Asian expulsion plunges economy into a tailspin

An Asian operates a pharmacy on Kaiti Road in Namutumba Town on November 24. Photo/Ronald Seebe

What you need to know:

  • This month, 50 years ago, hundreds of Asians expelled by Idi Amin’s government flew out from Entebbe International Airport to seek new opportunities mainly in the United Kingdom and Canada.  In this eleventh installment of our series marking the golden jubilee of the expulsion, Timothy Kalyegira analyses the impact of Asians’ expulsion on the economy.

After Asians were expelled in 1972, Uganda’s economy descended into a decline that would last at least 25 years. A new group of indigenous Ugandan entrepreneurs took the lead in business. 
These were first-time, first-generation entrepreneurs. There was an acute scarcity of almost everything -- basic commodities, spare parts, and fuel. None had experience running a business and a good number of them were semi-literate.
Army officers were appointed as general managers of the beer, soda companies and other parastatals.
Did the Ugandan economy begin its 25-year period of decline because of the expulsion of the Asians or because of mismanagement by the Amin administration?

The general view in academia and the news media is that the expulsion of Asians in August 1972 was the beginning of near-collapse of the economy.
Because of President Idi Amin’s personality and reputation for brutal rule, it’s easy to see how many arrive at this oversimplified view. The facts, although, show that it’s difficult to separate cause and effect here.
For example, if it was because of the expulsion of Asians, how about a separate development, the departure of hundreds of American and British educators and civil servants during the 1970s?

And how much of that decline was due to the economic boycott of Uganda by the United States and several European countries?
To get a clear and accurate answer, we should stand back and take in a general view of the historical period, both inside Uganda and elsewhere in Africa over the 20-year period, 1972 to 1992.
There were several other forces and factors at work, of which the loss of the Asian civil servants, white-collar professionals, and business merchant class was but one.

Sabotage of economy by armed groups
Shortly after Idi Amin came to power in 1971, he faced resistance from members of the ousted UPC government and former officers of the Uganda Army and the now-disbanded General Service Unit intelligence agency.
Over the years, several exiled Ugandan groups in Kenya and Tanzania, targeted Uganda’s coffee produce and export for sabotage as a way to weaken Amin’s government.
It took active countermeasures in 1977 by Uganda’s intelligence service, the State Research Bureau, to contain part of the situation.
After the fall of Amin’s government in 1979 and later the return to power of the Milton Obote government in 1980, the UPC government faced armed Opposition similar to what Amin’s military government had after 1971.

In 1981, the armed group, the Uganda Freedom Movement (UFM) under Andrew Kayiira, this time fighting the government of President Obote, urged farmers not to sell their coffee to the Coffee Marketing Board, Uganda’s main coffee exporting agency.
In August 1984, a sabotage attack on a power station by guerrillas of another group, Yoweri Museveni’s National Resistance Army (NRA), caused an electricity blackout in Kampala that lasted five days.
All this, of course, is before we mention the destruction and displacement caused by the UFM and NRA guerrilla wars that were in Mpigi and Luweero respectively, where much of Uganda’s coffee and agricultural economy were based.

Then President Idi Amin. After Amin’s expulsion of Asians, there was an acute scarcity of almost everything -- basic commodities, spare parts, and fuel. Photo/File

Collapse of the East African Community
The collapse in July 1977 of the East African Community was also a setback for Uganda’s economy.
The first immediate effect was that Uganda’s coffee export was held up at the Indian Ocean port in Mombasa because of the difficulty in obtaining rail transport from Kampala to Mombasa, following the collapse of East African Railways.
President Amin ordered two more transport aircraft from Britain to airlift coffee to the main European market and the two Uganda Air Cargo Hercules C-130 transport planes chartered from the United States began to fly coffee to Europe and North America via Djibouti in the Horn of Africa.

The Tanzania-Uganda war, 1978-1979
The five-month war between Uganda and Tanzania contributed to the decline. 
Three towns, Arua, Masaka, and Mbarara, were badly damaged during the war. In Arua, there was a retaliatory strike at Amin’s home base. Apart from extensive looting of factories, Kampala also sustained substantial damage.
In January 1979, Tanzanian President Julius Nyerere estimated that the war with Uganda was costing the Tanzanian economy about $1 million a day.

Africa’s 1970s and 1980s debt trap
Other than Uganda, most of sub-Saharan Africa saw major economic stress during the 1970s decade.
Africa’s external debt grew from about $6 billion in 1970 to $82 billion in 1985. By the end of 1990, sub-Saharan Africa’s external debt had exploded to $164b.
The GDP of sub-Saharan Africa collectively declined by about 1.7 percent each year between 1980 and 1985. Uganda’s gross domestic product declined every year from 1972 until 1976. 
In 1977, there was a return to growth following the coffee frost that wiped out Brazil’s harvest, world coffee prices rose sharply and advantaged major exporters such as Uganda.

All this, paints a complete picture of the challenges, and turmoil that Uganda faced between 1972 and1992.
Even if the Amin coup of 1971 had not taken place and Uganda remained as stable as Zambia, Senegal, Tanzania, or Malawi and the Asians remained in the country, it would still have faced the effects of the 1970-1990 debt trap crisis.
Indeed, when the Tanzanian army arrived in Kampala and overthrew Amin’s government, most officers were taken aback by the fact that Ugandans had items such as TV sets, wrist watches, and radio cassette players, items that were considered luxuries in Tanzania at the time.

It is against this background, the new “Mafuta Mingi” business class of indigenous Ugandans struggled to find their way. Most failed because of lack of business experience, particulars of Ugandan culture, and the general economic landscape plaguing sub-Saharan Africa at the time.
Today, with the Asians back in Uganda, and a fully liberalised economy, Ugandan businesses are still struggling.
Asian businesses are also struggling, but they contribute 69 percent to Uganda’s revenue.
 

Welcome!

You're all set to enjoy unlimited Prime content.