Ugandans happy about economy

By Julius Businge 

New poll indicates majority of Ugandans happy with the economy but…

A poll conducted in April this year by Research World International (RWI) in partnership with Monitor Publications Limited and Uganda Governance Platform paints a good picture about Uganda’s economy since 2011. The major objective of the poll among other things was to assess the opinions and attitudes of voting-age Ugandans two years to 2016 general elections. One of the questions that were asked was; in your view since the elections in 2011, is Uganda better economically?

Of the 2142 interviewees, 53% said yes, 32% said no, 10 % did not know and 5% had no comment.   In the central region where most economic activity is concentrated, 55% of the respondents said the economy was better (out of 470 interviewees), 35% said no, 3% had no comment and 7% did not know. In the Eastern region where 615 people were sampled, 46% said yes, 42% no, 2% no comment and 9% did not know.

In Northern Uganda where 481people were interviewed, 47% said yes, 27% no, 12% had no comment and 15% did not know.    In Western region out of 576 people, 64% said yes, 24% no, 2% had no comment and 9% did not know.

Comparing the urban and rural areas, 54% of 481 people in urban areas said the economy is better, 32% said no, 6% had no comment and 7% did not know.

In the rural areas, where 1661 people were interviewed, 53% said yes, 32% no, 4% had no comment and 10% had no idea.

On the question of whether interviewees were better off economically since 2011 elections, 48% of the 2142 said yes, 44 % said no and 8% had no comment.

When asked whether their wellbeing shall improve in the near future, 66% of 2142 said yes, 13% no and 18% did not know.   On whether this country’s economy shall improve during the current government, 55% of the total number of interviewees (2142), said yes, 18% no, 5% had no comment and 21% had no idea.

On both questions, interviewees appeared to be positive about the state of the economy since 2011.

Patrick Wakida, the chief executive officer at RWI says peoples’ perception about the economy is directly linked to what they earn from their daily activities.

For instance, he says, most youth argued the economy is better because they are involved in the boda boda business.

For others, he says, leaving grass thatched houses for iron sheet houses is an indication that they are doing better and the economy is improving.

He said however, most people in the middle class (the elite) category tend to paint a rosy picture about the economy because they are involved in business and high profile transactions. The group easily understands what the economy is all about.

They can interpret the trends in inflation, the exchange rate and interest rates and their impact on the performance of the economy.    For instance, on the question of whether they were better off since the 2011 elections, majority of the well to do respondents (in the AB class) 64% said no. Only 33% said yes.

The timing

Observers say the findings of the report could be linked to the trend of the key economic indicators (inflation, interest rates, and exchange rate) since 2011.

These indicators are now favorable compared to the last months of 2011 and some parts of 2012.

For instance, at the end of 2011, year-on-year inflation had jumped to 30%, the highest since 1993 compared to 5.4% recorded in May this year.  Bank of Uganda projects inflation will remain low, in line with the medium-term target of 5%.  Its (Bank of Uganda) reports indicate that the average commercial bank lending rates went up to around 27% at the end of 2011 and some parts of 2012 compared to an average of  21.9 %  recorded in March, 2014.  The jump in interest rates was largely attributed to Bank of Uganda’s tight monetary policy stance that involved the use of the Central Bank Rate (CBR) to influence movements in interest rates in the market with the aim of taming inflation.

The CBR went up to 23% in November 2011, but has since been reduced to 11%, thanks to lower inflationary pressures.

The exchange rate hit a Shs 2, 900 highest mark against the ‘popular’ US dollar at the end of 2011 compared to the current stable Shs 2, 500 mark.   This ideally translates into reduced prices for imports.

BoU reports that the local unit averaged Shs 2,529.79 in April per US dollar, which presents an exchange rate appreciation on monthly and annual basis, by 0.2% and 1.9% respectively.  When these indicators “misbehaved “at the end of 2011 and some parts of 2012, the cost of doing business went up, forcing traders to protest the high interest rates by closing shops for four days in Kampala and some other urban towns across the country.

The opposition responded by walking-to-work for some weeks until police foiled the campaign.   But the situation is now calmer.

Bank of Uganda, analysts predict positive, stable economic growth in the near term.    Louis Kasekende, the deputy governor at Bank of Uganda told journalists at the beginning of May at the Bank’s headquarters that the economy is now better compared to the FY2011/2012. He was responding to my question on economic growth.

“Why don’t you say that we are now growing at a better rate compared to the financial year 2011/12,” he challenged the journalists.  He said the economy is expected to grow at 5.7% this financial year (2013/2014) compared to 3.2% growth recorded in 2011/2012.

“To me this is good news,” he said, before projecting a higher 6-6.5% growth in 2014/2015 which he said, will mainly be supported by public investment.

The 3.2% growth recorded in 2011/12 was lower than the over 6% recorded a year before and the projected 5.7% GDP growth for 2013/14 is slightly lower than the 5.8% recorded last financial year.

If the poll’s same questions had been asked at the end of 2011 or early 2012, chances are high that the survey would have noted different answers about the economy.   However, his findings are somewhat related to current poverty levels in the country.    According to Uganda’s Poverty Status Report for 2012, the number of absolutely poor Ugandans has reduced from 9.9 million (56.4%) in 1992/1993 to 7.5 million (24.5%) in 2009/2010.  The number of middle class has grown from 1.8 million (10.2%) in 1992/93 to 10.0 million (32.6%) in 2009/2010.

Inclusive growth critical

Former Research Fellow at the Economic Policy Research Centre, Makerere University, Lawrence Bategeka, says peoples’ participation in the non-farm activities like brick making, boda boda business, retail and wholesale trading, entertainment businesses among others has greatly improved their wellbeing.

He says, however, that government has to promote more inclusive growth by focusing investments in sectors where majority of the population can benefit.

“I am talking about the agriculture sector,” he says, adding that the sector has been growing at a minimal 2.5% year-on-year yet it is Uganda’s mother sector employing nearly 80% of the population.

Bategeka says infrastructure developments such as roads, energy (rural electrification) are the other key sectors that government has to focus on if it is to promote inclusive growth.  He says interest rates have come down, but a further reduction would boost borrowing and economic activity.    “Ugandans have woken up,” he says and they are realising that there are opportunities at regional markets on top of the local market and they are ready to work and benefit.    He says the growth of mobile money transactions and the continued deeper penetration of commercial banks and microfinance institutions in rural areas is good for Small and Medium size enterprises (SMEs).

Issa Sekito, a business man and spokesperson of the Kampala City Traders Association (KACITA) says there has been a slight improvement in the economy since 2011, but businesses continue to register low revenues.

“We are yet to recover from the shocks of 2011/2012,” he says, adding peoples’ purchasing power measured by traders’ turnover daily remains low.

He says SMEs should be helped to access cheap credit so they can employ more people. Currently, SMEs contribute close to 80% to Uganda’s GDP and employs about two million people. Despite the reduction in poverty levels over the years, Sekito told The Independent that the gap between the rich and the poor in Uganda is still wide.

The 2013 Uganda Bureau of Statistics (UBOS) abstract data shows on average, income inequality increased from 0.408% in 2005/06 to 0.426% in 2009/10.

“Those who have money are continuing to count more and those that don’t have are continuing to lose even the little they have,” he says.   Uganda’s per capita income stands at US$547 lower than Kenya’s US$862, Rwanda’s US$619 and Tanzania’s 608, according to the World Bank.

Wakida said the results of the poll can be used for policy implementation.