Why economic impunity needs to be tackled head on

By Jim Mugunga

A few days before the Budget Speech, the World Bank (WB) released its 7th Uganda Economic Update, and the International Monetary Fund (IMF) presented its Sub-Saharan Africa Regional Economic Outlook.

All three reports recognized that Uganda's economy, just like others in the region, grew much slower than has been the case over the past years.

There are documented contributing factors to this, among them the lower oil and commodity prices on the international market. Such commodities as coffee, cocoa, tea, tobacco, cotton and minerals like copper, gold and iron ore traded at the lowest ever.

The majority of African countries, some with larger economies than Uganda, namely Angola and Nigeria which almost depend a lot on such exports were most hit. Prolonged dry spells and famine in other countries such as Zambia, Zimbabwe and Malawi made matters worse.

Of course there is the impact of China. A few years ago this aggressively industrializing and manufacturing giant had the biggest of appetite for mineral commodities. It made unprecedented acquisitions worldwide, boosted by easy pickings in Africa.

Countries south and west of Uganda are reported to have literally handed over their entire mineral sector(s) in exchange for ‘modern' infrastructure projects. Whether the infrastructure secured was necessary or the correct exchange for the value is a debate for another day.

What is certain is that in most of the affected countries, national discourse is about rethinking, renegotiation and in extreme cases, compensation and renationalization of the mining interests as nationals wake up to the realities of bad deals of yesteryears.

In addition, China is over supplied and now looking to ship back the excess stocks cheaply.

The other giant, USA is not spared. We are aware of whole cities filing for bankruptcy and traditional brand companies screaming out for bailouts. A bit of recovery under Obama is recorded but the damage of the recession will take years to fix.

The biggest spending block and our sizeable trading partner, Europe, has limited resources as it recovers from the worst financial slump in recent decades. Europe is besieged by a multitude of other issues ranging from home grown revolts due to unemployment, to the influx of migrants.

Uganda is not an island and hence not immune to the negative impacts of such world happenings. Hon. Matiya Kasaija noted that Uganda's economy has grown by 4.6 percent slightly lower than the World Bank target of 5.4 percent. The slow growth is partly shaped by the global economic issues cited above.

Although the signs manifest differently depending on the country, Uganda is affected by the fall in international commodity prices, stagnation in economic activity as a result of the election cycle, slow private sector growth due to high interest rates, overall inflation and depreciation of the Shilling.

Aware that the elections are over and mindful that government deliberately mainstreamed infrastructure, has heavily invested and that the budget commits to increased investment in the sector to promote private sector growth; we should soon begin to reap the benefits and clap in anticipation of better times all factors remaining constant.

The projections in the national budget that the economy will grow at 5.5 percent next financial year and the GDP at 6.3 percent over the medium term, are therefore not farfetched.

The Permanent Secretary and Secretary to the Treasury, Keith Muhakanizi however advocates for caution as the country pushes for infrastructure.

"Key infrastructure that will not blow up the treasury must be carefully planned and feasible. Such infrastructure is necessary as it contributes to tangible productivity however it should be within the National Development Plan, and not driven by the urge to tick off the political-wish list," Muhakanizi advocates.

His position is shared by the World Bank and the IMF. The World Bank recently commended government's extensive infrastructure development programme that "should boost economic activity even if the global economy remains sluggish."

However, the Country Manager, Christina Calvo, called for an investment strategy that will reap the estimated return on public investments for Uganda. She pointed out that "for every shilling that government invests, Uganda reaps less than 1 shilling in return … other countries reap 4 to 6 times."  

So, we have to candidly look on the inside to better our Public Investments Management Systems (PIMs). For example, would the current PIM stand against what is on record relating to the Northern by-pass project? Are we able to respond in the affirmative to questions such as whether it improved services; whether we have dollar value, whether it increased growth and productivity or indeed alleviated congestion and created employment?

Institutional streamlining and strengthening, standardization and a robust legal and regulatory framework are also overdue. The government is pushing through with the restructuring of ministries, departments and local governments to enhance efficiency.

A commitment to avoid costly duplicity has been made firm, and wasteful expenditure is being minimized with trips, workshops and seminars as the starting point. The above baby steps are correct ones in the right direction.

There are other encumbrances that often pass un-quantified yet they greatly cripple/hinder investments or delivery and are priced raising by far the cost of infrastructure in Uganda. For example, un-predictable technical and oversight environment is an obvious risk and hence a cost yet remains almost off the radar.

There should be a streamlined approach to approving investments and a clearer role for the legislature informed more by the oversight mandate as opposed to outright suspicion and zeal to overrule technocrats. The overlapping nature of reviews, approvals, oversight, investigations etc also make our country non-competitive.

Broadly nevertheless, in spelling out measures to tackle impunity head on, the budget speech was in total agreement with the World Bank and IMF.

We cannot afford to do business as usual. It sounded the warning bells and the President in his address, the war drums.

Writer is the spokesperson of the Ministry of Finance and Economic Development