Struggle towards a self-sustaining economy
May 04, 2005
Ladies and Gentlemen, I salute all of you. My speech at Kololo will be read by H.E. the Vice President, Professor Gilbert Bukenya.
Ladies and Gentlemen, I salute all of you. My speech at Kololo will be read by H.E. the Vice President, Professor Gilbert Bukenya. I am reading the same speech, at this very moment, in Fort Portal, where I had a long-standing “Meet the People†engagement that we had to push to the Labour Day because of the historic debate and vote in Parliament last Thursday (28.04.05). As many of the National Resistance Movement Members of Parliament as possible had to be in Parliament on Thursday, to ensure that the People’s power is protected against those forces that want to usurp it. Uganda, since 1986, has been a people’s democracy with representative institutions, the apex of which is Parliament. However, the people of Uganda retain authority over the destiny of the country in crucial matters, if necessary, through referenda. It would, for instance, have been unwise to change the Movement political system to allow those not happy with such a harmonious arrangement to find their own political home (mubaleke bagende) without involving the People. Another way of looking at it is to rid the Movement, by opening up the political space, of those that are not happy with unity (kubejjako). The vote on Thursday in Parliament was, therefore, important and historic because the decision will now involve the People.
Elements among the elite and certain foreign circles think that our People can be by-passed. We should not associate ourselves with such positions. It is the People, you remember, that defended Uganda against the dictatorship in the protracted war in the Luwero Triangle.
That is why my activities in Fort Portal had to be postponed to today. Hence, I could not be with those in Kololo. I am, instead, here in Fort Portal.
On this occasion, I would like to raise three issues:
Adding value to our raw-materials so as to create employment for our youth and working population; expand our GDP; and increase forex earnings.
Collecting more revenue for the Government so as to be independent financially;
Implications of the continued rising of oil prices for our economy.
Right from the bush days, the National Resistance Movement pointed out that the future of Africa lies with industrialisation. This means that the raw materials that we have been “donating†to the Western countries, in particular, as well as the rest of the world, in general, in unprocessed form, must be turned into finished products. The coffee must be roasted and ground into powder (instant coffee, granules or any other form). The cotton must be turned into textiles; the fruits into fruit juices; the skins and hides into leather goods; the fish into processed and preserved fillets; the beef into beef products; the milk into milk products and many others. This struggle has advanced in some areas such as:
Fish processing; tea processing;
Sugar processing; limited capacity of leather processing; limited capacity of recycling of steel and lead (batteries).
However, the big battles are still ahead: to roast and grind all our coffee into finished forms; to convert all our cotton into textiles; to turn our iron ore at Muko and Tororo into steel; to convert our huge deposits of phosphates at Tororo into fertilisers and other industrial products; and expand the processing of leather, beef, fish, tea, tobacco, etc. We also need to develop the human skills of our youth as far as electronics and computers are concerned, not to forget heavy and light engineering, human sciences, etc.
Our tourism sector is God-given, bearing in mind our latitude and altitude. Provision of security by the UPDF and Police and development of the infrastructure are the main pre-requisites for tourism development.
We are not forgetting our petroleum and hydrocarbon resources. Although we encountered carbondioxide in the first drilling site, we shall continue to support the exploration in the areas north of the Semliki drilling site. In any case, carbondioxide is not incompatible with the presence of petroleum as is shown by the cases in Libya and Sudan. Yesterday, I visited the Semliki drilling site. The Heritage group did a commendable work in investigating our oil resources.
Hitherto, we have relied on private entrepreneurship to lead in all sectors of the economy. Foreign investors are quite frivolous, unfortunately, mainly because, since the collapse of Communism, the whole world is open to private capital. We have, therefore, resolved that, come what may, the sectors in which Uganda has got natural and comparative advantages will be industrialised: coffee, cotton, beef, milk, cereals, fish, leather, etc. If foreign capital will not be forthcoming, we shall encourage local capital, including limited State intervention to kick-start certain sectors, after which, we, then, sell to the private sector as in the cases of New Vision and Uganda Clays, recently. The same is happening to Kinyara Sugar Works. Therefore, the equivocation as to the methods of industrialising our country is over. We shall move sector by sector, starting with coffee, then cotton and continue with other products. The factory at Bweyogerere for coffee processing will be built, come what may. Those who have been discouraging our Indian partner will do so in vain.
In order to empower our forward-march, we need more robust revenue collection by the Uganda Revenue Authority (URA). When the National Resistance Movement captured power in 1986, we only had cadres in the Army. Many of the sectors have been under-performing on account of lack of patriotic cadres. Even the much-talked about corruption is caused by the absence of patriotic cadres complicated by other temporary problems such as inadequate remuneration. Since 1991, I started paying attention to the Uganda Revenue Authority (URA). Initially, I inserted only eight cadres of my choice headed by Mrs J. Mbabazi and Mr S. Akabway. Immediately, tax collection jumped from 4% of GDP to 12% of GDP. It stagnated there because our reform of URA was not complete. Finally, the insertion of a critical mass of patriotic cadres into URA has been achieved. Already, by the end of March this year, URA had over performed by USh40b beyond the target for this financial year. Recently, I met the entire new management of URA. They think by stopping leakages in the tax collection (tax evasion), we can move to 18% of GDP. This would translate into approximately, Ush2700b, if the economy continues to grow at 5-6%. If we achieve the tax/GDP collection ratio of 24%, we shall not need the ignominious practice of dealing with the so-called donors whose meddling is, partially, responsible for the perpetuation of terrorism in northern Uganda, the present load-shedding of electricity and the removal of tax holidays for investors that somehow affected our investment tempo.
One factor that merits attention is the need to lower the costs of transport to the sea through Mombasa and Dar-es-Salaam. We cannot compete internationally without resolving this issue. We need to work with our EAC partners to resolve this. Hence, the importance of the East African Federation that should be fast-tracked.
The public must be aware of the rapid rise of petroleum prices. This is due to the high cost of petroleum internationally. This, in turn, is due to a happy phenomenon that we need to learn to live with. Since the industrial revolution in Europe (about 300 years ago), only a small portion of the human race has been living a good, luxurious and, even, profligate life, with private cars, television sets and permanent houses warmed by gas, etc. Much of these items of “civilisation†like petroleum, steel, etc. come from the backward countries of the world. The small portion of the human race that has been living this luxurious life has been the inhabitants of Western Europe, USA and Japan, accounting for about 15% of the human race.
The “happy phenomenon†that is now evolving is that the huge Chinese population, under the revolutionary leadership of Communists, first detached their huge country from the imperialist-dominated system in 1949. Initially, they made some management mistakes of stifling the private sector. Deng Hsiao Ping corrected this about 20 years ago when he said it does not matter whether “A cat is white or black; as long as it catches mice, it is a useful catâ€. In other words, it did not matter whether a country used capitalist methods (private sector) or public sector (socialism) as long as development was achieved. By using capitalist methods in an independent way (not being told by the so-called donors how one should run his home), China has now become a roaring success. Finally, the huge population of China is beginning to lead a good life: permanent houses, cars, railways, etc. This means the demand for raw materials like (petroleum, steel, copper, cement, and others), has gone up; and so have the prices.
When the raw materials of the world were only being used for the benefit of the small populations of the USA, Western Europe and Japan, they appeared to be too much. There appeared to be an over-supply. Now that the huge populations of China, the population of India, Brazil and, later, Africa are in need of these raw materials, their prices are going up. Is this bad for Uganda or Africa? Not at all. Already, our steel is going up in price. A few years ago, nobody was interested in investing in our steel in Muko. We are now the most competititive in the production of steel because other steel production operations in the world are very expensive as one Indian steel producer — Mr Sanjay Awashi of Tembo Steels (U) Ltd said:
“No country in the world can match the prices from Uganda, if bulky commodity manufacturing starts here. For example, Tembo Steels (U) Ltd realised 200% growth during the past two years.â€
Mr. Sanjay continues:
“Currently, steel prices in India for iron bars are
US$ 600-625 per tonne; in China- US$ 700 per tonne; in Europe- US$ 750 per tonne; in USA - US$ 700 per tonne; and in Uganda – US$ 500 per tonne on the domestic market.â€
When it comes to oil, my comments are three: use petroleum economically now that it is a scarce natural resource; secondly, let us develop our own much cleaner and everlasting energy: hydro-power — even for transport in the form of trams like the ones we see in Europe; and, thirdly, do not forget that we are also hopeful for discovering petroleum. I hope the prices will be still high when we hit our oil.
With regard to aid from outside, I told you, in my New Year’s speech (2005) that too much un-earned forex will ruin our economy by creating inflation thereby compelling the Governor of the Bank of Uganda to issue expensive Treasury Bills so as to suck out the liquidity thus created. In order to make the treasury bills attractive, the Governor raises their rates. This is one reason interest rates are still high in spite of our controlling inflation for a long time. Unearned dollars in the form of aid, when not controlled, will also cause the appreciation of the Uganda shilling (the shilling becoming strong, artificially). This will affect our exports such as tea, tobacco, coffee, etc, by rendering them too expensive to buy, thereby undermining our competitiveness in foreign and local markets.
We have already resolved not to accept aid that will cause the above disadvantages. The aid that we shall welcome is the one related to trade facilitation: development of railways, ports, research and such other infrastructure areas.
Let me conclude by stating that I am optimistic that once Uganda is transformed along the above spheres, the employment opportunities will be higher for our people, especially the youth and the standard of living amongst Ugandans, will, indeed, improve tremendously. What we need most is consensus in handling private investors. There should be co-ordination on this point. Uncoordinated actions by State organs will scare away our potential investors. Why do you scare away investors so that you qualify to beg from those who attract and retain investors? UK now earns more from coffee than Uganda because of the Nestle factories based in UK. Uganda will build our own coffee processing factories.
All the sectors of the Ugandan society should support this process. The unions by backing industrialisation will raise the price of labour (wages) structurally by making labour scarce not only artificially by legislating for minimum wage when there is still a huge reservoir of unemployed Ugandans.
The concerns about one of the workers’ statutory corporation body — National Social Security Fund (NSSF), are totally unfounded. I transferred supervision over NSSF from the Ministry of Labour to Ministry of Finance for two reasons:
NSSF, with Ush414b, is more or less, a bank. Banks cannot be competently looked after by the Ministry of Labour. That volume of money wrongly used can cause inflation and ruin our macro-economic stability;
Wisely investing the workers’ money is also crucial. People experienced in handling finance, such as the Governor of the Bank of Uganda, alongside officials from the Ministry of Labour and the Trade Unions, should take ultimate responsibility for all public financial matters.
Therefore, the misinformation being peddled by detractors should be rejected.
I wish you a happy Labour Day.
I thank you.
Speech by H.E. Yoweri Kaguta Museveni President of the Republic of Uganda, read for him by Vice President Prof. Gilbert Bukenya, on Labour Day 2005 at Kololo
Elements among the elite and certain foreign circles think that our People can be by-passed. We should not associate ourselves with such positions. It is the People, you remember, that defended Uganda against the dictatorship in the protracted war in the Luwero Triangle.
That is why my activities in Fort Portal had to be postponed to today. Hence, I could not be with those in Kololo. I am, instead, here in Fort Portal.
On this occasion, I would like to raise three issues:
Adding value to our raw-materials so as to create employment for our youth and working population; expand our GDP; and increase forex earnings.
Collecting more revenue for the Government so as to be independent financially;
Implications of the continued rising of oil prices for our economy.
Right from the bush days, the National Resistance Movement pointed out that the future of Africa lies with industrialisation. This means that the raw materials that we have been “donating†to the Western countries, in particular, as well as the rest of the world, in general, in unprocessed form, must be turned into finished products. The coffee must be roasted and ground into powder (instant coffee, granules or any other form). The cotton must be turned into textiles; the fruits into fruit juices; the skins and hides into leather goods; the fish into processed and preserved fillets; the beef into beef products; the milk into milk products and many others. This struggle has advanced in some areas such as:
Fish processing; tea processing;
Sugar processing; limited capacity of leather processing; limited capacity of recycling of steel and lead (batteries).
However, the big battles are still ahead: to roast and grind all our coffee into finished forms; to convert all our cotton into textiles; to turn our iron ore at Muko and Tororo into steel; to convert our huge deposits of phosphates at Tororo into fertilisers and other industrial products; and expand the processing of leather, beef, fish, tea, tobacco, etc. We also need to develop the human skills of our youth as far as electronics and computers are concerned, not to forget heavy and light engineering, human sciences, etc.
Our tourism sector is God-given, bearing in mind our latitude and altitude. Provision of security by the UPDF and Police and development of the infrastructure are the main pre-requisites for tourism development.
We are not forgetting our petroleum and hydrocarbon resources. Although we encountered carbondioxide in the first drilling site, we shall continue to support the exploration in the areas north of the Semliki drilling site. In any case, carbondioxide is not incompatible with the presence of petroleum as is shown by the cases in Libya and Sudan. Yesterday, I visited the Semliki drilling site. The Heritage group did a commendable work in investigating our oil resources.
Hitherto, we have relied on private entrepreneurship to lead in all sectors of the economy. Foreign investors are quite frivolous, unfortunately, mainly because, since the collapse of Communism, the whole world is open to private capital. We have, therefore, resolved that, come what may, the sectors in which Uganda has got natural and comparative advantages will be industrialised: coffee, cotton, beef, milk, cereals, fish, leather, etc. If foreign capital will not be forthcoming, we shall encourage local capital, including limited State intervention to kick-start certain sectors, after which, we, then, sell to the private sector as in the cases of New Vision and Uganda Clays, recently. The same is happening to Kinyara Sugar Works. Therefore, the equivocation as to the methods of industrialising our country is over. We shall move sector by sector, starting with coffee, then cotton and continue with other products. The factory at Bweyogerere for coffee processing will be built, come what may. Those who have been discouraging our Indian partner will do so in vain.
In order to empower our forward-march, we need more robust revenue collection by the Uganda Revenue Authority (URA). When the National Resistance Movement captured power in 1986, we only had cadres in the Army. Many of the sectors have been under-performing on account of lack of patriotic cadres. Even the much-talked about corruption is caused by the absence of patriotic cadres complicated by other temporary problems such as inadequate remuneration. Since 1991, I started paying attention to the Uganda Revenue Authority (URA). Initially, I inserted only eight cadres of my choice headed by Mrs J. Mbabazi and Mr S. Akabway. Immediately, tax collection jumped from 4% of GDP to 12% of GDP. It stagnated there because our reform of URA was not complete. Finally, the insertion of a critical mass of patriotic cadres into URA has been achieved. Already, by the end of March this year, URA had over performed by USh40b beyond the target for this financial year. Recently, I met the entire new management of URA. They think by stopping leakages in the tax collection (tax evasion), we can move to 18% of GDP. This would translate into approximately, Ush2700b, if the economy continues to grow at 5-6%. If we achieve the tax/GDP collection ratio of 24%, we shall not need the ignominious practice of dealing with the so-called donors whose meddling is, partially, responsible for the perpetuation of terrorism in northern Uganda, the present load-shedding of electricity and the removal of tax holidays for investors that somehow affected our investment tempo.
One factor that merits attention is the need to lower the costs of transport to the sea through Mombasa and Dar-es-Salaam. We cannot compete internationally without resolving this issue. We need to work with our EAC partners to resolve this. Hence, the importance of the East African Federation that should be fast-tracked.
The public must be aware of the rapid rise of petroleum prices. This is due to the high cost of petroleum internationally. This, in turn, is due to a happy phenomenon that we need to learn to live with. Since the industrial revolution in Europe (about 300 years ago), only a small portion of the human race has been living a good, luxurious and, even, profligate life, with private cars, television sets and permanent houses warmed by gas, etc. Much of these items of “civilisation†like petroleum, steel, etc. come from the backward countries of the world. The small portion of the human race that has been living this luxurious life has been the inhabitants of Western Europe, USA and Japan, accounting for about 15% of the human race.
The “happy phenomenon†that is now evolving is that the huge Chinese population, under the revolutionary leadership of Communists, first detached their huge country from the imperialist-dominated system in 1949. Initially, they made some management mistakes of stifling the private sector. Deng Hsiao Ping corrected this about 20 years ago when he said it does not matter whether “A cat is white or black; as long as it catches mice, it is a useful catâ€. In other words, it did not matter whether a country used capitalist methods (private sector) or public sector (socialism) as long as development was achieved. By using capitalist methods in an independent way (not being told by the so-called donors how one should run his home), China has now become a roaring success. Finally, the huge population of China is beginning to lead a good life: permanent houses, cars, railways, etc. This means the demand for raw materials like (petroleum, steel, copper, cement, and others), has gone up; and so have the prices.
When the raw materials of the world were only being used for the benefit of the small populations of the USA, Western Europe and Japan, they appeared to be too much. There appeared to be an over-supply. Now that the huge populations of China, the population of India, Brazil and, later, Africa are in need of these raw materials, their prices are going up. Is this bad for Uganda or Africa? Not at all. Already, our steel is going up in price. A few years ago, nobody was interested in investing in our steel in Muko. We are now the most competititive in the production of steel because other steel production operations in the world are very expensive as one Indian steel producer — Mr Sanjay Awashi of Tembo Steels (U) Ltd said:
“No country in the world can match the prices from Uganda, if bulky commodity manufacturing starts here. For example, Tembo Steels (U) Ltd realised 200% growth during the past two years.â€
Mr. Sanjay continues:
“Currently, steel prices in India for iron bars are
US$ 600-625 per tonne; in China- US$ 700 per tonne; in Europe- US$ 750 per tonne; in USA - US$ 700 per tonne; and in Uganda – US$ 500 per tonne on the domestic market.â€
When it comes to oil, my comments are three: use petroleum economically now that it is a scarce natural resource; secondly, let us develop our own much cleaner and everlasting energy: hydro-power — even for transport in the form of trams like the ones we see in Europe; and, thirdly, do not forget that we are also hopeful for discovering petroleum. I hope the prices will be still high when we hit our oil.
With regard to aid from outside, I told you, in my New Year’s speech (2005) that too much un-earned forex will ruin our economy by creating inflation thereby compelling the Governor of the Bank of Uganda to issue expensive Treasury Bills so as to suck out the liquidity thus created. In order to make the treasury bills attractive, the Governor raises their rates. This is one reason interest rates are still high in spite of our controlling inflation for a long time. Unearned dollars in the form of aid, when not controlled, will also cause the appreciation of the Uganda shilling (the shilling becoming strong, artificially). This will affect our exports such as tea, tobacco, coffee, etc, by rendering them too expensive to buy, thereby undermining our competitiveness in foreign and local markets.
We have already resolved not to accept aid that will cause the above disadvantages. The aid that we shall welcome is the one related to trade facilitation: development of railways, ports, research and such other infrastructure areas.
Let me conclude by stating that I am optimistic that once Uganda is transformed along the above spheres, the employment opportunities will be higher for our people, especially the youth and the standard of living amongst Ugandans, will, indeed, improve tremendously. What we need most is consensus in handling private investors. There should be co-ordination on this point. Uncoordinated actions by State organs will scare away our potential investors. Why do you scare away investors so that you qualify to beg from those who attract and retain investors? UK now earns more from coffee than Uganda because of the Nestle factories based in UK. Uganda will build our own coffee processing factories.
All the sectors of the Ugandan society should support this process. The unions by backing industrialisation will raise the price of labour (wages) structurally by making labour scarce not only artificially by legislating for minimum wage when there is still a huge reservoir of unemployed Ugandans.
The concerns about one of the workers’ statutory corporation body — National Social Security Fund (NSSF), are totally unfounded. I transferred supervision over NSSF from the Ministry of Labour to Ministry of Finance for two reasons:
NSSF, with Ush414b, is more or less, a bank. Banks cannot be competently looked after by the Ministry of Labour. That volume of money wrongly used can cause inflation and ruin our macro-economic stability;
Wisely investing the workers’ money is also crucial. People experienced in handling finance, such as the Governor of the Bank of Uganda, alongside officials from the Ministry of Labour and the Trade Unions, should take ultimate responsibility for all public financial matters.
Therefore, the misinformation being peddled by detractors should be rejected.
I wish you a happy Labour Day.
I thank you.
Speech by H.E. Yoweri Kaguta Museveni President of the Republic of Uganda, read for him by Vice President Prof. Gilbert Bukenya, on Labour Day 2005 at Kololo