Uganda won’t industrialize during our lifetime

Uganda won’t industrialize during our lifetime

Before Uganda became a British protectorate, the communities in the area had attained an economic structure of balanced agriculture, manufacturing and trade in local and regional markets. Industrious people had utilized their comparative advantage to improve their standard of living by eating balanced diets and accumulating capital through sale of surplus products. Travelers in east and central Africa marveled at the level of economic development. If the British had asked Ugandans whether to specialize in agriculture or manufacturing, they probably would have opted for industries because of the range of products and the level of industrial sophistication that had been attained.

Because Britain was looking for tropical raw materials like cotton for her domestic industries, food for her exploding population and markets for her surplus manufactured products, Ugandans were not asked about their preference. Thus, at the start of the 20th century, British authorities decided that Uganda would become a producer of raw materials and food by African and non-African farmers and a market for British manufactured products. However, in 1922 British policy was changed and Uganda’s small holder farmers would become sole producers of agricultural produce except tea and sugar. From 1923 the government actively encouraged and organized peasant production, suffocating indigenous manufacturing enterprises out of existence.

At the end of WWII it became clear that the agriculture sector would not meet basic needs of rising population and employment. It was decided to introduce industries to create forward and backward linkages, jobs and transform the economy. With considerable funds available from high commodity prices, colonial government used the surplus to construct a dam to generate energy and transport (roads and a railway to the copper mines) that facilitated the establishment of cement, textile and copper industries. Uganda Development Corporation (UDC) was established in 1952 to promote industrial development. Because of unfair competition at that time, the textile ‘infant’ industry was protected by a substantial tariff that began in 1958 (P. L. Wickins 1986, E. J. toutjesdijk 1967).

Independent governments since 1962 have emphasized transformation of Uganda’s economic structure away from agriculture. In practice, however, Uganda has remained an agrarian economy because, according to advisers, that is where it has a comparative advantage. Uganda has therefore developed types of industries based on raw agricultural produce like cotton; industries that manufacture products that have high transport costs like beer; assembly industries like suitcases; and industries that process perishable products like bread (E. J. Stoutjesdijk 1967). These are industries that have limited employment opportunities, forward and backward linkages essential for Uganda’s economic and social transformation.

Attempts to diversify Uganda’s industrial base needed to create jobs and raise incomes for rapid population growth are not welcomed because such industries would require long-term government protection that would undermine competition and efficiency. The argument for keeping markets open gathered support since globalization became fashionable from the 1980s onwards.

Since the 1960 World Bank report on economic development, Uganda has been advised that her economic development potential is in agriculture through increased production and diversification for regional and global markets. The production of non-traditional commodities like food with high demand on global markets has received tremendous boost notwithstanding that primary commodities continue to experience wild fluctuations in demand and price.

We need to recall that countries that have industrialized rejected the comparative advantage doctrine, cut domestic markets off and industrialized their economies until they were ready to compete. There is no short cut. The good news is that the current global recession began in 2008 and its adverse impact on employment has raised political temperatures especially in democratic countries where the voices of the unemployed cannot be ignored unlike in countries with military dictators where such complaints would be crashed. Accordingly, governments are urging their citizens to consume national products to stimulate home industries, create jobs and end the recession. These are decisions that have ignored market and laissez-faire fundamentals for understandable political and social reasons. Uganda should take advantage of this window of opportunity and begin to process those commodities that are being exported in raw form.

Over reliance on birth control to reduce population growth and development of services largely in big towns to provide jobs and incomes will not do in the short and possibly in the long term. Manufacturing enterprises using Uganda’s abundant resources and cheap labor and energy should be promoted to produce competitively in regional and global markets after a short period of protection. What is needed is a bold political decision otherwise Uganda will not industrialize in our lifetime.