The trio that has sunk Uganda’s economy deeper into the ground

UDU has done exactly what it was mandated to do at the Boston conference: (1) conduct civic education; (2) strengthen diplomatic networks and (3) keep an eye on Uganda’s political economy. I have been privileged to serve as UDU Secretary General and spokesperson on the three mandates.

Civic education has been conducted through the media and Joe Magandazi and Dorothy Lubowa have been very active. Dennis Nyondo has served very well as publicity secretary. There are others who are compiling a list of capable Ugandans in preparation for creation of a transitional government to avoid a repeat of what happened after formation of a transitional government in Moshi in 1979. Their names will be withheld for now because of the sensitive nature of their work. We are grateful to Ugandans at Heart Forum for accepting our articles and comments. We are also grateful to Kamunye for translating some UDU articles into Luganda and distributing them for a wider leadership. We are also working very closely with the leadership of Uganda Federation Confederates. We want all Ugandans to know UDU thinking and what we shall do after NRM has exited. The idea of a transitional government of all stakeholders including NRM appears to be gathering support pretty fast. Uganda belongs to all Ugandans and every group must be represented. Inclusiveness and peaceful resolution of problems in a win –win atmosphere are principal elements of UDU’s philosophy.

Diplomatic networking has also progressed well through mostly silent contacts that have produced commendable results witness slow down in abuse of human rights albeit much remains to be done and reduced interference by NRM in by-elections that the opposition has won.

We have written to Uganda religious leaders, parliamentarians, women, youth and security forces urging them to speak up including through protests, demonstrations and strikes and non-cooperation with NRM government failing which Uganda would slide into a feudal system of Tutsi lords, Tutsi knights (army and police generals) and serfs (the rest of Ugandans) serving the interests of lords and knights.

We have also commented at great length on Uganda’s political economy. By popular demand, I am writing this article to highlight selectively what has gone wrong in Uganda’s economy. It is important to record that NRM inherited an economy that was already in a hole. Sadly, NRM has sunk it deeper into that hole. Our experience shows that Uganda has performed very poorly during the regimes of Amin and Museveni raising serious concerns about the wisdom of hiring more military generals as presidents of Uganda. NRM is headed by General Museveni who is grooming Brigadier Muhoozi to succeed him. FDC has just elected a military general as its president succeeding a colonel. The experiment of military rule was tried in Latin America to solve economic problems and failed miserably. The generals decided to restore leadership to civilian leaders who are now doing well. This lesson should not be lost on Ugandans.

The purpose of this note is to point out what has gone wrong economically and recommend what needs to be done to correct it.

Uganda’s economy has been managed by a trio of Museveni, Mutebile and Muhakanizi (the three big Ms) that has been described as joined at the heap (we witnessed recently how Museveni worked hard to save Mutebile because without him the other two would probably be axed as well). These three officials accepted fully the conditionality of “shock therapy” or extreme version of stabilization and structural adjustment program (SAP), the version advocated by Margaret Thatcher, former British prime minister, and endorsed by the IMF and World Bank. This version which was adopted in Uganda in 1987 had already failed in Chile and Ghana.

From school and work days in Butobere, Ntare, Nairobi, Lusaka and New York, I knew some Ugandans involved in this SAP program. I advised them that the rigid version of shock therapy had not worked and we should draw lessons from Chile, Ghana and Senegal to avoid repeating the same mistakes. But my advice fell on deaf ears.

The elements of shock therapy structural adjustment program include operation of market forces, privatization of the economy, promotion of economic growth and per capita income, inflation control, currency devaluation, balanced budget, economic liberalization, export increase and diversification, labor flexibility, external management of SAP and trickledown mechanism. The state was virtually dropped from the economy which was driven by the invisible hand of market forces and laissez faire policies. Let us show how this neo-liberal paradigm crippled Uganda’s economy and society. We shall select a few areas as illustrations because of the necessity to keep the text short.

1. Inflation control: This aspect received strong support. NRM decided to keep inflation as low as five percent per annum. It was believed that there was too much money in the economy causing high inflation. The money was drastically reduced by increasing interest rate that encouraged savings by keeping money in banks. Inflation came down but at a heavy price. Small and medium enterprises that create jobs and grow the economy could not afford to borrow at such high interest rates of over 20 percent. Consequently investments declined and some businesses were closed or reduced considerably with many job losses and economic growth depressed.

2. Devaluation of Uganda currency: In order to promote exports, Uganda currency was drastically devalued making Uganda exports cheaper in international markets and imports into Uganda very expensive. Since most investments depend on imported inputs, small and medium enterprises were unable to import intermediary goods. Consequently investments were restricted further by expensive imports with adverse impact on economic growth and job creation.

3. Export diversification: In order to increase foreign currency, Uganda was encouraged to increase and diversify exports. The export of traditional commodities of coffee, cotton and tea was stepped up. But more significantly, the export of non-traditional exports (NTEs) mostly of foodstuffs including fish and beans traditionally the main source of protein for low income countries and maize increased dramatically. While export earnings increased, it happened at great cost to household food security and the environment. The export of food reduced the level of supplies in the domestic market below demand driving up prices beyond the means of many households and contributed to acute food insecurity and under-nutrition. Over thirty percent of all Ugandans go to bed hungry every night. Surplus food producers are the ones with the highest level of food insecurity and malnutrition because they sell most of the food as recommended by NRM policy of production for cash and not for the stomach. To increase production of traditional and non-traditional agricultural exports including timber, Uganda’s environment has been badly damaged through deforestation and de-vegetation.

4. Trade liberalization: liberalization of trade opened Uganda’s economy to all sorts of imports: cheap or subsidized and outcompeted Uganda products. The importation of second hand clothes in particularly has done great damage to Uganda’s textile industry adversely affecting Uganda’s forward and backward linkages. No country can develop without a dynamic manufacturing sector which NRM has missed since it came to power in 1986.

5. Privatization of Uganda economy: It is true that Uganda’s public enterprises like any other sector were in trouble. But blanket privatization as NRM did was not a solution. Hurried privatization of Uganda enterprises was designed to raise revenue and improve efficiency. We don’t know how much revenue was generated and to what uses it was put. Ugandans have a right to know. The ministry of finance that has responsibility for privatization of Uganda enterprises should answer this question. Efficiency has not occurred in large part because privatized enterprises went to relatives and friends of state house that had no managerial expertise and experience. This shortcoming together with trade liberalization have forced Uganda to de-industrialize as businesses have cut back on investments, closed down completely or relocated outside Uganda.

6. Balanced budget: This meant two major things – (1) elimination of subsidies and introduction of user fees particularly on education and healthcare; transport and energy and (2) retrenchment of public servants. User fees made it impossible for many families to send their children to school resulting in a generation of illiterate citizens. Hospital fees kept many sick people from accessing health services resulting in losing many Ugandans that could have been saved. Retrenchment of public servants helped NRM government to get rid of experienced Ugandans and keep others in the diaspora in order to create jobs for many NRM cadres that were poorly educated and inexperienced. Standards of qualifications were drastically reduced even at the political level including a minimum requirement of High School (A Level) to qualify and contest for office of president, vice president and member of parliament. There are reports that some MPs speak poor English which imply that they also understand little English constraining their ability to deliver. I have met many Ugandans in international conferences and their understanding of global and national issues leaves much room for improvement. This deficit was confirmed during negotiations for barter trade. Uganda negotiators did such a poor job with net losses and barter trade was dropped, yet NRM knew there were Ugandans with tremendous negotiating experience including with the European Union but these were not NRM cadres.

7. Reliance on expatriate advisers and managers: One of structural adjustment conditionality is hiring expatriate advisers and managers to manage economies under economic reforms. Managers were brought to supervise Ugandans including senior public servants. One of them objected but was told he had no choice. Some of expatriates meant well but were schooled in conventional economics based on theories that fit all situations (one size fits all) whereas Uganda needed behavioral economists with understanding of local conditions including history, culture and location specific endowments. Consequently much of the advice was not appropriate.

8. Trickle down mechanism: with no state in the economy the distribution of benefits of economic growth were left to market forces which didn’t work. Consequently, benefits disproportionately went to those already rich. It is estimated that some 20 percent in the lowest income bracket have become poorer since 1986. As an aside, let me make one correction about Uganda’s engine of rapid economic growth particularly in the second half of 1980s and 1990s. Some have argued that it was due to economic reforms. I beg to differ. NRM should be given credit for creating some peaceful conditions in southern Uganda that enabled Ugandans to use their entrepreneurship and excess capacity to grow the economy. It wasn’t macroeconomic policies. In fact removal of subsidies, cooperatives and extension workers undermined agriculture Uganda’s economic mainstay. That is why in areas where there was no peace as in the north the economy actually declined. With excess capacity gone, Uganda’s economy has plummeted from 10 percent in mid-1990s to three percent currently while elements of neo-liberalism are still in force.

9. Monopoly of new ideas: In Uganda none is allowed to come up with new ideas. Ideas spring from the president. When Gilbert Bukenya started upland rice growing on his own and did well and put his name on the world map, the project was undermined and we don’t hear much about it. We were told to send ideas to state house for presidential review and announcement if acceptable. Some concurred and I wrote to the president and sent some of my books. Some of my ideas were incorporated into NRM policy documents including the Presidential Initiative Against the Twin Evils of Hunger and Poverty. Sadly, these policies have not been implemented or have been poorly implemented that poverty and hunger have not been reduced.

10. Continuation of SAP elements after its abandonment: Structural adjustment as Uganda’s flagship was officially abandoned in 2009. But the trio either for lack of will or capacity didn’t support the five year development plan which replaced SAP and hasn’t been implemented as reported by the prime minister not too long ago. Instead, NRM has continued to implement elements of failed and abandoned structural adjustment program with a focus still on elements such as inflation control, export diversification, economic liberalization and trickle down mechanism. Uganda has thus continued to sink deeper into the hole because of the failure of the trio to adjust or give way to a new team.

Conclusion: Uganda under NRM has reached a point of no return economically, socially, politically and environmentally. Put differently, NRM has reached the end of its tether. It is incapable of reforming itself: in fact the leadership is busy fighting internal conflicts and has no time for improving the economy, society and the environment. Additionally, the president is busy insulting as bankrupt and idiots those who oppose his policies and practices. A president who behaves like that is one that has lost trust of the people and must go. When Diaz, former president of Mexico, lost trust, he was sent into exile so that Mexicans could get on with their lives. When Marcos of the Philippines lost trust of the people, he was sent into exile so people could get on with their lives. Uganda has some 35 million people who want to get on with their lives. Museveni must be sent into exile to create room for new leadership to renovate the economy, society and environment.

UDU has already prepared a National Recovery Plan (NRP) accessible at We are now engaged in civic education, diplomatic networking and assessment of the situation in Uganda. We are also in the process of identifying Ugandans with caliber and character to lead the transitional government of all stakeholders including NRM to prepare for free and fair multi-party elections.

We call on all Ugandans to come together, arrest and reverse the current unhappy trajectory and restore Uganda to her rightful place in the international community.

Happy New Year to you all

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