Museveni reversing privatization after 33 years

According to information available to The Independent, the decision to reverse the government’s privatization policy was sealed at a cabinet meeting in 2015. At that meeting, President Museveni reportedly informed his ministers that no more parastatals would be privatized. Instead, the government would invest directly into several businesses.

Apart from reviving Uganda Airlines, the government has invested heavily in the power generation sector and in enterprises like the Kiira Motors Corporation, the Soroti Fruit Factory, the Atiak Sugar Factory, and an International Specialized Hospital at Lubowa in Wakiso District. There has also been talk of the revival of the national commercial bank which has caused bickering between the Finance Minister and the National Planning Authority (NPA) and the Katwe Salt Industry and the Kasese Copper Mines in Kilembe, Kasese District.

Talking to government officials, however, it is not clear if there is a clear strategy on the government’s place in business. Instead, every official appears to have their own version of what is going on.

No clear government policy

The Uganda Development Corporation (UDC) is behind most of these projects. Its Executive Director, Patrick Birungi, calls the process a “de-risking.” In his view, all the government is trying to do is ‘de-risk’ certain sectors so that it can later relinquish them to the private sector.

“It is the responsibility of the government to go into sectors where the private sector feels it is too risky for them to invest,” he told The Independent on May 10.

“This is why the government went into opening the fruit factory in Soroti,” he said, “The idea is to try to drive up prices for the fruit farmers in the area who have been selling their fruits to Kenyan and Rwandan buyers at very low prices.”

He said the government will go into starch production because it spends a lot of money in importing both food and pharmaceutical starch.

“Why should we continue spending a lot of money on this when we can produce it locally? We want that starch produced here,” Birungi said. He also mentions clinker, a binder in cement, which cement manufacturers currently import. Birungi told The Independent that he expects the government to continue investing in agro-processing, mining, mass transport and telecommunications sectors.

On the other hand, Syda Bbumba; the former minister of Finance and current chairperson of the Parliamentary Committee on the National Economy, does not see any deep direct government engagement in business.

“These are limited strategic interventions,” she told The Independent when asked about Uganda Airlines and others.

But Shinyekwa of EPRC and Ramathan Ggoobi of Makerere University see a more deliberate move by the government.

Shinyekwa told The Independent on May 08 that it appears the government “after a lot of soul searching,” has realized that it made some “technical mistakes” during the 1990s privatization drive that it is determined to fix.

Ggoobi meanwhile says perhaps the government has realized that economic development of Uganda will after all require the participation of both the state and the private sector.

“The NRM government is trying to retrace its footprint to where they started in 1986 with their 10-point programme, one of which talked about nurturing a mixed economy.”

He added: “If the investments that the government is trying to go for are very well appraised and backed up by robust corporate governance, the best development strategy is one that has the private sector and the government participating.”

Ggoobi told The Independent that African countries should actually embrace “second-generation reforms” to not only facilitate business but also participate in sectors which the private sector has been shunning for a long time.

Not everyone is convinced about the new government move. Dr. Fred Muhumuza, a senior economics lecturer at Makerere University says he does not see any justification for government rushing back into business.

“What problem is the government exactly resolving? If the government must get back into business, it must be via calculated economic reasoning, not emotions and politics,” Muhumuza says.

“The reasons why the private sector has not gone into some sectors need to be investigated because none of these sectors in which the government is re-entering is non-profitable,” he said, “The re-entry of government is not the solution to the constraints of doing business in the country that the private sector has been complaining about.”

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