The politics behind Musevenomics

By Andrew M. Mwenda  

Last week, President Yoweri Museveni gave his State of the Nation address in a grandiloquent fashion. He was detailed in showing off the key achievements of his administration, not just over the last year but since he came to power. The economy has been growing at an average of 8.4% per year for the last 23 years.

Many Ugandan commentators don’t take this achievement seriously. Economic history teaches us that for a country to develop, it needs to sustain per capita income (PCY) growth over generations. In the United States it has grown at an average of 1.5% per year for the last 150 years; that is why average income stands at US$ 40,000 today. This lesson was best expressed by MIT’s Lester Thurow in his book, Fortune Favours the Bold that development favours to marathon runners, not sprinters.

Africa’s biggest handicap has never been lack of growth but erratic growth i.e. we have sprinted but been poor at marathons. For example, some countries have enjoyed bouts of growth during commodity price booms in international markets. But then they fall back to slow, stagnant or negative growth due to international shocks, prolonged droughts or civil disorder. The major challenge for Africa therefore has been how to sustain PCY growth over generations.

It is here that Museveni pioneered Africa’s economic revolution by building a macroeconomic policy framework that has sustained growth over decades even in the midst of international shocks. Since 1987, Uganda has sustained PCY growth of 2.5%. Few countries have historically achieved  this.

In almost every sphere of our economy, Museveni’s policies have worked. Gross tax revenues have grown from Shs 5.05 billion in 1986 to Shs 5.03 trillion this year; foreign exchange earnings from US$ 520m to US$ 3.6 billion over the same period. The important thing has been the declining share of coffee from 90% of export receipts to less than 10% today. Commercial and residential real estate is booming and the traffic jams are killing us. Telephone lines have increased from 62,000 to 11 million.

The health of a modern, service-based economy can be seen from its banking sector. Bank deposits have grown from 383 billion in 1995 to 5.2 trillion in 2009; bank assets from Shs 724 billion to 8.3 trillion over the same period. The number of people employed by the banking sector has grown from 493 people in 1995 to 8,467 today; staff wages from Shs 10b to Shs 200 billion over the same period. I must admit the average  wage in banks has not changed in 15 years.

A consumerist culture is growing. Private healthcare and education are booming. Over weekends, shopping, dining and ‘hanging out’ at Garden City, Nakumatt and Game makes Kampala look like a mini city in America. When walking around Kampala, the noticeable features are the growing number of expensive cars on the roads, shopping centres, supermarkets and restaurants. Even for the lower end, hawkers, vendors and boda bodas are doing brisk business.

Of course like in all success stories, there are people who have not benefited much and others who have lost out in this new growing economy. But it is not true that the average Ugandan has gotten worse. The number of people living in poverty has fallen from 56% in 1992 to 31 in 2006. When this year’s figures come out, it will be even lower.

How has Museveni achieved this amidst potholes, a collapsing public education and healthcare system and with chronic absenteeism, corruption and apathy in the public sector?

Through prudent fiscal and monetary management, he has ensured macroeconomic stability. Through liberalisation, privatisation and deregulation, he has liberated the economy from a corrupt and incompetent state.

Museveni has also cultivated a fairly bureaucratically competent ministry of finance, central bank and tax authority. He has personally provided them a significant degree of protection from particularistic pressures. He has exercised a reasonable degree of restraint from personal interference in their functioning.

For example, in the 2001 and 2006 elections, he faced a real threat to losing power. He did many dirty things but never printed money to finance his campaigns and never went to Uganda Revenue Authority or Bank of Uganda to grab sacks of cash to save his regime.

These policy and institutional designs have underpinned our growth. This way, Museveni has solved the biggest economic challenge Africa has confronted since independence.

He came to power promising to promote a mixed economy where the state would control the commanding heights. Yet under his rule, state enterprises became the centres of unprecedented corruption and incompetence. So he sold them and disbanded state monopolies. This unleashed private entrepreneurial initiative – a great achievement.

Politically, Museveni came promising to reorder our politics from tribalism and corruption towards a modern bureaucratic state where the primary objective of government would be public service. He has ended up reproducing the archetypal neo-patrimonial order of the worst of African dictators like Mobutu in Zaire, Omar Bongo in Gabon, Paul Biya in Cameroun and Daniel arap Moi in Kenya – a tragic failure for a leader who preaches modernisation.

Conventional political theory is unable to come to terms with this paradox. A rapidly growing economy and an equally rapidly growing neo-patrimonial order seem an oxymoron. Growth should ideally produce an educated middleclass that would in turn foster the evolution of a modern bureaucratic state. Yet in Uganda, it is the reverse ‘ growth has increased public revenues not so much to provide public goods and services but to finance private goods i.e. political patronage.

Thus, Uganda has the second largest cabinet in the world; possibly the largest retinue of presidential advisors and assistants, ever increasing districts, myriad semi autonomous government agencies and the proliferation of security agencies on every arm and leg of our lives.

Only a continuously growing economy would furnish Museveni with the revenues to pay for the profligate cost of political appointments. The alternative to growth would be foreign aid. But western donors are unreliable; they can pool the plugs and send a regime in a tailspin. The only reliable alternative to growth is a rich mineral like oil.  That is why Ugandans should be worried about it.

amwenda@independent.co.ug