The path to wealth for Uganda’s young is bleak - Part II
What you need to know:
- There’s truly no way to separate social wealth from private wealth but there are definitely ways to instutionalise private wealth and make it contribute to social wealth; the most prominent of that is taxes – but without efficient government it’s a far cry.
READ: The path to wealth for Uganda’s young is bleak -Part I
Private wealth is an important component of human well-being. Wealth, above many things, allows individuals choices and freedom. It enhances their chances at long life just as it does increase their well-being – happiness, comfort and purpose
Uganda is a predominantly Judo-Christian country where perceptions around wealth are mixed. The wealthy are in some instances frowned upon in their private pursuit of wealth whilst those who get it, often have to endure long lines of dependents; play an active role as a pension for their old parents, be the health insurance for their relatives and act as a school fees revolving fund for their children, their relatives’ children and sometimes the children on the village on which they stay.
It is just that very little has been done about institutionalizing private wealth to contribute to social wealth. National health insurance and National pensions remain a far cry for a country where pooled funds, definitely, would do better at creating social safety nets.
So, across generations, due to this failure, families have gotten out of poverty only to go back – or remain at the risk of poverty. 2 in 10 Ugandans live in absolute poverty but half of all Ugandans are a heartbeat away from that absolute poverty. It is also that even the well-to-do one percenters, would be poor in the event of a calamity to the breadwinner – or faced with a delicate medical bill.
There’s truly no way to separate social wealth from private wealth but there are definitely ways to instutionalise private wealth and make it contribute to social wealth; the most prominent of that is taxes – but without efficient government it’s a far cry.
But let’s talk, first of private wealth.
There are two important ways to build wealth; the first is what economists call the eighth wonder of the world; compounding and the other is credit financing.
In compounding, a principal sum gets invested and after a cycle an interest gets added to it. It’s the principle behind savings accounts, pensions, saccos etc. The higher the principal sum, the better the chances of creating sustainable wealth. The longer the investment period, the higher the chances of getting better pay outs.
It is why, for compounding to work, we need to also factor in life expectancy, wages, time spent in work, cost of living and general productivity of the economy. On all those indicators, young people are of the back foot of all, except life expectancy.
The cost of living in urban areas of Uganda remains higher than average wages- driven up principally by rents that are borne by young people unable to afford houses. The time spent in work, for young people, is also low with many young people dropping in and out of active employment more than twice every year. This is made worse by SME’s, who are the main employers, not having a clear, consistent and trackable payroll for their employees – somewhere somehow, there’s a young person always waiting on ‘some ka money’.
This makes securing the principal sum for compounding desirable but unattainable for young people.
In the next week I will talk about how this has sent young people into cyclical high interest debt – and how the financial eco-system will need re-engineering to make this happen. We shall also start to talk about credit financing and the options it provides.