Thursday 7th June 2012 | H.E. Yoweri Kaguta Museveni
As
usual, I will start my State of the Nation Address with the economy.
This time, however, I will concentrate on only four aspects:
i) the recovery of the economy in the last 26 years;
ii) disagreement amongst us on the priority of allocation of scarce resources and the consequent delay in infrastructure development, with its implications for the delay of socio-economic transformation;
iii) sabotage of vital development projects by the indiscipline and, sometimes, selfishness of various actors, including some political leaders; and
iv) corruption as well as selfishness.
Before I talk about the above four aspects, I should also talk about the five reasons that have caused the recovery of the economy since 1986 to-date. These are:
i) security of person and property brought about by the NRM, but more especially by the discipline of NRA/UPDF;
ii) the Private Sector, whose investments account for about 77% of all total investments in the economy, including investments of our citizens of Indian origin (who contribute 25-30% of all the total investments);
iii) the macro-economic stabilization and liberalization of the economy, which enabled us to control inflation for a very long time and to free the Private Sector from bureaucratic interference;
iv) the ever-expanding consumer demand in Uganda and in the Region; and
v) some little support from Development Partners that enabled us to repair some roads, repair the Nalubaale power station, etc.
In particular, I would like to salute the former British Minister, Baroness Linda Chalker, who helped us to repair Nalubaale.
Most of these five are obvious and they need no explanation. The fact that people’s property cannot be grabbed by soldiers and that Ugandans can no longer disappear without a trace needs no explanation. I will only comment on two of the five. These are the nature of the Private Sector that propelled our recovery and the support from the Donors (Development Partners). Regarding the Private Sector that propelled our recovery, it comprises of three elements:
i) those engaged in services such as transport (matatus, boda bodas, buses, etc.), hotels, restaurants, beauty saloons, fuel stations, real estate and shopping malls;
ii) those engaged in light industry manufacturing for import substitution as well as some limited exports; and
iii) those engaged in trading, especially importing – the Kampala City Traders Association (KACITA) type.
Some of the industrial activities are linked with agriculture like fruits, juices, coffee, cotton, etc. Agricultural production has certainly contributed to the recovery of the economy. Three players in agriculture have done so. These are:
i) the plantation owners (sugar, tea and coffee);
ii) the big scale farmers; and
iii) the medium scale farmers.
The subsistence farmers, who, according to the 2002 census, comprised 68% of all homesteads, still have much of their potential untapped because we have not yet mobilized them to do. The Mrs. Josephine Kizza’s model farm is the solution to their problem.
Nobody here can claim that I have not exposed all of you to this fact. If all the 40 million acres of land of Uganda that are suitable for arable farming are put to their full potential, there will be a revolution in this country. Everybody will be richer – the families themselves, the Local Governments, the churches and the mosques and the country. Through our zonal meetings, we identified the packages of enterprises for each area according to the households’ landholdings. Let all the leaders get moving on this one.
The first two elements of the Private Sector, i.e. those engaged in services and light manufacturing industries, are the most useful because they add value to the goods and services produced in Uganda. They are not like KACITA which concentrates on turning Uganda into a perpetual market for the products of foreign countries. This is where the future lies. We should have more and stronger enterprises of this type. These groups must be specifically encouraged. They should not be delayed in any way by anybody if we want our country to go beyond where we are now. Yet the economy cannot stay where it is now. This is because it is already being overtaken by the demand for jobs by the young people as well as the demand for dollars for imports.
As you know, the light manufacturing has been in sugar, soft drinks, beer, soaps, some little textiles operations, vegetable oils (Mukwano and BIDCO), fish processing, cotton-ginning, coffee-hulling (removing the skin of the coffee berry), cement production, steel bars production (mitayimbwa), recycling of batteries, milk processing, fruit juice processing, plastics, etc. These light industries save or earn the equivalent of US$ 1,230 million for Uganda per annum. This category has got a lot of potential for expansion. If we could, for instance, stop the bad fishing practices on our lakes, deepen coffee processing beyond coffee-hulling to coffee-roasting and grinding, expand juice and milk processing, link the steel mills with the iron-ore deposits at Muko and Sukuru hills, etc, this economy would be totally transformed.
We have seen that among the categories of the Private Sector, the most useful ones are: agriculture, services (transport, banking, hotels, etc) and light industry. The perpetual importers of products that can be made here are not a positive element in the long run. As already mentioned, trading is partly positive if it involves internal distribution in Uganda and exporting our products to the Region or beyond.
Importers, however, have caused chronic haemorrhage in Africa, especially because most of the imports are simply luxury goods, not production inputs. It is important to point out that, even when they are inputs for production, it would be better if most of them were produced in Uganda and if the local products are comparable in price as well as quality to the imported ones.
Light industry is the most promising of all these. It produces products that are, indeed, very much needed for human sustenance. These include transport, food, clothing, building materials, medicines for human beings, drugs for pest control and for livestock and so on. These are all basics for human life and their demand is durable. In addition, light industries produce weapons for self-defence and, then, a country’s future is assured. These days, brains, in the form of computers, are the ones that operate machines – guiding them to do work. These are the sectors where the whole political and administrative groups should focus their attention. This is where the future of the country lies. In time, light industries will move into sectors of heavy industry such as steel manufacturing out of our good iron-ore deposits, fertilizer manufacturing, earth-moving equipment and so forth.
Yet, if you examine the sectors that have been growing fast in the last decade, you will find that they are the following: importing vehicles i.e. transport in that sense – not in the sense of manufacturing the means of transport here; beauty saloons; restaurants and hotels; bars; real estate; shopping malls and many others. These have been growing at the following average annual growth rates: banking sector – 17.2%; transport and communication services including mobile telephones – 14.3%; hotels and restaurants – 8.8%; real estate – 5.6%; other business services (saloons, stationery sales, etc) – 9.7%. If you compare them with growth in manufacturing and agriculture, the figures are as follows: 6.5% and 1.4% respectively (period 2004-2011). All these, except for hotels, are characterized by little employment potential, no export earnings and low or no technology. This is where Uganda is now.
High rates of growth but in sectors that create little employment, bring in little or no foreign exchange and, actually, sometimes squander the little foreign exchange we earn from coffee, etc, in the form of inputs imported for their operations. This source of growth does not bring socio-economic transformation quickly. Their main attraction is that they are of low technology and require little capital to start-up. These are what the indigenous Private Sector can afford as of now. This is the paradox of the present economy of Uganda: growth without creating enough employment and without earning enough foreign exchange but instead squandering the foreign exchange earned from coffee and other raw-material exports. I, therefore, think that it may be useful to distinguish between core industries that are a must in terms of sustaining human life and, then, peripheral or dependent industries that are either not as important as the other ones or dependent on the others to thrive.
As
usual, I will start my State of the Nation Address with the economy.
This time, however, I will concentrate on only four aspects:i) the recovery of the economy in the last 26 years;
ii) disagreement amongst us on the priority of allocation of scarce resources and the consequent delay in infrastructure development, with its implications for the delay of socio-economic transformation;
iii) sabotage of vital development projects by the indiscipline and, sometimes, selfishness of various actors, including some political leaders; and
iv) corruption as well as selfishness.
Before I talk about the above four aspects, I should also talk about the five reasons that have caused the recovery of the economy since 1986 to-date. These are:
i) security of person and property brought about by the NRM, but more especially by the discipline of NRA/UPDF;
ii) the Private Sector, whose investments account for about 77% of all total investments in the economy, including investments of our citizens of Indian origin (who contribute 25-30% of all the total investments);
iii) the macro-economic stabilization and liberalization of the economy, which enabled us to control inflation for a very long time and to free the Private Sector from bureaucratic interference;
iv) the ever-expanding consumer demand in Uganda and in the Region; and
v) some little support from Development Partners that enabled us to repair some roads, repair the Nalubaale power station, etc.
In particular, I would like to salute the former British Minister, Baroness Linda Chalker, who helped us to repair Nalubaale.
Most of these five are obvious and they need no explanation. The fact that people’s property cannot be grabbed by soldiers and that Ugandans can no longer disappear without a trace needs no explanation. I will only comment on two of the five. These are the nature of the Private Sector that propelled our recovery and the support from the Donors (Development Partners). Regarding the Private Sector that propelled our recovery, it comprises of three elements:
i) those engaged in services such as transport (matatus, boda bodas, buses, etc.), hotels, restaurants, beauty saloons, fuel stations, real estate and shopping malls;
ii) those engaged in light industry manufacturing for import substitution as well as some limited exports; and
iii) those engaged in trading, especially importing – the Kampala City Traders Association (KACITA) type.
Some of the industrial activities are linked with agriculture like fruits, juices, coffee, cotton, etc. Agricultural production has certainly contributed to the recovery of the economy. Three players in agriculture have done so. These are:
i) the plantation owners (sugar, tea and coffee);
ii) the big scale farmers; and
iii) the medium scale farmers.
The subsistence farmers, who, according to the 2002 census, comprised 68% of all homesteads, still have much of their potential untapped because we have not yet mobilized them to do. The Mrs. Josephine Kizza’s model farm is the solution to their problem.
Nobody here can claim that I have not exposed all of you to this fact. If all the 40 million acres of land of Uganda that are suitable for arable farming are put to their full potential, there will be a revolution in this country. Everybody will be richer – the families themselves, the Local Governments, the churches and the mosques and the country. Through our zonal meetings, we identified the packages of enterprises for each area according to the households’ landholdings. Let all the leaders get moving on this one.
The first two elements of the Private Sector, i.e. those engaged in services and light manufacturing industries, are the most useful because they add value to the goods and services produced in Uganda. They are not like KACITA which concentrates on turning Uganda into a perpetual market for the products of foreign countries. This is where the future lies. We should have more and stronger enterprises of this type. These groups must be specifically encouraged. They should not be delayed in any way by anybody if we want our country to go beyond where we are now. Yet the economy cannot stay where it is now. This is because it is already being overtaken by the demand for jobs by the young people as well as the demand for dollars for imports.
As you know, the light manufacturing has been in sugar, soft drinks, beer, soaps, some little textiles operations, vegetable oils (Mukwano and BIDCO), fish processing, cotton-ginning, coffee-hulling (removing the skin of the coffee berry), cement production, steel bars production (mitayimbwa), recycling of batteries, milk processing, fruit juice processing, plastics, etc. These light industries save or earn the equivalent of US$ 1,230 million for Uganda per annum. This category has got a lot of potential for expansion. If we could, for instance, stop the bad fishing practices on our lakes, deepen coffee processing beyond coffee-hulling to coffee-roasting and grinding, expand juice and milk processing, link the steel mills with the iron-ore deposits at Muko and Sukuru hills, etc, this economy would be totally transformed.
We have seen that among the categories of the Private Sector, the most useful ones are: agriculture, services (transport, banking, hotels, etc) and light industry. The perpetual importers of products that can be made here are not a positive element in the long run. As already mentioned, trading is partly positive if it involves internal distribution in Uganda and exporting our products to the Region or beyond.
Importers, however, have caused chronic haemorrhage in Africa, especially because most of the imports are simply luxury goods, not production inputs. It is important to point out that, even when they are inputs for production, it would be better if most of them were produced in Uganda and if the local products are comparable in price as well as quality to the imported ones.
Light industry is the most promising of all these. It produces products that are, indeed, very much needed for human sustenance. These include transport, food, clothing, building materials, medicines for human beings, drugs for pest control and for livestock and so on. These are all basics for human life and their demand is durable. In addition, light industries produce weapons for self-defence and, then, a country’s future is assured. These days, brains, in the form of computers, are the ones that operate machines – guiding them to do work. These are the sectors where the whole political and administrative groups should focus their attention. This is where the future of the country lies. In time, light industries will move into sectors of heavy industry such as steel manufacturing out of our good iron-ore deposits, fertilizer manufacturing, earth-moving equipment and so forth.
Yet, if you examine the sectors that have been growing fast in the last decade, you will find that they are the following: importing vehicles i.e. transport in that sense – not in the sense of manufacturing the means of transport here; beauty saloons; restaurants and hotels; bars; real estate; shopping malls and many others. These have been growing at the following average annual growth rates: banking sector – 17.2%; transport and communication services including mobile telephones – 14.3%; hotels and restaurants – 8.8%; real estate – 5.6%; other business services (saloons, stationery sales, etc) – 9.7%. If you compare them with growth in manufacturing and agriculture, the figures are as follows: 6.5% and 1.4% respectively (period 2004-2011). All these, except for hotels, are characterized by little employment potential, no export earnings and low or no technology. This is where Uganda is now.
High rates of growth but in sectors that create little employment, bring in little or no foreign exchange and, actually, sometimes squander the little foreign exchange we earn from coffee, etc, in the form of inputs imported for their operations. This source of growth does not bring socio-economic transformation quickly. Their main attraction is that they are of low technology and require little capital to start-up. These are what the indigenous Private Sector can afford as of now. This is the paradox of the present economy of Uganda: growth without creating enough employment and without earning enough foreign exchange but instead squandering the foreign exchange earned from coffee and other raw-material exports. I, therefore, think that it may be useful to distinguish between core industries that are a must in terms of sustaining human life and, then, peripheral or dependent industries that are either not as important as the other ones or dependent on the others to thrive.
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