ARIAKA

UGANDA SURVIVES WORLD ECONOMIC MELT DOWN

2009 is the year that was predicted to be painful to Uganda.  When Off shore investors withdrew over USD 400 million last year, the pressure on the Uganda shillings was immediate.  The dollar appreciated to a new high of USD/Shs 2300.  It was unprecedented, many observers quickly pointed to the eminent effect of the global economic down turn on the country.

Indeed, many companies took note and scaled down development plans and took a cautious spending approach.  We saw in the new year; marketing budgets were sliced, some corporates cut jobs while many companies stopped hiring altogether.

However, the year saw an interesting turn of events as bank of Uganda’s Deputy Governor, Patrick Kabakama would tell us.  That the terms of trade was improving.  In fact we in the an unlikely surplus of USD 2.7 billion.  Uganda did roaring business exporting to new markets in Southern Sudan, and reaping from the misfortune that befell Kenya after the 2007 elections.  In Kenya, agricultural production in Western parts of the country ground to a trickle as the country reeled from post-election violence.

The country had another shocker. This time the climate was harsh.  Failing rains,  meant drying riverbeds, declining arability of land and we saw, the grimness of it all in the death at city abbatoir in Nairobi, of emaciated livestock.

That sad story has a flip side.  In all these forlorn picture, Uganda is thriving.  The weather has been nicer to us, we produced and now fully blessed with alluring markets in the East and North of our border.

Southern Sudan is home to 8.6  million (April 2008 Census figures) mostly tall and huge people. Certainly they have a huge appetite that needs a constant flow of food.  Unfortunately, the southern  government is new and the institutions required for production is undeveloped

That is  sweet music to Uganda, as the country cashed in on the kill, exporting thousands upon thousands of maize and other farm produce to levels the country has never witnessed before.

In the midst of the worst economic crisis in four decades, Uganda finds a cushion in the unlikely of places.   The  market forces unfortunately meant, that produce was moving away, creating a huge void in country where the prices surged to new heights as demand outstripped supply.  

Many Ugandans had now to adjust to this new reality.  Those with comfortable incomes may not have felt this surge in the cost of living, many adjusted to it.  In the words of Professor John Sender of Cambridge University, there was no marked adjustment in workers earning in the wake of percieved economic hardships. 

He echoes the common feeling by many employers who took a cautious spending streak, certainly increasing workers pay to match the soaring inflatuion is not a wise thing to do. 

The good professor is the author of a report commissioned by by United Nations International Labour Organisation in conjunction with Uganda’s ministry of Gender, Labour and Community Services,  on the effects of Global Economic economic crisis on Uganda. He did it with Erik Von Uexkull, of ILO headquarter, Trade department.

The report makes a sombre reading as it highlights the fate of the most vulnerable and poor of the house holds in Uganda in the wake of this price reality.  It says poor households spend over 60% of their income on food.  With employers not adjusting wages to factor in the food inflation, the real wages of this segment of society has dropped as they increasingly are having reducing purchasing power.

The increase in the export of food stuffs and to an extent other goods, albeit through informal trading groups meant the country would earn foreign exchange that would fill the coffers of Bank of Uganda, but deprive people of the means to afford a food.  Of course the biggest losers in all these are the girl children, who now must stop school because their parents would rather have the boys in schools or no child at all, owing to rising cost of living.    Many girls are roundly married off at the earliest.

Is this the effect of the global economic down turn on the country?  Of course not.  It is well known that the world is experiencing the effects of a shrinking world trade, that was sparked off on Wall street by hedge funds where a combination of  stock market deregualtion and greed by industry players created a huge financial bubble that burst.

Uganda has the least of linkages with that system. In fact I recall NSSF as a few of Uganda’s presence on that market.  Therefore, we survived the  full thrust of the economic down turn on account of this minimal engagement.  Nevertheless, we suffered from secondary effects, on the fear that the country might respond by tightening forex controls.  

We saw that in the panic by off shore investors, who withdrew their investments.  According to the deputy Governor, they soon realised their folly and are returning the money.  Where else in the world is Return on Investment sweeter, than in Africa, than in Uganda. 

We will say therefore, that what we have seen in inflation, as the result of good harvest from our produce.  Unfortunately, we are simply unprepared to cash in on this good fortune meaningfully, owing to our low capacity.    We need to restructure our agricultural production.  Perhaps, the land bill is a good starting point, as distortions in land ownership is cleaned. We would then respond more vigourously and profitably.

In the report, Professor John did say that Uganda appeared to have survived the effects of global economic crisis.  However, many labour related issues came to the fore.  The lack of labour statistics, the lack of a minimum wage etc., to which a number of suggestions were put forth.

A comprehensive national employment policy is top on the agenda.  All the participants at the workshop, where the report was launched by Hon. Eriya Kategeya at Protea hotel last week, were unanimous that this policy is long overdue and that government is already working with stakeholders to make it a reality.