Museveni must solve these and more issues in his new term  

Now that President Museveni has been returned, he re-inherits a raft of demands and challenges that have remained troublesome throughout his 35-fiver rule.

In the more than three decades under his rule, much has been achieved but the mounting challenges amid a chaotic pandemic, presents the NRM ruling party with a mountain to climb to achieve much of what has been promised in the next five years.

However, the most immediate will be dealing with Covid-19 that has not only ravaged the economy, but has presented long term challenges that will take age to be worked on. 

Therefore, today we look at what President Museveni has inherited and what he needs to do to make a difference.

Middle income question

In the run-up to the 2016 elections, somewhere in 2015, President Museveni told Ugandans he would drive the country to middle income. 

However, five years later, Uganda is still struggling to attain middle income status and this time round, as he sought his six five-year term, President Museveni seemed to have muted that conversation, shifting to new promises with less talk on how the country was performing in regard to achieving middle income.

World Bank ranks middle income countries as those whose income per person averages between $1,000 and $12,600 

According to the National Planning Authority, Uganda had been projected to have attained middle income status by close of last year. However, this never happened.  

So the dream to achieve the per capita income, also known as income per person, in the range of $1,000 (about Shs3m) continues. Currently Uganda’s per capita income is just $733.

Tackling Covid-19 

Attaining middle income status is just one of the so many things that President has, well for the second time, inherited having eluded him in his fifth term due to end in May.

Well, it will definitely be a hard ball, but his resilience and workmanship will be tested by the long term disruptions due to Covid-19. 

On March 11 last year, the World Health Organisation declared Covid-19 a global pandemic, projected to have devastating effects on both local and the global economy.

Subsequently, governments across the globe, including Uganda, introduced measures to counter the spread of Covid-19.

However, the weak position of many economies across the globe, especially in Africa and particularly in Uganda, could not support growth thus exposing a number of sectors to sever stress.

In Uganda, the services sector, informal trade, transport, retail and tourism, among others, have been the most ravaged, requiring billions to rebuild.

Experts have projected that Covid-19 will worsen Uganda’s position with the rest of the world, as inflows from foreign direct investments, tourism, remittances, and exports sharply decline.

The effects of Covid-19, therefore, are also expected to worsen Uganda’s poverty levels, with at least 2.6 million people expected to slip into poverty in addition to the eight million, who had been below the poverty line pre-Covid-19.

Therefore, how quickly and precisely President Museveni deals with Covid-19 will determine the direction of the country in his next five-year term.

The economy

The economy had already been ravaged but was worsened by Covid-19 related effects. Uganda is estimated to have grown by 3.1 per cent by June 30, 2020, slower than the of 5.4 per cent five-year average.

A report by the Economic Policy Research Centre, paints a proper picture, noting that almost all sectors of the economy have, in some way or the other, felt the brunt of Covid-19.  Small and medium enterprises have been the worst hit, according to the report with large declines reported in demand and cash flow. 

This  is  not  surprising  since  most  of  the  micro  and  small  businesses  halted   operation  due to inability to implement standard operating  procedures such as the provision of on-site accommodation for employees.

Another survey designed and conducted by the United Capital Development Fund and College of Business and Management Sciences of Makerere University, shows that the future of the private sector and its contribution to economic growth has become uncertain.

In response to Covid-19, many countries have introduced partial or complete lockdowns limiting movement across borders and within countries.

Uganda started feeling the impact of Covid-19 even before the first case was reported.

Industries such as tourism and trading, were, among the first to suffer as a result of falling international passenger arrivals and movement of goods.

Unemployment

Available research, among them done by EPRC, projects that in the event that Covid-19 persists, about 3.8 million jobs will be shed temporarily while 0.6 million permanently.

Over 75 per cent of employees projected to lose jobs permanently are in the services sector.

The latest National Labour Force Survey found that the majority of youth between 18 and 30 years are unemployed with only or less than 15 per cent holding formal jobs.

This is made worse by the lack of any contribution to the economy with on 31 per cent of Ugandans involved in the monetised economy. Therefore, this is an area that will, just like in the last 20 year of President Museveni’ rule, continue to present serious challenges.

Public debt

Total   public   debt   as   of December   2019 stood at $ 13.3b with   external   debt accounting for $8.59b or 64.4 per cent while domestic debt stood at $ 4.74b or 35.6 per cent of the total debt stock. 

This is a troublesome area that is expected to present serious challenges for Mr Museveni in his new term.

Julius Mishambi Kapwepwe, a development aid policy specialist, says Covid-19 has seen government increase borrowing with about 16 loans acquired in the name of interventions between January and August last year. 

The loans exclude grants and supplementary budgets at the end of 2019/20 financial year and according to Kapwepwe, there is need for proper computation of the debt burden and impact on the economy.

Government, Kapwepwe says, can borrow but the money must be used on productive sectors with a good return on investment or social good.

Import substitution

The Import Bill of Uganda averages $7b per annum. Sadly, Uganda is stuck as a net importer, importing products that can be produced in the country.  However, Covid-19 has presented Uganda with lessons and the need for export substation is now more apparent.

Regional trade

For  the  first  time in decades,  Uganda  had  a  surplus or favourable  balance  of  trade  with  Kenya  in  the   2017/18 Financial  Year  of  $ 122.78m (exports  of $628.47m against  imports  of $505.7m) and also registered a record high trade balance in the EAC region of $ 413.86m (exports of $1.2b against imports of $806.77m, in the same period.

However, lately Uganda is becoming a target of its own success with increasing cases of non-tariff barriers. As we speak, blockades on Uganda’s exports to Kenya, Tanzania and Rwanda have been running yet the three countries continue to trade in Uganda freely.

Therefore, in his sixth term, President Museveni must solve the trade impasses with regional neighbours to save exporters from losses.

The Covid-19 factor                         

Covid-19, according to available data has badly ravaged a number of sectors but the most affected include the services sector, informal trade, transport, retail and tourism, among others.

Corruption and illicit financial flows

So much has been said. But so little has been said about revenue mobilisation. 

Therefore, enforcement of tax compliance, which has been improving will be a key area of focus. 

Uganda Revenue Authority (URA) is struggling on how to close leakages with a lot of technological innovations, but can only do so little in a country where multinational companies are domiciled in tax havens where there is little or no tax liabilities.  

Besides providing safe havens for illicit financial flows, tax havens also share limited or no financial information with foreign tax authorities.

The situation has now further been complicated with emergence of global tech corporations such as Facebook, Google and Amazon, all largely operating in virtual spaces.

As a result, URA has found itself in unchartered waters, struggling to find ways through which it can tax digital platforms operating virtually.

Some of the outflows being perpetuated by multinational companies include illicit capital flight, tax and commercial practices such as mis-invoicing of trade shipments and criminal activities such as illegal markets, corruption or theft.

Therefore, in his new term Mr Museveni must stop the bleeding as well as tackle corruption that has become so deep-rooted.  

For example, it is still puzzling why starting a business must take days, involving presentation of large volumes of documents and payments, which encourages corruption in one way or the other.

According to  the  Enterprise  Survey  on  Uganda,  more  than  50 per cent  of  the  companies  surveyed  expect  to  give  gifts  in  order to “get things done”.

Uganda remains one of the most corrupt country, standing at 149 position out of 175 countries, according to the 2018 Corruption Perceptions Index report by Transparency International.

Therefore, in his new term, President Museveni must tackle corruption.