Suruma plan takes us back to old debate
Mar 06, 2005
MY attention has been drawn by the new Finance minister Dr Ezra Suruma’s economic strategy. I would like to begin by thanking Suruma for stating his thinking and the way he is going to manage the economy. Unlike his predecessors, he gives his stand on the economy and points out its shortcomings.
Musoke Muyiiya
MY attention has been drawn by the new Finance minister Dr Ezra Suruma’s economic strategy. I would like to begin by thanking Suruma for stating his thinking and the way he is going to manage the economy. Unlike his predecessors, he gives his stand on the economy and points out its shortcomings. However, I find his strategy lacking in many aspects.
The laissez-fare model
He begins by castigating laise-sez-faire as a failed model, which accounts for low Uganda productivity figures, but does not tell us other successful countries, which have adopted alternative models. He does not tell us why NRM abandoned the statist approach to the management of the economy in late 1980s.
We need to share the experience and lessons learnt before we return to the failed model. I believe there were strong reasons why the Government rolled back. Suruma stands in better position to know because he has been in the Government at senior level since the advent of NRM to power.
I appreciate Suruma’s disappointment on the performance of the economy, but he needs to know that the decimal performance is not entirely a result of wrong prescription by the World Bank and IMF, but it is because of our failure to fully implement them. Sadly, Suruma is silent on how the strategy will be implemented. It is common knowledge that the new economic plan will be implemented by the same administrative apparatus, which failed the former.
The strategy for increasing agricultural productivity
On the strategy to increase agricultural productivity, Suruma proposed a three-pronged strategy, which includes: Establishing and strengthening micro-finance services to provide input credit, ensure households have access to inputs and advisory services on how to utilise the inputs and establish a rural information system to measure production periodically.
The strategy reveals that the minister has lost touch with people and social economic events in the credit and capital areas. Development agencies were hoodwinked and without taking deliberate studies have massively invested in micro-finance, but none of them can claim to have alleviated rural poverty as a result of micro-finance initiatives.
Micro-finance has not contributed to business growth, but rather, have milked peasants and the marginalised groups to proportions hitherto unknown. In one of the evaluations of micro-finance programmes I carried out, the following shortcomings were unearthed: loans are given without feasibility studies; repayment of loans is not based on revenues generated from funded projects. In most cases, projects are not given grace periods; there is no deliberate and effective effort to train beneficiaries in business management and most micro-finance institutions carry out supervision with a view of loan recovery other than providing technical assistance to beneficiaries.
Consequently, most beneficiaries end up selling their assets to repay the loans. Most micro-finance institutions measure their success on the basis of loan repayment yet most beneficiaries will tell you that the major sources of repayments are not revenues from funded projects, but from spouses, relatives and transfer earnings. Suruma needs also to revisit other failed projects to finance peasants before he commits scarce financial resources. These include, but not limited to Entandikwa, Poverty Alleviation Project (PAP) and Crop Finance.
The strategy further proposes to encourage each rural household to open an account with micro-finance institutions to be opened at every sub-county. This proposal seems to be based on a false belief that there is a lot of money in rural areas, which is not tapped. Secondly, it depicts the short memories of our decision makers, especially with regard to the failed UCB policy of late 1980s, which opened many branches in rural areas. Suruma needs to revisit these lessons before he plunges the country into fresh disinvestments.
Popularising cooperatives in the rural areas
On cooperative societies, one has to appreciate the ministers enthusiasm, but he fails to understand the dynamics of the cooperative movement. A producer cooperative movement is based on farmers but not on traders and politicians. In Uganda today, following the failure of commodity markets, state exploitation and neglect, you will hardly find serious farmers in rural areas.
Any attempt at establishing cooperative movement will end up with structures occupied by movement and FDC cadres not farmers. He proposes building stores and providing weighing scales at village level. That prescription seems to wrongly suggest there is too much surplus without storage facilities and that farmers are cheated by traders because of lack of weighing scales. Suruma needs to be informed that following the liberalisation of markets, farmers sale all their produce on cash basis and no farmer is willing to take his produce to a cooperative union and be given a payment waiting note instead of money as the previous practice.
Cooperatives are not a panacea to farmers’ problems because of the problems associated with them. You need far reaching reforms in the cooperative movement before you reactivate them. On the building cooperative store, Suruma should also know that the Government invested heavily in constructing national silos, which are currently empty.
Magnitude of the challenges of transforming the agriculture sector
It looks as if the minister has not had access to the treasury. He proposes that the state buys seeds and chemicals to be distributed to 12.5 million plots and build storage facilities. Where will this money come from? The other interesting aspect of the strategy is that it aims at reducing dependency on external sources of funds, but does not tell us where the money will come from. Suruma’s belief in promoting peasant agriculture is another beginning on wrong footing. In the modern era, it is day-dreaming to expect peasants to be the engine for economic development.
Facts on the ground clearly show there is no successful economy based on peasant agriculture. Agriculture as a business, is very expensive and cannot be afforded by our peasant farmers. All investments towards transforming peasants into commercial farmers should not even hesitate to attract foreigners to invest in the agriculture sector. These are likely to provide employment and income to the population.
Conclusion
Suruma needs to know that to achieve his strategy of an intervention state, one of the prerequisites is a ‘development state’ with competent bureaucracy, which is insulated from partisan politics.
Unlike the Asian Tigers, Uganda has not attained a development state and any attempt to unroll the state into business will open doors for corruption. Suruma does not suggest anything new, but rather a return to the old model. He needs to be reminded that NRM is not a new government and should not be allowed to experiment on the people of Uganda any time it wishes to do so because it is expensive.
As a student of public management, I need to emphasise that public policy initiation, formulation and management is not a one man’s show. The economic strategy needs to be discussed widely by different stakeholders because of its far reaching implications to the economy.
The writer is a
management consultant
MY attention has been drawn by the new Finance minister Dr Ezra Suruma’s economic strategy. I would like to begin by thanking Suruma for stating his thinking and the way he is going to manage the economy. Unlike his predecessors, he gives his stand on the economy and points out its shortcomings. However, I find his strategy lacking in many aspects.
The laissez-fare model
He begins by castigating laise-sez-faire as a failed model, which accounts for low Uganda productivity figures, but does not tell us other successful countries, which have adopted alternative models. He does not tell us why NRM abandoned the statist approach to the management of the economy in late 1980s.
We need to share the experience and lessons learnt before we return to the failed model. I believe there were strong reasons why the Government rolled back. Suruma stands in better position to know because he has been in the Government at senior level since the advent of NRM to power.
I appreciate Suruma’s disappointment on the performance of the economy, but he needs to know that the decimal performance is not entirely a result of wrong prescription by the World Bank and IMF, but it is because of our failure to fully implement them. Sadly, Suruma is silent on how the strategy will be implemented. It is common knowledge that the new economic plan will be implemented by the same administrative apparatus, which failed the former.
The strategy for increasing agricultural productivity
On the strategy to increase agricultural productivity, Suruma proposed a three-pronged strategy, which includes: Establishing and strengthening micro-finance services to provide input credit, ensure households have access to inputs and advisory services on how to utilise the inputs and establish a rural information system to measure production periodically.
The strategy reveals that the minister has lost touch with people and social economic events in the credit and capital areas. Development agencies were hoodwinked and without taking deliberate studies have massively invested in micro-finance, but none of them can claim to have alleviated rural poverty as a result of micro-finance initiatives.
Micro-finance has not contributed to business growth, but rather, have milked peasants and the marginalised groups to proportions hitherto unknown. In one of the evaluations of micro-finance programmes I carried out, the following shortcomings were unearthed: loans are given without feasibility studies; repayment of loans is not based on revenues generated from funded projects. In most cases, projects are not given grace periods; there is no deliberate and effective effort to train beneficiaries in business management and most micro-finance institutions carry out supervision with a view of loan recovery other than providing technical assistance to beneficiaries.
Consequently, most beneficiaries end up selling their assets to repay the loans. Most micro-finance institutions measure their success on the basis of loan repayment yet most beneficiaries will tell you that the major sources of repayments are not revenues from funded projects, but from spouses, relatives and transfer earnings. Suruma needs also to revisit other failed projects to finance peasants before he commits scarce financial resources. These include, but not limited to Entandikwa, Poverty Alleviation Project (PAP) and Crop Finance.
The strategy further proposes to encourage each rural household to open an account with micro-finance institutions to be opened at every sub-county. This proposal seems to be based on a false belief that there is a lot of money in rural areas, which is not tapped. Secondly, it depicts the short memories of our decision makers, especially with regard to the failed UCB policy of late 1980s, which opened many branches in rural areas. Suruma needs to revisit these lessons before he plunges the country into fresh disinvestments.
Popularising cooperatives in the rural areas
On cooperative societies, one has to appreciate the ministers enthusiasm, but he fails to understand the dynamics of the cooperative movement. A producer cooperative movement is based on farmers but not on traders and politicians. In Uganda today, following the failure of commodity markets, state exploitation and neglect, you will hardly find serious farmers in rural areas.
Any attempt at establishing cooperative movement will end up with structures occupied by movement and FDC cadres not farmers. He proposes building stores and providing weighing scales at village level. That prescription seems to wrongly suggest there is too much surplus without storage facilities and that farmers are cheated by traders because of lack of weighing scales. Suruma needs to be informed that following the liberalisation of markets, farmers sale all their produce on cash basis and no farmer is willing to take his produce to a cooperative union and be given a payment waiting note instead of money as the previous practice.
Cooperatives are not a panacea to farmers’ problems because of the problems associated with them. You need far reaching reforms in the cooperative movement before you reactivate them. On the building cooperative store, Suruma should also know that the Government invested heavily in constructing national silos, which are currently empty.
Magnitude of the challenges of transforming the agriculture sector
It looks as if the minister has not had access to the treasury. He proposes that the state buys seeds and chemicals to be distributed to 12.5 million plots and build storage facilities. Where will this money come from? The other interesting aspect of the strategy is that it aims at reducing dependency on external sources of funds, but does not tell us where the money will come from. Suruma’s belief in promoting peasant agriculture is another beginning on wrong footing. In the modern era, it is day-dreaming to expect peasants to be the engine for economic development.
Facts on the ground clearly show there is no successful economy based on peasant agriculture. Agriculture as a business, is very expensive and cannot be afforded by our peasant farmers. All investments towards transforming peasants into commercial farmers should not even hesitate to attract foreigners to invest in the agriculture sector. These are likely to provide employment and income to the population.
Conclusion
Suruma needs to know that to achieve his strategy of an intervention state, one of the prerequisites is a ‘development state’ with competent bureaucracy, which is insulated from partisan politics.
Unlike the Asian Tigers, Uganda has not attained a development state and any attempt to unroll the state into business will open doors for corruption. Suruma does not suggest anything new, but rather a return to the old model. He needs to be reminded that NRM is not a new government and should not be allowed to experiment on the people of Uganda any time it wishes to do so because it is expensive.
As a student of public management, I need to emphasise that public policy initiation, formulation and management is not a one man’s show. The economic strategy needs to be discussed widely by different stakeholders because of its far reaching implications to the economy.
The writer is a
management consultant