Introduction
In a recent book entitled Uganda's economic reforms: insider accounts (Kuteesa et al. 2010), Uganda's economic performance is portrayed as a role model in reducing poverty, to be emulated by other African countries because of its economic reforms. This paper is a critique of two chapters in the book, one by Whitworth and Williamson (pp. 1–34) focusing on economic performance and poverty reduction, and another by Kakande (pp. 226–245) dealing with poverty monitoring. From the perspective of peasants in rural areas and traders in informal sector operating in urban areas, particularly Kampala City and its suburbs, the critique focuses on the weaknesses of economic growth rates and poverty reduction levels in determining the good economic performance depicted in these chapters. It is intended to stimulate a debate on the success story of Uganda that is portrayed.
This critique does not claim impartiality, since the ideology of neoliberalism spearheading the economic reforms is not neutral either, as elaborated by Harriss-White (2003). Further, as correctly observed by Peet (2003, p. 15), ‘economic policy analysis is a cultural, political and social endeavour, rather than a study of the application of proven, scientific truth … In this sense any critical understanding of policy formation has to begin with the basic notion that policy serves economic and social interests.’ Therefore, from the proceeding quoted arguments, it is necessary to take an unwavering stand in favour of the disadvantaged in Uganda. The critique is informed by the emerging paradigm of the political economy of institutions. From the history of the policies that the industrialised countries used when they were developing, the paradigm advocates the state's intervention in the management of economic activity to promote national goals (Chang 2004 [2002], 2003, Kiiza 2002, 2006).
Concerning the methodological approach, the critique analyses the articles under examination using available literature. However the arguments in the critique, to a great extent, are also derived from what the author has seen physically and heard while interacting with people as well as the close following of press reports on the country, over the period that the economic reforms have been implemented in Uganda.
What is the meaning of economic reforms, and what were they to achieve? The two articles under examination do not directly define economic reforms. However, according to Whitworth and Williamson (2010, p. 4), the economic reforms were to get prices right; establish macroeconomic stability; strengthen revenue and public expenditure management; and to promote the private sector. The critique does not contest the achievement of the objectives of the reforms but rather their end results.
Despite the claim that the economic reforms are home-grown and that because of their success, they have been adopted elsewhere (Kuteesa et al. 2010), actually they are a uniform set of policies imposed by the World Bank and International Monetary Fund (IMF) on most developing countries (De Rivero 2003 [2001], pp. 54–55). Green (2008, p. 109) describes them as ‘simplistic solutions to complex economic problems’ whereby most countries of the Third World are compelled to liberalise their economies and privatise their state enterprises while avoiding fiscal deficits at all costs.
The economic reforms guided by the ideology of neoliberalism assume, as pointed out by Peet (2003, pp. 4–5), that the private sector, under a free market, accumulates capital and employs it in the economy to bring about growth and eventually development that will benefit the majority of the people in a country. Therefore, Whitworth and Williamson (2010, p. 27) assert that as a result of implementing the economic reforms, Uganda has enjoyed two decades of sustained growth, consistently exceeding that of sub-Saharan Africa since 1986. The mentioned authors go further to controversially assert that the growth has been accompanied by significant poverty reduction in the country, declining from 56% in 1992 to 31% in 2006 (ibid., p. 30). Kakande (2010, p. 237) claims that the economic growth has generally been pro-poor and the poverty reduction ‘is one of the largest and fastest … recorded anywhere in modern times.’
However, in contradiction, the findings from qualitative studies show that the peoples' ‘well-being is declining and the poor are becoming poorer’ (Kakande 2010, p. 238). If the victims of poverty, who are supposed to be the beneficiaries of economic growth, point out that they are becoming worse off, then there is something amiss with the statistics that indicate the economy is growing steadily and poverty is rapidly declining. It is because of the above anomaly that the rest of the article examines the weaknesses of economic growth rates and poverty reduction levels in determining the portrayed good economic performance in Uganda.
The weaknesses of judging economic performance on growth rates
The economic growth rates on Uganda are misleading because they do not show the capacity of the country to produce its own goods for consumption, and by whom. For instance, the claimed growth rates are taking place under persistent trade deficits as Table 1 on Uganda's selected trade data shows. The table shows that from 1991 to 2004, the country on average was importing merchandise worth twice the value of exports. The trend has not changed. For instance, in the financial year 2008/9, the value of total imports was US$4,526.9 million compared to exports of US$1,724.3 million (UBoS 2009, p. 69), an import figure more double that for exports. To make matters worse, as the World Bank observed, ‘aid covers more than 80% of all investment and [a] substantial share of other public outlays, such [as] other recurrent expenditures and debt service’ (quoted in Whitworth, 2010, p. 132). Therefore, under this arrangement, the majority of people in Uganda do not have an opportunity to earn income by themselves to improve their lives.
| 1991 | 1992 | 1993 | 1994 | 1995 | 1996 | 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total merchandise export (FOB US$million) | 175.4 | 172.1 | 157.1 | 253.9 | 595.3 | 590.3 | 670.9 | 458.4 | 549.1 | 459.9 | 462.9 | 479.0 | 507.9 | 647.2 |
| Total merchandise imports (CIF US$million) | 545.0 | 450.6 | 530.5 | 671.7 | 1,085.5 | 1,218.3 | 1,246.3 | 966.1 | 1,039.4 | 954.3 | 953.3 | 1,003.9 | 1,130.6 | 1,321.4 |
| Industry (% GDP) | 11.6 | 12.5 | 12.3 | 12.8 | 13.1 | 14.7 | 15.9 | 16.4 | 18.0 | 18.5 | 18.6 | 19.8 | 19.6 | 19.5 |
| Manufacturing (% GDP) | 5.4 | 5.8 | 5.6 | 6.0 | 6.2 | 7.1 | 7.8 | 8.3 | 9.0 | 8.9 | 8.8 | 9.1 | 8.6 | 8.4 |
| Source: World Bank, African Indicators (2006) database. Quoted in ( Cawley and Zake, 2010:125) |
The economic growth that does not come from internal production mechanisms, the production processes that would create job opportunities for many people and therefore provide them with incomes to purchase goods and services, creates conditions for the existence of poverty in the country. It is not surprising that Uganda still has an undiversified economy with few employment opportunities in the formal sector, because it does not have large-scale industries, a fact admitted by Whitworth and Williamson (2010, p. 31).
Besides, for the economic growth rates to improve the lives of the people in the country in a sustainable and meaningful manner, the quality of growth should be considered. For instance, ‘Uganda's domestic exports are still dominated by coffee, tea, cotton and tobacco (the traditional cash/ export crops), and fish, cut flowers, hides and skins, among the principal non-traditional exports’ (UNDP 2007, p. 74). As a result, economically Uganda is affected because the prices of these primary commodities are prone to fluctuations; actually their prices have been declining in the international market (Oxfam 2002, p. 151). In particular, the decline in coffee prices since 1997 has had devastating effects on the lives of coffee-growing communities in the country (Oxfam 2002, p. 11). Surprisingly, Whitworth and Williamson (2010, p. 30) still maintain that the coffee-growing districts have contributed more to poverty reduction than non-growing ones.
Moreover, a country like Uganda largely dependent on primary commodities for export and importing manufactured goods usually finds it very difficult to build a national market and national industrial base, as well as the development of national-oriented capitalists, all of which are necessary for the development of technical skills to process local materials into finished consumer goods and in the process create employment opportunities (De Rivero 2003 [2001], pp. 4, 122). If Uganda continues to depend on the exportation of raw materials, which do not require sophisticated skills, it will most likely remain static at a primary level of production. No wonder, because Uganda is dependent on the exportation of raw materials, that there is a tendency for the percentage of the people earning a meagre living from agriculture to enlarge as other sectors like the service sector dominate the economy (Uganda National NGO Forum 2009, p. 15).
In addition, because of their poor terms of trade and their fluctuating prices already cited above, it is difficult for the country to earn enough income from the export of primary commodities to save for development let alone have a balance of trade. This explains why Uganda is largely dependent on aid as already cited. Further, as Uganda keeps on importing manufactured goods, it loses opportunities for future industrial development (Kiiza et al. 2006). Asea (2006, p. 8) claims that the promotion of service industry could be an alternative form of development for countries like Uganda. The assertion is wrong because services emerge to facilitate the production of goods, or to entertain people who produce and consume goods. Besides, is there any advanced nation known to have development in the service sector without any industrial base?
The weaknesses of statistics in depicting growth
Even after pointing out the flaws of judging the performance of an economy based mainly on economic growth rates and poverty reduction levels, it is also imperative to mention the weaknesses of statistics in painting a true picture of the economy. Figures speak loudest but at the same time can deceive. The economic growth rates, when expressed in percentages, do not show the real volume of goods and services. If the percentage increase is based on a small economic base, it may appear to be high while the corresponding increment in volume is meagre. Therefore, a high percentage increment in economic growth does not necessarily mean a substantial economic growth.
Further, in a country heavily dependent on imported manufactured goods rather than local production as already cited, it is possible to have double counting let alone recording growth where the tangible production of goods for consumption does not exist as illustrated further below. For instance, according to the 2008/9 and 2009/10 budgets, the highest growth was recorded in the service sector (MoFPED 2009), including wholesale and retail trade; transport and communications; and financial services. Logically it can be concluded that if goods and services are imported and sold in Uganda, then economic growth is recorded as a service provided; if goods are imported by neighbouring countries but transported by Ugandan imported vehicles to their destination, again economic growth is recorded as a service provided; when money is borrowed from foreign sources and lent to the people in Uganda, also economic growth is recorded; and absurdly, when the borrowed money is used to buy imported goods in Uganda, economic growth too is recorded. Above all, the averages in statistics hide the glaring inequalities in Uganda where the minority elite is doing well while the masses are poor and the gap between the categories is widening (MoFPED, 2004, p. 12).
The weaknesses of the current statistics in measuring poverty reduction
The social sciences' poverty reduction levels in Uganda are arrived at by quantifying responses to a questionnaire as revealed by Kakande (2010, p. 233). As correctly argued by Andreski (1972), such figures are not exactitudes and therefore cannot be taken for granted. In addition, even the concept of people living on less than one dollar a day is misleading and confusing. It is simplistically based on energy-giving food requirements of 3000 calories, valued by respondents, while the non-food requirements are arrived at indirectly as the equivalent of the mentioned food requirements (ibid., pp. 233–235). As observed by Mwangi and Markelova:
many poor people in rural areas of developing countries consume the goods they produce or barter them for other goods as they have little or no interaction with the market. This creates difficulties in determining the monetary value of their production. One can theoretically value self-consumption, but it is difficult to do so with precision. (2008, p. 6)
The measure does not show the source of income. Without showing the source of income, there is an anomaly of figures showing that poverty is reducing while agriculture, the source of livelihood for the majority people in Uganda, whose contribution to the economy is declining and stood at just 23.7% in 2008 (UBoS 2009, p. 63). While the agricultural contribution to the economy has declined by about 50% since the 1980s (UNDP 2007, p. 48, Whitworth and Williamson 2010, p. 27), more than 72% of the people in Uganda still eke their living from it. If the source of livelihoods for the majority in the country is declining, then what is causing poverty reduction in Uganda? Is the poverty reduction manna from heaven?
Above all, and most importantly, the household consumption expenditure method of measuring poverty reduction is not a good proxy for welfare improvement. Expenditure on consumption can in fact affect the welfare of the people negatively. As Kakande admits:
The use of private consumption as a household welfare measure implicitly assumes that the higher the consumption the higher the welfare. However, this has been questioned. It has been observed that some private consumption actually reduces household welfare. (2010, p. 235)
As has been also observed in the past in a newspaper article, modernisation is eroding the welfare of farming communities. ‘For long, it has not been uncommon to find families selling all the produce they harvest in a season to buy mattresses or selling land on which they grow food to build iron-sheet roofed houses, calling it development or modernisation. Thereafter, they are faced with food shortages, starvation and lack of source of income’ (Byekwaso 2002, p. 14). Expenditure on other aspects of modernisation, like the ownership of mobile phones and paying school fees using the insufficient money earned from the declining agricultural production already cited, is also causing hardship to the people.
Actually, the broad-based growth on consumption expenditure deemed to reduce poverty (Whitworth and Williamson 2010, p. 30) is sucking money from the rural population. Whatever is earned from agriculture by hard labour is siphoned out to buy articles of modernisation and not reinvested in the sector, consequently impoverishing peasants (Mamdani 1999 [1976]). As a result, land, the natural resource base, is deteriorating, thus leading to increasingly frequent food insecurity even acknowledged by Kakande (2010, p. 238). This is explained by the fact that the money earned from the land is not reinvested on it in the form of fertilisers. As observed by the National Environment Management Agency (NEMA 2007, p. 60) again, because the peasants no longer practise the traditional shifting and fallow farming, now as the land is continuously used to grow crops, it has lost fertility further leading to poor yields and consequently to increased poverty.
On the other hand, consumption expenditure is from borrowed money that is on the increase in Uganda (Muhumuza 2007, p. 100), but causing uneasiness to the borrowers as elaborated below. Politically, the government has been using micro-credit schemes as a tool of poverty reduction (Muhumuza 2007, p. 133, Mugambe 2010, p. 158). Subsequently this has been emulated by other institutions, especially non-governmental organisations (NGOs) and social credit networks (Muhumuza 2007, pp. 167–263), as well as profit-oriented financial institutions and private individuals, all of which operate in every corner of the country as a micro-finance movement. Consequently, most people borrow money for consumption but usually find it difficult to pay back, while some fail completely and eventually are forced to sell their assets (Muhumuza 2007, p. 190). To express the widespread indebtedness, Ronald Mayinja, a local artiste, composed a Luganda song, Ffenna Tulikubukenke, meaning ‘we are all on our toes because of debt’, which became and is still a popular hit in Uganda (Mayinja 2006).
If Uganda accumulated debts to unsustainable levels to the extent that the country was given relief under the Heavily Indebted Poor Country (HIPC) Debt Relief Initiative in 1998 (Kitabire 2010, p. 271), that indebtedness is now slowly being replicated at an individual or household level. Without a possibility of debt relief, the individuals or households are compelled to sell their assets, and consequently are pushed deeper into poverty. As observed by NEMA (2008, p. 32), though not attributing it to debt, a significant number of peasants do not have access to land for farming. Without a reduction in the number of such landless people, it is difficult to imagine that poverty is reducing. Under the Poverty Eradication Plan (PEAP) (MoFPED 2004), there has been a rapid expansion of spending on the public sector, dubbed ‘poverty reduction’. The increased expenditure has been on services like health, education, access to safe drinking water, good sanitation and as well as road construction, without considering the quality of the services provided coupled with their increased costs of administration (Whitworth and Williamson 2010, p. 30). However,
What are termed as poverty reduction areas like primary education, primary healthcare, water, rural roads, gender mainstreaming and fighting HIV AIDS, do not directly increase the income of the poor and put in place inbuilt mechanisms for economic growth of the country, though necessary. People do not eat education or primary healthcare. These are services, which in any case could be afforded by individuals if the people are earning enough from the products of their labour, like a better price from the crops they grow and high wages from industrial employment. Even feeder roads, which are assumed to aid peasants sell their products at a better price, do not necessarily increase the incomes of the poor. Due to high transport costs engendered by high fuel prices and operating under conditions of tight monetary squeeze and liberalisation, peasants continue to earn peanuts from their produce … Even if education creates room for one to be employed or create self-employment, it is of no use if its graduates fail to get employment or have no opportunity of creating employment because of the limitations of the economy even if their thinking capacity has grown. (Byekwaso 2005, p. 7, 2008, p. 12).
Even the logic of the government's increased expenditure on social services like education to reduce the pressure on the pockets of the poor is contradicted by the findings from the qualitative studies, which revealed that: ‘Disposable household incomes were increasingly outstripped by needs. The main concern was user fees for public services that were limiting access by [sic] the poor’ (Kakande 2010, p. 239).
Conclusion
In monetary terms, the Ugandan economy has grown from ‘US$4 billion in 1993 to US$15 billion in 2008’ while inflation was under control (Byaruhanga et al. 2010, p. 71). However, considering the huge trade deficits the country is experiencing already cited, the growth is mainly not from internal production mechanisms. Therefore, it has failed to diversify the economy, create employment in the formal sector and invest in large-scale industries (Whitworth and Williamson 2010, p. 31). This is because the growth rates give a false impression of economic performance. On poverty, it is an undeniable fact that there is an increase in the consumption of foreign imported goods and modern services like the use of mobile phones, making time talking on mobile phones ‘a major expenditure item for many households since 2003’ (Kakande 2010, p. 233). However, the growth in consumption is taking place at the expense of the usually basic needs of the people like food while their source of livelihoods is being undermined. The method of measuring poverty reduction in Uganda on the basis of consumption expenditure has numerous shortfalls. The figures given are not exactitudes. Otherwise, why is there a contradiction between the findings of quantitative and qualitative studies when all of them are attempting to determine the magnitude of poverty in the same country?
Therefore, one wonders how the consumption expenditure method was arrived at as the best option. For instance, why not measure the physical consumption of goods and services as well as the ownership of assets, making the list comprehensive and scaling it up according to the hierarchy of needs, to show a proportion of people enjoying a certain standard of living and from where their income derived? For example, it is possible to indicate the proportion of the people eating a number of meals and of what quantity and quality a day, as well as their source of income in the form of sale of assets or employment and of what kind.
Otherwise the poverty reduction figures in Uganda appear to be fiction. It is unbelievable that the number of people who are able to access and eat food of 3000 calories has increased, when half of Uganda's population does not have access to sufficient food (Opolot and Kuteesa 2006, p. 23); when there are high incidences of malnutrition, famine and hunger, with 40% of children under the age of five years dying (MoFPED 2005); when the number of children with stunted growth is on the increase (Kakande 2010, p. 240).
Note on contributor
Ndinwane Byekwaso has been Lecturer in Development Studies since 2007 at Kyambogo University and a number of other universities in Uganda. The author is also a freelance writer in local newspapers in Uganda since 1992, and also worked for a number of years for the Movement Secretariat as a research officer.