Let’s tighten our belts, brace for tougher days

Author: Okodan Akwap. PHOTO/FILE.

What you need to know:

  • We need to find ways Ugandans can invest substantially in their economy.

P resident Museveni’s oft-repeated reference to foreign investors as “saviours” raises three quick questions. First, why should foreign investors hold the key to our economy? Second, for how long must we accept this reality? Third, how can we get out of this full dependency?

I was thinking about these questions recently when I came across two very interesting statistics attributed to Uganda Bureau of Statistics (Ubos) and cited by a local paper. Ubos periodically conducts Uganda National Household surveys. The latest survey was done in 2019/2020.

The first statistic in that survey that struck me is that the population below 18 years stood at 54 percent. In my view, this may explain how Mr Museveni sometimes views Ugandans. Whenever he makes a televised address to the nation, he seems to have no problem sounding and looking at once authoritarian and patronising. Is it because he feels he is addressing a nation of children?

The second statistic that struck me is that in 2019 the number of households operating a business was 31 percent, down from 38 percent in 2017. And the source of capital for 81 percent of those households was from their own savings. Only a miniscule 0.4 percent of the households got loans from banks!

This ridiculously tiny bank lending means that Ugandans barely participate in the development of their country. This is for the simple reason that they have little or no access to affordable investment credit. To have financial inclusion and public participation in the development process, citizens must have access to cheap credit.

Why then do we have all these banks, an overwhelming majority being foreign-owned? I think they do best to mobilise deposits, which they use for risk-free lending to the government. To borrow money domestically, the government issues Treasury Bills, with maturities of three or six months or one year. With a government perennially thirsty for debt – external and domestic – why would banks lend us money for operating businesses?

Already, the country has crossed or is set to cross the red line of borrowing more than 50 percent of gross domestic product (GDP).

The President often cites GDP to illustrate his point about foreign investors being our “saviours” because they produce a range of goods and services ostensibly to the benefit of the economy. But he should also be talking about what they really do with the surplus profits they make. Remember, the theory of firms states that firms exist and make decisions largely to maximise profits.

The President should also enrich his speeches by talking about new(ish) things like venture capital. This is money provided by investors to small businesses with perceived long-term growth potential. It is a very important source of funding for small and medium enterprises (SMEs) that do not have access to capital markets dominated by banks and other big financial institutions.

When I was a business reporter with New Vision, I had a chance to accompany a delegation of top government and business leaders to Canada in May 2000 to discuss economic cooperation at a series of conferences held in Calgary, Toronto and Montreal. High-level delegations from seven other African countries were also invited for the “Africa Direct Mission to Canada.”

Venture capital was one of the things the Canadians told us they had capacity to provide to the economies of these countries. What happened? Where is ours? 

We need to find ways Ugandans can invest substantially in their economy. I have asked this question before in this paper and I want to ask again: If foreign-owned banks left Uganda in a hurry, what exactly would happen to the economy?

In these tough times, we are told to tighten our belts. We must do more. We must brace for tougher days. We must vigorously debate the Museveni succession. The issue we must tackle is: How will change, when it finally comes, affect an economy that President Museveni has straddled like a colossus?

Mr Akwap  is an associate consultant at Uganda Management Institute.                                                 [email protected]

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