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Why Uganda should process raw materials into finished products
A woman purchases hibiscus powder during an expo of Women in Business in Kampala recently. Uganda must process her raw materials into finished products in order to survive amidst the current fierce global competition. PHOTO BY MICHAEL KAKUMIRIZI
What you need to know:
Economist Edward Baliddawa explains how industrialisation will help Uganda attain economic growth instead of subsistence agriculture which is practised by majority of the population.
I was encouraged by the President’s pronouncement that this year, government will minimise Uganda’s dependence on foreign imports.
As we digest the President’s message in which he outlined what lies ahead for Uganda, there is an economic juxtaposed dilemma we need to address.
Uganda is mainly an agricultural country, whose biggest population (80 per cent) live in rural areas and depend on subsistence agriculture.
Consequently, many economic and policy experts have urged government to increase its annual budget allocation to for meaningful social economic transformation to take place from the current 7 per cent to 15 per cent of Gross Domestic Product as recommended by the Maputo Declaration of 2003.
Although the arguments for agriculture being the main engine for Uganda’s economic growth may sound convincing, the global economic historical facts don’t support that line of argument.
We should therefore ask: Can subsistence agriculture that still depends on the whims of mother nature and is endemic with all sorts of challenges including the disoriented land tenure system, unabated land fragmentation, lack of extension services and skewed structural direction be relied on to create the desired economic transformation?
Subsistence agriculture in its current form won’t attain us the economic growth for the 21st century economy.
Records show that world over, there is no country that has attained meaningful economic transformation through agriculture.
It never worked even in Canada, a country that has more fertile land acreage per capita than Uganda. (Size of Canada – 9,985 million km2, Canada’s Agriculture Productivity was $91,291 in 2016 compared to Uganda’s Agricultural Productivity of $460 in 2015). Canada has the highest fertile land acreage per capita in the world (Agricultural land in Sq. km per capita in Canada was 20.25 per 1,000 people compared to Uganda’s 4.23 per 1,000 people in 2007 respectively).
Canada had to rely on industrialisation for its economic transformation just like many other countries.
Vietnam, which for decades depended on agriculture, has shifted its economic focus from experimenting with agriculture to industrialisation and modernisation.
Although they have all the technology in Canada, they have more land and water than Uganda. Farmers in Canada also still receive government subsidies to remain in agricultural production.
Therefore, agriculture must only be regarded as a raw material source for value addition and a strategic source for food security but not for the economic trans-formation of Uganda!
Our best bet remains on industrialisation. We must exploit and leverage on the abundant resources that God has bestowed upon us. Ugandans need to start mainstreaming production of vital inputs to industrialise the economy. All countries that have made economic breakthrough have done so by either exploiting and or processing into semi-finished or finished products of the various raw materials such as coal, iron ore, tin, aluminum, phosphates, copper and tin, which in essence spurred those economies to industrialisation, a pre-requisite for meaningful economic social transformation.
According to reports, Uganda has large deposits of various minerals including large tonnages of aluminous clays which are highly enriched in rare earths (REE) such as Yttrium, Scandium and Gallium.
The global demand for rare earths has increased as more uses for these elements are found. Today, there are hundreds of uses for REE, ranging from high tech (lasers, camera lenses, computer memory modules, x-ray machines), energy (batteries, lamps, superconductors) and industrial (aerospace, caustic cleaning agents, specialised glass) applications.
It is not only Busoga region that is host to large deposits of minerals in this country. Karamoja is reported to have abundant deposits of limestone, first class marbles stones and gold.
Bukedi and Busia are endowed with gold deposits which the communities are extracting locally using crude methods that are hazardous to both residents and the environment.
Reports show that mineral deposits in Busoga and Sukulu in Tororo are worth $800b, almost 16 times more than what is expected from the oil discoveries so far in the Albertine Graben.
Is it therefore, not paradoxical that regions reported to host the country’s potential economic trolls are currently rated as the poorest?
The Uganda National Household Survey 2016/17 report by the Uganda Bureau of Statistics (Ubos) on poverty cites the worst hit regions as Karamoja, with 61 per cent of the people categorised as income poor, followed by Bukedi with 48 per cent and Busoga with 42 per cent.
It should be a shame to leaders to continue looking at only peripheral issues and not address the crisis of income and jobs that is facing our people.
Recently, the UK government through its development arm Department for International Development has committed an additional $37m (about Shs133.7b) to address malnutrition concerns in the Karamoja sub-region. While this gesture from our donors/development partners is applauded, is this the best that can be done for Karamoja?
But why aren’t the people of Karamoja empowered with jobs and income to address their nutrition issues? Imagine the economic impact for not only Karamoja but also Uganda’s economy, if that amount of money was geared towards processing minerals resources in Karamoja.
Nigerian businessman Aliko Dangote’s Cement Consortium operates in 10 African countries including Zambia and Tanzania. Media reports say the prices of cement both in Zambia and Tanzania are going down by 50 per cent as a result of Dangote cement manufacturing operations in those countries.
So, why are cement prices in Uganda still high yet there are large deposits of limestone in Karamoja, Tororo and Hima?
What if we marshaled the Shs133 billion to not only exploit this limestone/ cement, marble and gold in Karamoja but also construct the long-awaited railway line to evacuate these resources and products.
With the ongoing electrification in Karamoja, exploitation of these resources shouldn’t be a farfetched aspiration. Small scale and often clandestine mining of gold and other minerals should stop because it doesn’t help the country and the people of Karamoja as a whole.
Mineral processing
Similarly, why hasn’t serious exploitation and processing of those rear earth minerals in Busoga started so that youth get jobs?
It is reported that the prospectors/investors who are trying to do some mineral exploita-tion of the rare earth minerals in Makuutu in Bugweri, Busoga just don’t have enough financial muscle to undertake any meaningful operation. However, given the high re-turns associated with rare earth minerals, government should source and provide ven-ture capital in not only the Matuuku rear earth exploitation, but also other viable minerals places in the rest of country.
Policy and decision makers need to establish mechanisms that can permit the exploitation of our resources and the processing of those raw materials into industrial products that can be used not only locally, but also be exported for the country to earn foreign exchange and create jobs.
We must be export-oriented to survive amidst the current fierce global competition.
The big question, however, is: How do we get there? Agriculture in its present subsistence form will not deliver us. The notion that all economic activities in this country should be left to the private sector without critical government support save for attracting foreign investors needs to be revisited.
The private sector is still small and under-financed to undertake any meaningful, size-able and sustainable industrial production.
Lessons from china
We need to take lessons from China, a world economic giant. China pursues a deliberate protectionist policy coupled with efforts to prop-up its industries both operating locally in China and outside the country.
It has done this through a number of ways including taxation, restrictions on certain imports and ensuring that the Chinese entrepreneurs access cheap financing and technical know-how, factors that contribute to the Chinese products being much cheaper both locally and internationally for the export market.
Edward Baliddawa is an economist.
