NRM govt can achieve a lot more success by doing a lot less, better

In his many chalk-and-blackboard lectures around the country in his early days in power, President Museveni loved to roll off examples of extravagant imports by the Tito Okello and Milton Obote regimes as examples of wealth erosion. Why, he often wondered, did they import furniture when they could buy it at home?

To build an integrated self-sustaining economy – one of the 10 points in the NRM programme – Uganda would have to build or rebuild local manufacturing capacity and stop exporting raw materials, he argued. 

This was the correct argument in 1986. Making stuff locally creates jobs and incomes, drives consumption of local inputs, services and products, and generates wealth.

It remains the correct argument today as President Museveni has repeatedly said, including in an article on taxation after meeting with striking traders last week. 

There has been progress in the four intervening decades. Supermarket shelves groan under the weight of locally produced salt, sugar, soap, milk and other consumer goods that were being imported at the time.

Higher-value goods like tiles, steel products and other manufactures are also made or locally assembled. As the American social anthropologist Warren Anderson Mathis noted at the turn of the millennium, “life ain’t great now, but it’s much improved”.

Things haven’t gotten as good as they should or could have, and certainly not for everyone. Part of the ‘why’ lies in simple human nature and the complacency (some might say erosion of empathy) that comes with success.

In the early days of abstemiousness, NRM cadres wore ‘Kaunda’ suits, drank their sugar-less tea out of metallic tumpeco mugs, and drove around in simple Nissan Laurels.

By the time expensive furniture was imported from Europe to match the lavishly redecorated State House ahead of the 2007 Commonwealth Heads of Government Meeting, executive tastes had been refined and seriously upgraded. That need not be a problem and as the economy grows some level of luxury is acceptable.

So what is the problem and why does this remain a matter of contention? The President’s article falls short on diagnosing why we continue importing goods that can be produced locally. 

Officially, government policy has been to create an enabling environment with stable macroeconomic fundamentals and deliver public goods such as security and infrastructure in which the private sector can thrive. Here outcomes have been mixed. There is more electricity generated, but the supply remains dirty and relatively expensive.

Plenty of roads have been built, especially outside Kampala, but key pieces of kit, including rail, cold storage and air cargo remain missing. Investments in cooling infrastructure, for instance, have sparked remarkable growth in the dairy sector but they weren’t fairly distributed.  

Government policy has been incongruent. Loopholes in tax exemption rules designed to attract investment have undermined collections and mostly benefitted assemblers, including some with very limited local raw material needs or knowledge transfer. 

A significant chunk of the taxes collected is then allocated to ghostly entities in a curiously opaque system of trying to pick winners in different sectors of the economy.

Billions handed to the hides and skins magnate Hassan Basajjabalaba, to the Sri Lankan snake oil salesmen at Tri-Star, or to the alchemist’s attempt to turn bananas into gold dust all seem to have evaporated.

This has not stopped ongoing efforts to throw taxpayer money at one (out of 16) sugar factory, to a phantom hospital on the outskirts of Kampala, to a syndicate of clever coffee cons, and to a litany of failed or failing ventures. 

One revolutionary idea is for the government to stop trying to pick winners and focus, instead, on allowing a fair and competitive marketplace.

Many entrepreneurs complain about the cost of doing business including the costs of compliance and enforcing contracts, as well as the low purchasing power.  

Most complaints, however, are about the cost of capital. With average financing costs in the high teenage digits, and short-term, many entrepreneurs seek the safety of trade instead of the headache of manufacturing.  

Here is how the government can help. It can start by living within its means, downsizing, reduce borrowing and cut the tax rate to spur consumption and investment.

Merely not giving out our money to ‘investors’ would be a good start. If it feels particularly generous it can also build things on time, enforce the rule of law, and invest in better health and education outcomes.

This would create more aggregate demand, better-skilled factory workers, cheaper and more efficient public goods, and a compelling reason for investors, local and foreign, to build stuff here. Working hard is great, but we should try to do less, better.

Mr Kalinaki is a journalist and  poor man’s freedom fighter. 
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