Magazine article New African

Wanted: More Investors: The Past 25 Years Have Seen Steady Economic Growth in Uganda, Even Though This Year Growth Has Dipped Greatly. the President Suggests That Ugandans Should Woo Investors as They Would a Bride

Magazine article New African

Wanted: More Investors: The Past 25 Years Have Seen Steady Economic Growth in Uganda, Even Though This Year Growth Has Dipped Greatly. the President Suggests That Ugandans Should Woo Investors as They Would a Bride

Article excerpt

RESIDENT MUSEVENI'S MUSINGS ON THE Ugandan economy can be hilarious at times, but they do have a ring of truth, even wisdom, about them. When he came to power 26 years ago, Uganda's economy was in the doldrums. Twenty years of political and social turmoil, climaxed by Idi Amin's disastrous expulsion of the business-owning Ugandan-Asians in 1972, had combined to cripple the economy. Inflation was rampant, hitting a high 240% in 1987, but by 1992 it was down to 42%, and in 2003 it stood at 5.1%.

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In 2000, Uganda became the first country to go under the Heavily Indebted Poor Country (HIPC) programme put in place by the IMF and World Bank to help struggling countries to resuscitate their economies. HIPC involved a set of economic measures to be followed by recipient countries leading to massive foreign debt relief at the completion stage. In all, Uganda had almost US$2bn of foreign debt written off, which enabled it to pay off all its foreign debts by 2006.

Launching itself from that platform, the country pushed for economic liberalisation, and with the return of a sizable number of the expelled Asians to rebuild their old industries and businesses and thus augment the tax-take of the government, the Ugandan Exchequer today boasts deep pockets, which has given the government the ability to put other economic basics in place, such as generating more electricity, building new roads and repairing old ones, which it could not do in the past.

It was from this background that President Museveni gave his 2012 State of the Nation Address on 7 June, a large part of which was concentrated on the economy. He gave "five reasons" for the recovery of the economy since 1986.

These are: (a) security of persons and property, and the professionalisation of the national army; (b) interest shown by the private sector, whose investments account for 77% of the total investments in the economy, including investments by Ugandan-Asians (who contribute 25-3o% of all investments); (c) macroeconomic stabilisation and liberalisation of the economy which has brought inflation under control and freed the private sector from bureaucratic interference; (d) the ever-expanding consumer demand in Uganda and in the East African Region; and (e) "some little support," as Museveni put it, "from development partners that enabled us to repair some roads and the Nalubaale power station."

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This gave the economy the fillip to grow consistently over the past two decades. In some years the growth rate was between 7% and 8%. However, in the 2011-2012 financial year, because of a slump in the global economy and the financial crisis sweeping Europe, and of course "some mistakes at home" (according to Museveni), Uganda's economy grew by only 3.2%, one of the lowest growth rates in the last quarter century. To make matters worse, inflation rose at the same time to 30%, though it is now down to 18%.

Although demand for Uganda's exports to Europe slumped in the 2011-12 financial year-cut flowers went down by 7o% and fish down by 4o%-it was balanced out by high demand in other markets, especially in the East African Region, where Ugandan exports (in goods and services) have been rising steadily over the years-from $654m in the 2009-10 financial year, to $873m in 2010-11, and $1.17bn in 2011-12.

The main drawbacks for the economy had been the lack of enough electricity to power industries and businesses (only 12% of the country is electrified), and the absence of good roads and other transportation links. But these problems are being solved. A new dam over the River Nile, called the Bujagali Dam (a public-private partnership project) has just come on stream. When fully operational, it will add 250MW to the national grid. At the moment, it is adding 150MW with only three of its turbines operational. …

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