Museveni’s lament on value addition

Why we African elites should stop looking at individual leaders for impediments to our development.

THE LAST WORD | Andrew M. Mwenda | On April 12, President Yoweri Museveni wrote a very good article on the need for Uganda to add value to the raw materials she produces and exports. Museveni has always said the real donors of value are Uganda, not the Western world who send us handouts in form of financial aid. He argues that in selling our products without adding value, we are enriching others while impoverishing ourselves. While Museveni has talked loud and long, he has done little to advance industrialisation in Uganda.

Before I deal with why he has done little, let me first make the case for adding value to the products we produce and sell locally and abroad. This would be called industrialisation, or the growth in manufacturing output. The best way to measure it is by looking at its share of GDP overtime. Development takes place in the context of international trade. Countries that are closed off from international markets for goods, ideas, capital, technology and skills are also locked out of economic prosperity.

Thus, countries trade abroad to grow rich at home. China today, South Korea, Taiwan, Singapore etc. are exemplars of this while Cuba, North Korea and Eritrea are textbook cases of failure. However, international trade is a value chain. Some countries produce and export cotton, others weave/knit cloth while others market high fashion. Some countries mine and sell iron ore, others make steel while others sell automobiles. How much a country earns from international trade is determined by its position in this global value chain. The lower your rank in this global chain, the poorer you remain.

For instance, Uganda produces and exports raw cotton, an activity it has been involved in since 1903 – that is 120 years. It earns about 2% of the international market price of the cotton. That is why we are a highly indebted poor country with a nominal per capita income of $1,250. Mauritius knits and weaves raw cotton into cloth (adds value) and therefore earns about 17% of the international market price. That is why it is an upper middle income country with a per capita income of $13,000 – ten times higher than Uganda. France and Italy market high fashion: Louis Vuitton, Dolce and Gabbana, Gucci, Christian Doir, etc. They earn about 65% of the international market price of cotton. That is why they are advanced countries with income per capita of $40,000 each.

Therefore, the journey of development is a process of upgrading from producing and selling low value products to producing and selling high value products. It is a process of changing your position in the global value chain.

To illustrate this point better, here are the facts about Uganda’s cotton. In 2019, our nation produced 200,000 bales of cotton and sold 190,000 abroad in raw form. It earned $50m. It retained 10,000 bales which it knitted and weaved into cloth at Nytil and Fine Spinners and sold here and abroad. It earned $50m. If Uganda had knitted and weaved all her cotton and sold cloth, it would have earned $1 billion from her domestic sales and exports.

This brings me back to Museveni’s otherwise good article. He has been president for nearly 40 years, almost twice as long as all other Ugandan presidents combined. In his article, Museveni says that previous leaders of Uganda were stupid not to see this point of value addition. He argues that they allowed our goods, especially minerals, to be sold abroad without adding value. Then he says that in 2011 he banned the export of our minerals in raw form. Never mind that he still grants exemptions for some companies. What took Museveni 25 years to issue this ban on raw minerals?

Milton Obote and Idi Amin whom he blames for not instituting such a ban ruled for only eight years each. We cannot know the alternative history if these men had remained in office beyond 25 years. Maybe they would have instituted the ban in their 10th or 15th year in office. In this case they would have acted better than Museveni. In any case, our president’s argument sounds hollow to me because even our coming oil, in which he has invested utmost energy and focus, 80% of it will be exported in crude form. Only 20% will be refined domestically. Why?

This is the critical issue for Uganda and Africa. It seems to me the lack of industrialization in our country and continent it a product of forces beyond the vision and competences of individual leaders. How come Museveni who had talked loud, big and long about value addition runs a country that still exports raw cotton and coffee, 38 years since he assumed office and 120 years since the British introduced this crop into our country? The share of manufacturing to GDP in Uganda has been 8% for 25 years despite consistent growth in manufacturing output. Yet whenever I have wanted to criticise Museveni on this matter, I have reminded myself that across our continent, all (and I mean ALL) our countries are de-industrialising i.e. the share of manufacturing to GDP is either stagnant or declining. Museveni is not president of these other African countries.

This is the debate about structure and agency. Are the dynamics of international trade structurally obdurate or is there room for agency? To put it simply, is international trade deliberately and/or inadvertently designed to benefit some countries and regions while disfavoring others? Or is there room for a dynamic leader running a dynamic team to overcome these structural constraints? There is room for such agency because of the experience of Japan, and later South Korea, Taiwan and Singapore and today China. What factors – social, cultural, geographic, historic etc. favoured these countries in East Asia and are missing in Africa?

Museveni has always blamed past leaders for all the failures in Uganda. Yet it’s hard to find anything fundamentally different in his leadership and its results from Obote – except the years spent in office. Between 1962 and 1971, and again between 1981 and 1984, Uganda’s economy grew at 6.5% as it has under Museveni. In the 1960s, manufacturing as a share of GDP grew consistently every year – just like Museveni’s first 12 years. Under Amin, Uganda’s economy declined at similar rates as other African economies except for a few like Malawi, Kenya, Ivory Coast and Botswana. We shall only make a difference if we take focus away from individuals and focus on the structural obstacles that keep our nations behind.

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amwenda@independent.co.ug