Museveni’s dream on the economy

Expert views on how the economy could be put on the right growth path

Kampala, Uganda | JULIUS BUSINGE | There is a general consensus that Uganda’s economy has recently improved and now is doing well.

This is coming from highly respected institutions like the International Monitory Fund, World Bank, Bank of Uganda, the Ministry of Finance Planning and Economic Development, Uganda Bureau of Statistics and some people within academic circles.

This reasoning is coming at a time the economy is reported to have grown at 6.1% in FY2017/18, up from around 5.6% a year before – levels that were unheard of in the past five financial years.

It is expected to further grow by 6.3% in FY2018/2019 and 6.5-7% over the medium term.

This growth, according to BoU data is supported by accommodative financial conditions, the multiplier effects of public investments, higher foreign direct investment, increased agricultural production supported by good weather and, increase in consumption and investment as private sector lending improves.

President Yoweri Museveni, who is at the centre of this growth sounds impressed about the performance but appears to now focus on what would keep this momentum going ahead.

“I am quite happy with the momentum,” Museveni told the National Resistance Movement Members of Parliament retreating in Kyankwanzi on March 15.

“The future of Uganda is bright in terms of building an integrated economy,” he told the MPs, “we need to conduct an audit and see which sectors are integrated and integrate those that are not.”

Museveni’s future definition of the economy is now about strengthening the integration of key sectors of agriculture, industry, services and information communication technology.

He explained how this works. For instance, he said that a sector like agriculture supplies raw materials to another sector like industry or industry supplies agriculture sector with machinery to ease production.

Also, a sector like ICT would offer technology that eases production in manufacturing, agriculture or in other sectors and the reverse is true. He also said that sectors like education would produce skilled and talented labour to support growth of key sectors.

He said supporting these sectors is essential for creating more jobs and leading to social and economic transformation. The IMF argues that Uganda needs to create 600, 000 jobs per year to tackle the growing unemployment problem.

Museveni said, to date, 4026 factories in Uganda are employing 600, 000 people, with ICT employing 2, 000 people and commercial agriculture employing7.8 million people.

He emphasized the need to support youth and women to join the four sectors by forming SACCOs so they are supported by the government.

He said government would cut administrative expenditure to save money for youth and women formations.

He said Uganda Development Bank will be allocated more money to lend to players in the four sectors at affordable annual interest rate not exceeding 12%.

“We want to have a more investor free atmosphere,” he said, “with no corruption, delays and confusion.”

He added that oil and gas sector will in the coming years add to the growth of the economy.

The good thing, he said, is that there is a good economic, working environment supported by good roads, electricity supply, peace and tightened security and an improved ICT infrastructure.

Museveni’s new dream is workable according to economic experts.

However, they are saying that tariff barriers and economic disruptions like the recent closure of the Uganda – Rwanda borders – which is suffocating businesses and the recent poor corporate governance exposed at BoU by Parliament and other challenges must stop.

Expert views

Musa Mayanja, an economist told The Independent that the President’s dream is fine.

He said that sectors are supposed to work as a connected system, where say agriculture can supply or receive from other sectors; financial sector can offer credit to agriculture sector as the latter borrows from the former. He says this has been working but ‘what is lacking is the magic bullet’for it to boost production and productivity.

The magic bullet, he said, is about offering affordable credit, inputs, and training of farmers on better farming practices, investing in water for production which would all link to the economic growth agenda.

Mayanja said that if a sector like agriculture is well supported and more output is produced, the country would have enough to supply to industries for further processing. This would create more opportunities for growth in terms of jobs and exports to outside markets.

Commenting of economic disruptions like the Uganda-Rwanda border standoff, he said that these “are with us for some time and they will affect us” in the short to medium term.

He said trade barriers leads to business failure where borrowers fail to pay loans, jobs are lost, and farmers failing to pay suppliers, and the local shilling depreciating against foreign currencies.

As a solution, he says there are frameworks in place that should guide authorities on how to solve grievances at hand, on time so as not to suffocate the economy.

Fortunately, Stanbic Bank’s East African Regional Economist, Jibran Qureishi says that amidst challenges, overall activity in the private sector remains robust.

He says that improving domestic demand has not been a coincidence considering that the banking sector non-performing loans have eased which has in turn boosted private sector credit growth.