Aftermath of the Asian expulsion on Uganda’s economy

Ugandans at a native market. The departure of Asians, who controlled most businesses left a scar on the economy and Ugandans would start feeling the pinch soon after 1972. PHOTO COURTESY OF HIPUGANDA

What you need to know:

Economic meltdown. Asian properties and businesses were shared out among Amin’s soldiers and local businesspeople but the party did not last long and soon the economy was paying the price.

What happened to the Asian properties that were taken over after the 1972 expulsion? It is perhaps important to partly answer that question as this series continues to recall the events that have shaped the country over the past 150 years.
Despite the swift and brutal manner in which the Amin regime conducted the expulsion, it also made arrangements to pay compensation to the Asians who had lost their property and businesses in Uganda.

Between 1972 and 1973, Amin issued a series of decrees providing a legal framework for the payment of this compensation. The British and Indian governments started a process of registering their nationals and the claims they laid on abandoned property and businesses, which were later paid.

Inconclusive compensations
Asians whose nationality was unclear, filed their compensation claims through the United Nations High Commission for Refugees. All claims went to a valuation committee that had been set up by the government of Uganda and Shs40,509,996 equivalent to $662,181, was paid to the Asians who claimed through UNHCR.

Compensation was not paid for land or buildings over 10 years old while plant and machinery of five years or newer, were valued at 1972 prices.

The compensation process was not conclusive (some Asians did not hear about it and did not file claims) and there were disputes about the valuations and the mode of payment (the government insisted on paying a tranche every six months for 10 years). It also did not address the injustice and human rights violations of the expulsion and was eventually disrupted by the overthrow of Amin but the Obote regime would continue with the process, passing a law in 1983 for the return of Asian properties, credit for which is often given to the NRM government.

Ironically, the biggest losers from the expulsion were not the Asians who lost their property but the Ugandan economy, which saw an industrialist class wiped out almost overnight.

“As a commercial and industrial class, the Asian population was the grease that lubricated the upper sector of Uganda’s economy,” historian A.B. Kasozi notes in The Social Origins of Violence in Uganda.

The expulsion destroyed a large chunk of the urban tax base, transferring the burden to the rural farmers who would vote with their hoes by refusing to grow the cash crops that the economy badly needed.

It also created a shortage of skilled workers and the trade connections necessary to keep the industries open, while also destroying the country’s international reputation. Investments dried up, as did capital inflows into Uganda.

Many Asian businesses were handed over to Ugandans who had no idea how to run them or restock them. One such Ugandan, having been given a clothes shop, reportedly sold all the clothes at the price he saw on the labels – which was, in reality, the size. The stock moved quickly but, not knowing how to restock, started dealing in matooke a few days later.

Prof. Mahmood Mamdani captures the dilemma of new nouveau riche petty bourgeoisie in his book, Politics and Class Formation in Uganda, from which we must quote at length.

“The petty bourgeoisie is not an autonomous class with effective control over the use of the nationally generated surplus; on the contrary it is a dependent class, an intermediary in the exploitation of the neocolony by centres of imperial capitalism,” he wrote.

“What it amasses is not capital, but wealth; its is not the productive accumulation of an industrialist but the unproductive riches of a merchant. Its riches are not destined to be transformed into means of production, thereby expanding the productive base of the economy; it will merely lubricate the export-import economy, at most permitting the assembly of a few luxury goods internally, thereby facilitating the metropolitan-style consumption of this intermediate class.”

The overall impact on the economy was startling. The Gross Domestic Product fell by five per cent between 1972 and 1975 yet money supply rose by 92 per cent during the same period, leading to inflation.

“Almost all sectors of the national economy, except the government bureaucracy, shrank,” notes Prof. Kasozi. “Amin continued Obote’s policy of shifting wealth from rural to urban areas by appropriating and taxing peasant surpluses. But unlike his predecessors, he did it to a point that broke the peasants’ backs.”

The manufacturing sector also fell; proceeds from manufacturing dropped from Shs740 million in 1972 to Shs254 million in 1979. “Only spirits, cigarettes and beer registered positive developments,” according to Prof. Kasozi, “but then they were needed by the social classes that controlled the allocation of resources.”

The Amin regime attempted to wean itself off the colonial links to Britain and went out to find new allies, on top of the Arab support that had quickly materialised. Soviet Union and France (working through the Libyans) provided some arms while Saudi Arabia and Libya provided money to bail out the Amin government; Pakistan was urged to supply civil servants to help replace some of the Indians who had been expelled.

Amin also attempted to get technical assistance and spare parts from Germany and Japan but a lot of the equipment was not compatible and many of the factories began to fall apart.

‘A clash of fools’
They were all acts of desperation. Unemployment soared, as did smuggling and crime. In September 1972, the first attempt to get rid of the Amin regime took place when a group of exiles launched an invasion, timed in part to take advantage of the confusion that ensued with the expulsion of the Asians.

The invasion would end in disaster. President Museveni has described it as a clash of fools and he would know a thing or two about it, seeing as he and his fighters played a key role in it.

Continues tomorrow