The challenge of economic growth

These findings were disarming to me especially because I have always argued that Museveni has presided over an incompetent government. Unless we believe growth comes from the blessings of the gods, there must be policy and institutional competences our government has acquired that have allowed it to sustain impressive growth rates over such a long period.

We also tend to think Museveni governed better in the first five to 10 years. This may be true in terms of the moral purpose of his government. However, this data shows that Museveni has successfully run the marathon of growth.

The IMF growth figures also contradict my second bias that Museveni has stifled institutional development and personalised the state. For any country to sustain such an impressive rate of growth over such a long period of time, it needs good institutions – unless we say institutions do not matter for growth. Only windfalls in form of high prices for minerals like diamonds, gold or oil can allow a mismanaged country to sustain high growth rates. May be my biases captured only a part of Uganda’s reality. Without high priced minerals, only consistently good policies and sound institutions can explain Uganda’s growth story. With hindsight institutions like the ministry of finance and the central bank are good examples.

Some would argue that the life of nations is not only about growth, which is a valid argument. Using GDP to judge Museveni’s performance over the last 25 years is like using one subject to judge the performance of a student studying ten. People care about many other things in a country like jobs (which are scarce) and health and education services (which today are in a sorry state). People also care about democracy, freedom and human rights. And then there is the moral purpose of government. Widespread corruption under Museveni, where the resources of the many have been turned into privileges for a few, means our president scores badly there.

Museveni can retort with some justification that he has done well with roads, electricity and water – and that we should not expect him to be 100% perfect. He can also argue that in the long term, what matters most is growth. This is because the ability of the state to provide public goods and services depends in large part on its ability to generate revenues to finance them. Only sustained economic growth over the long term can ensure constantly increasing state revenues to meet public expenditure demands. At our current level of GDP, Uganda’s revenues are too small to finance a large basket of public goods and services that we associate with a modern state.

There is something fundamental in this data. Museveni placed Uganda on the rails of growth and has sustained it over the long term, achieving a target that is excellent by all standards (being 11th out of 189 countries is not a small feat).

Over the last 25 years Uganda has performed better than Singapore, South Korea, Hong Kong, Taiwan, Malaysia, Botswana, Mauritius, etc. – the growth miracles of the last half of the 20th century. Many people may question these growth figures. But evidence of growth in production and consumption of goods and services like banking, beer, soda, cement, phones, soap, sugar, electricity, internet, hotels, cooking oil etc. prove the point.

But then why are many of our people still poor? Although the success of a nation’s economy is measured in the growth of GDP, the affluence of its population is measured by the growth in per capita income. While Uganda’s GDP growth has been impressive, its effect on per capita income has been grossly undercut by a high population growth rate of 3.3%.  This has given us a very young population (50% are below 15 years and hence not working). Instead we have a high dependency ratio.

Secondly, Uganda’s growth has been driven largely by services. These tend to employ a few elites with a high level of education. Agriculture on which 70% of our population depends for a livelihood has grown sluggishly over the last 25 years. And manufacturing which creates broad-based blue-collar jobs for the less skilled, thereby lifting millions out of poverty, is still small, employing only a few. Museveni has talked a lot about it but done little. He is now heavily investing in transport infrastructure (roads and railways) and electricity, which is excellent. But is this really enough? What more can we do to stimulate manufacturing growth? These are the issues we should hear our presidential candidates talking about.

amwenda@independent.co.ug