few lucky to get into reasonably paid employment. After paying 30 per cent income tax and 18 per cent in value-added tax, the average Mukasa then has to pay through the nose when they fall sick, or for their kids to go to school – on top of the black tax of the extended family.

A few years ago, the World Bank released a sad but intriguing report. It showed that most Ugandans never achieve their full potential because they are too busy making ends meet, and when they ‘make it’, are often too old and frail – dealing with high blood pressure from years in the “struggle” or swollen prostates – to enjoy their money. 

 Since 2010 more than a million people have been pushed back into poverty, even before we count the effects of the pandemic. So long, middle class, it is back to pre-school. Money that used to come and go these days goes without saying. Something will have to give. 

Mr Kalinaki is a journalist and  poor man’s freedom fighter. 
[email protected]; @Kalinaki