We need transformation, not poverty eradication

Dec 11, 2007

FOR the last three months, I have been engaged in a consultancy assignment by the African Policy Forum in Addis Ababa, Ethiopia. The main task given to me was to analyse budgets of all African governments and establish how adequately they have financed poverty reduction strategies (PRSPs).

By Dr. Augustus Nuwagaba

FOR the last three months, I have been engaged in a consultancy assignment by the African Policy Forum in Addis Ababa, Ethiopia. The main task given to me was to analyse budgets of all African governments and establish how adequately they have financed poverty reduction strategies (PRSPs).

I have also been contracted by the United Nations Capital Development Fund (UNCDF) in New York, to analysis local economic development in Uganda as compared to other countries in the region.

In Uganda, the poverty reduction strategy is the Poverty Eradication Action Plan (PEAP), first developed in 1997. The PEAP has been reviewed twice, in 2000 and recently in 2004.

I have analysed the budget framework of all the 53 African countries and these are the findings:

The Poverty Eradication Strategy of most of these countries comprises a wide spectrum of interventions, which has made them less effective. For instance, Uganda’s PEAP has five pillars, each comprising about seven interventions. This means that under the PEAP, the Government must carry out 35 interventions simultaneously. All these cut across various sectors, ranging from health; education, water and sanitation, environment management; trade and industry; macro-economic stability, peace building, security, disaster management and conflict resolution, agriculture to youth and women development.

While all these interventions are good, it is worth noting that given our meagre resources, one cannot get much from them. My analysis in most African countries is that the PRSPs have spent significant resources, but have achieved little.

The reasons why most PRSPs have been less effective is that the national budget is so spread out that the impact of the funded interventions cannot be felt on the ground. In each sector, there is very little financial resource allocation. For instance, the agriculture sector received 3.0% of the national budget in the financial year 2006/2007, having “improved” from a paltry 1.6% in 1996/97 to 2.6% in 2001/2002. Similarly, the per capita expenditure on health in 2004/5 was $5! This compares with Mauritius with a $105 per capita expenditure on health.

The financing of the PEAP is done under the three-year budget framework, commonly called the Medium Term Expenditure Framework. This means that beyond the three years, no one knows where the finances of a particular activity like the Universal Primary Education (UPE) will come from, yet UPE cannot be planned based on a three-year period. This is because the UPE graduates need to proceed to secondary education, which requires one not only to plan for UPE, but also the post-UPE and tertiary education. It is because of such short-term planning that the education ministry encountered serious problems in financing Universal Secondary Education in 2007. Some money for classroom construction had to be diverted to cater for USE, which the Government hurriedly implemented. This is disjointed short-term planning as opposed to role out planning that is coherent and strategic. One country that has had an effective and strategic financing and budgeting approach is Mauritius.

The financing approach used in Mauritius is referred to as “flagging the economy”, where the country does “one thing at a time”. For example, between 1980-1990, Mauritius concentrated on training personnel in identified niche areas which has made the country the leading exporter of highly-skilled labour. Between 1990 and 1999, Mauritius concentrated on production and export of textiles. This focused on attracting direct foreign investment in textile production, which made Mauritius one of the leading countries in this sector. From 2000-to-date, Mauritius has concentrated and invested heavily in information and communication technology (ICT) with coast-to-coast wireless Internet access. Currently, wireless “hot spots” are accessed by 70% of the population. This synchronised strategic planning and ICT penetration has rapidly transformed the Mauritius economy from agriculture to the service sector, with very high levels of productivity. As a result, Mauritius’ economic performance during 2000-2004 has reduced unemployment to 7% with a Human Development Index (HDI) of 0.804. This ranks Mauritius as the 65th country out of 177 countries in the world on this development index. Mauritius, Seychelles (50th on HDI) and Lybia (56th on HDI) are the only African countries in the high HDI category.

On the other hand, Uganda is ranked 154th with an HDI of 0.505, having slid back 10 positions from being 145th in 2005 with an HDI of 0.581 (UNDP Human Development Report 2007). In Mauritius, 10% of the population lives below the poverty line.

This compares with Uganda where 31% of the population is below the poverty line and seven million people are living under chronic poverty (Chronic Poverty Report 2005; UBOS 2005)

Given the above illustration, while it is understood that Uganda’s PEAP has slightly reduced poverty levels (from 56% in the early 1990s to 31%), it has not been an effective tool for poverty eradication in Ugandan households. I wish to emphatically state that both the planning and financing strategy under PEAP have not adequately delivered the intended results. While it can correctly be argued that corruption and lack of accountability have seriously constrained the effectiveness of the strategy, equally constraining has been the planning and financing approach which aim at a broad range of interventions with little impact. I have, however, indicated that some countries have followed different planning and financing approaches which have delivered significant results. It is, therefore, necessary that we learn from what has worked in other countries, bearing in mind different peculiarities and pick the “best practices” that will deliver results. There is no need to re-invent the wheel. I propose the following:

-The Government should adopt the principle of concentrating its efforts in financing specific programmes instead of aiming at achieving everything at the same time.

You cannot achieve economic development with such hurried interventions aiming at attaining everything at once. Development cannot be achieved through snap shot interventions.

-It is recommended that the Government, through the Ministry of Finance and National Planning Authority (NPA) pursue what we call “Strategic Flagship Sector Approach” to planning and financing. Under this approach, the Government should adequately and effectively finance specifically identified (but few interventions) that can be benchmarks for economic development.

-The PEAP should be reviewed and directed at achieving a few things at a time, rather than the current 35 things which obviously will not be achieved under the current approach.

-There is need to change from hurrying the economy to strategic planning, with the right stimuli for transforming the economy from agriculture to industry and service sectors.

-I propose that we change PEAP to Strategic Plan for Transformation because all countries are now looking at transformation of their economies toward global competitiveness. They are no longer talking about poverty eradication, but transformation. Uganda should not remain in history talking about poverty eradication, while others have moved to transformation.

If people agree that this is the way to go, I will be available to help in providing all the necessary technical expertise to this process.


The writer is a Technical Consultant for the United Nations Capital Development Fund
(New York) and African Policy Forum (Addis Ababa, Ethiopia)

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