Prime
Power subsidy removal won’t help poor
Bujagali employees take journalists around the new turbine, which once switched on, will ensure that power tariffs come down. PHOTO BY NELSON WESONGA
What you need to know:
A unit used for household lighting, ironing, listening to radio, and watching television increased from Shs385.6 to Shs524 per unit.
Currently, there are intellectuals who erroneously defend the increment of electricity tariffs, claiming that the move is in the interests of the poor in Uganda. Notably among them is Andrew Mwenda in The Independent of January 13 – 19, 2012. He argues that subsidies on electricity have been helping the “tiny minority of upper and middle incomes in alliance with big businesses”. To him, this is because only 350,000 households consume electricity while there are 450,000 connected to the national grid, of which 2000 are large and medium scale enterprises; 90,000 small businesses.
To argue that because currently there a few connections to the national grid while a small number of household in Uganda consume electricity is to simplistically ignore the input of electric power in industrial and consequently national development, both to day and in the future, as well as its impact on the prices of locally produced goods. Using examples of some industries and large establishments that do not use local materials, like Century Bottling Company and MTN, Mwenda attempts to convince unsuspecting readers that actually the increase of electricity tariffs will not substantially affect the economy.
However, this is to miss the point that the multinational corporations he cites, because they do not add much value to their products while being processed in the country, the increment of electricity tariffs does not significantly affect them. This is in sharp contrast with Hima cement factory, he also cites, that will be significantly affected because it largely uses local raw materials in its production processes and therefore adds much value to its product in Uganda. With the increment in electricity tariffs, the factory will be out-competed by Bamburi imported cement from Kenya, as Mwenda admits.
The above serves as an example of how our local industries, using local raw materials, will be affected and eventually wiped out. Possible the list of the factories to be affected will include Uganda Clays, which uses local clay as a raw material and as result employs a significant number of employees, to be out-competed by foreign imported tile-like iron sheets. When our local industries close, then unemployment situation becomes worse.
While Mwenda simplistically thinks that the increment in electricity tariffs will affect a tiny minority, the truth is that it will affect all the people in the country not only in the present but also in the future because local industrialisation is affected as illustrated above.
Those feeling immediate effect
Moreover, there are local small-scale industries, like maize milling, whose flour is consumed by mainly the poor, both in urban and rural areas, and more so by pupils and students in schools. The increment of electricity tariffs will increase the price of maize-milling, consequently increasing the price of maize flour, which price will be pushed to the poor consumers.
Alternatively, if the small-scale industries collapse as a result of failing to sell their flour in large quantities because of the increased price, the maize farmers in rural areas will lose market for their produce. This will hamper growth in agricultural sector, thereby negatively affecting the development of the country. On the other hand, maize-milling machines will be forced to use diesel. This will not only increase import bill thereby worsening the current Uganda’s bad balance of trade position but will also increase air pollution thereby contributing to the increase in global warming with its deleterious environmental consequences.
To Mwenda, some of the local industries will be affected by the increment in electricity tariffs because it is inefficient. The issue of efficiency under the free competition ideology of neo-liberalism cannot be taken for granted under all circumstances. It is preached by the developed countries abroad while practising protectionism at home. For instance, while millions of smallholder farmers in the third world have to survive on less than $400 a year in total income, they are competing against American and European farmers who respectively receive an average of $ 21,000 and $ 16,000 a year in subsidies.
Consequently, the USA and the EU account for around half of all wheat exports at respectively prices 46 per cent and 34 per cent below costs of production; the US accounts for more than one-half of all maize exports at prices one-fifth below the costs of production; the EU is the world’s largest export of skimmed-milk at prices one-half of the costs of production; and the EU is the world’s largest export of white sugar at only one quarter of production costs (Oxfam, 2002:112).
It may be argued that the practice of giving subsidies is a bad idea because some European countries are currently implementing austerity measures to fix their economies. However, it should be observed that it is not the subsidies that have caused economic problems in Europe but rather the system of capitalism facing its usual cyclic problems.
Otherwise, why is Europe turning to China for a bailout which, to promote economic growth, gives subsidies to producers, competed for by the local governments. In addition, China has the lowest interests rates, propped up by the government, to encourage investments within the economy (BBC, Business Daily, 2011).
To those who believe in the ideology of free competition leading to efficiency should learn from the insights of German political economist, in the names of Friedrick List, contained in his classic, The National System of Political Economy, (List, 19885. In line with line with his argument, the ideology of economic liberalism does not put into consideration the peculiarities of nations; it assumes that all countries and individuals in the world are at the same level of development and have acquired the same capacity to equally compete for resources and markets for development.
Yet, there is a “significant difference between the interests of a “cosmopolitical” (that is, a “global”) economy, and those of the national economy” (in Kiiza, 2002:3). Accordingly free trade is the natural view of dominant global forces to prevent competitors from emerging abroad (Ibid).
Therefore, depending on the circumstances and nationalistic considerations, a country has to subsidise some of the costs (like electricity costs in Uganda) to promote national development. For that it was a bad idea for the government to remove some subsidies on electricity.
Mwenda blames the elite for being selfish by advocating for the continued existence of subsidies on electricity and claims that the poor do not have the voice and is actually against the current democratic arrangement because it is opposed to the increment of electricity tariffs.
Where does he get the high moral order to talk on behalf of the poor when currently is living a lifestyle above the average rich in Uganda. Ostensibly speaking on behalf of the poor, he is actually defending the interests of the dominant global forces, which bankroll his fabulous lifestyle at the expense of national interests.
