Evolution of Uganda’s Economy and the Road to Middle Income Status

By Hannah Nyombi

 “Middle Income Status by 2020”, is a phrase that has been reiterated since H.E. Yoweri Kaguta Museveni was sworn in earlier this year on 12th May after successfully winning the 2016 elections. It was stated during his state of the nation address on 31st May, 2016 and further emphasized during his National Budget speech. It is by far, his superlative objective for this new term. Contrary to public perception this is a phenomenon that can be achieved if there is consistency, determination and hard-work. To obtain the middle income status, a country’s Gross National Income per capita has to be $940 which means the average citizen would have to be earning about UGX3.1m per year. Uganda has been on a long road to economic stability and growth and even though we still have a long road ahead the middle income status level is finally obtainable.

Since pre-colonial times, Uganda has always been dependant on agriculture production. Throughout the pre-colonial era, it was predominantly peasant agricultural production for subsistence use and barter trade however, the Europeans came with many improvements that changed the face of Uganda’s economic future and introduced commercial farming where farming was practiced for sale in the market at a profit. They introduced crops

like cotton, tea, coffee. By the 1950’s, coffee replaced cotton as the Uganda’s principle export and contributed to substantial economic growth coupled with the growing industrial sector which promoted the agricultural sector because these crops were sent to these factories to be further processed leading to the expansion of the agriculture in Uganda.

At the dawn of independence, Uganda was finding footing economically. In the years following independence, with a population growth of 2.5% and a promising Gross Domestic Product, Uganda’s economy was undergoing rapid economic and political growth. There were a number of international investors especially Indians that had businesses, factories, plantations all over the country, they brought new machinery for the factories in Uganda, parts of the country like Jinja and Entebbe developed speedily with the construction of roads, employment opportunities, tourism attractions for example the Source of the River Nile.

But during Milton Obote’s presidency, between 1962 -1971 there was harassment of Ugandans, shortage of food due to harassment of the Indians who were the suppliers of basic needs in the economy; there was a plunge in the power of the Ugandan shilling and widespread corruption. This political instability contributed greatly to the depreciation of the economy.

Idi Amin’s coup of Obote’s government was greatly welcomed by most of the Ugandans because he was seen as a savior who was going to bring change to the standard of living of all Ugandans. There was an inception of hope for the economy with the coming of this coup. Unfortunately in the wake of the much publicized atrocities during Idi Amin’s time, the economy was doomed.

Although the government envisioned annual economic growth rates of about 5.6 percent in the early 1970s subsistence sector of the economy. Uganda’s foreign policy under Amin’s leadership greatly declined so this had a negative effect on the progress of the economy especially because sanctions were imposed on Uganda, decay in public service, declining agricultural productivity. In a bid to gain back his popularity, Idi Amin turned his efforts on intensifying the Indophobia that Milton Obote had incepted. He spearheaded propaganda of “dukawallas” slur. He encouraged tendencies to negative reactions towards people of Indian descent along with their culture, and habits. On 4th August, 1972, Amin gave directives to all the Asians living in Uganda, that they had 90 days to evacuate the country.

“We are determined to make the ordinary Ugandan master of his own destiny, and above all to see that he enjoys the wealth of his country. Out deliberate policy is to transfer the economic control of Uganda into the hands of Ugandans for the first time in our country’s history,” said Idi Amin Dada. By this time, Asians were involved in most of Uganda’s investments mostly in banking and vestrian businesses and contributed 1% of Uganda’s population. On the successful expulsion of the Indians, their businesses were disseminated to underskilled Ugandans that run the businesses down in the long run.

To make matters worse, the disbandment of the East African Community in 1977 was a big step backwards for the economy because one of the core reasons for its very existence was for economic growth and harmony of Uganda, Kenya and Tanzania. By the end of Amin’s leadership, the economy had notably declined (1971 – 1979).

The economic and political destruction of the Amin years contributed to a decline in earnings by 14.8 percent between 1978 and 1980. By the time Amin had fled from Uganda in 1979, the nation’s GDP measured only 80% of the 1970 percentage. Industrial output sharply declined, equipment, spare parts, and raw materials became scarce.

However between 1981 and 1983, the country experienced a 17.3% growth rate, which was mostly contributed by the agricultural sector. There was hardly any progress in the manufacturing sector. The renewed political crisis in the early 1980’s led to negative growth rates of 4.2 percent in 1984, 1.5 percent in 1985, and 2.3 percent in 1986.

The economic decline stagnated when H.E. President Yoweri Kaguta Museveni came to power in 1986. By 1987, the GDP had risen by 4.5% from 1986’s level. Due to political stability, agricultural and factory production increased. In 1988 the GDP was steadily rising to a whopping 7.2% with

substantial improvements to the manufacturing sector and the coffee production. The economic growth in Uganda was at a steady progress upto- date. Due to the political stability, absence of civil wars, the tourism industry has greatly improved, more factories have been constructed with state of the art machinery, roads constructed, foreign investors attracted to the country, Asians came back to reclaim their businesses.

Given these 15 directives that the President presented his cabinet with are precisely followed through with. These include;

  • Reducing the price of electricity from 11 US Dollar cents to 6.
  • Begin construction of the Standard Guage Railway.
  • Build 22 industrial parks within the next 5 years.
  • Uganda Investment Authority must be able to license businesses within 2 working days.
  • Zero tolerance to corruption.
  • Regulation must improve for instance for licensing sugar factories, selling unprocessed milk.
  • 11 interventions in agriculture including: commercial farming, linking with research institutions, use of fertilizers, food processing, credit from Uganda Development Bank, Mechanisation.

 

Oil companies must urgently acquire production licenses.

  • Modernise mineral testing and streamline and regulate artisanal mining.
  • Stop damaging of environment by dealing with offenders.
  • Service delivery must improve in all sectors.
  • Deal with land ownership problems so that bibanja holders can become title holders.
  • Address problems of armed forces such as housing.
  • Government to get a national airline within the next five years.
  • Pay the veterans their gratuities. It has been a long road for Uganda to get to this level, the first few years after independence gave us a peek into the future of the country. Despite all its trials Uganda has always managed to come out of the rubble and emerge victorious. It is important to take advantage of the current political stability and take measures that will enable us to plunge into the middle income status.

 

Agricultture is still Uganda’s leading economic activities in Uganda

 

 

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