As you heard, the economy grew by 3.2% this Financial Year. This is one of the lowest rates of growth in the last 25 years. Inflation had also gone up to 30%. It has now come down to 18% of all. Food inflation has gone back to 8%. As I have told you in all my previous speeches, this is due to a confluence of two sets of factors – the global problems on the one hand and our own mistakes within Uganda, on the other hand.
The global problems are well known to those who watch Western media channels such as CNN, BBC, Aljazeera, etc., as well as those who watch the Russian Television channel – RT. The economies in Europe and the USA are in trouble with failed banks, high level of indebtedness, high unemployment rates, etc. Consequently, domestic demand in the EU declined by 4.2% (2009). This has affected our exports to Europe. Demand for flowers, for instance, has declined by about 70%, demand for fish has declined by about 40%.
Nevertheless, the economy of Uganda is not just glued to the economies of Europe and the USA. Fortunately, we have got our own internal and regional markets. Aggregate demand here in Uganda has not been as adversely affected.
Uganda exported to the Region goods and services worth US$ 654 million in 2009/2010, US$ 873 million in 2010/2011 and US$ 1,170 million in 2011/2012. Therefore, demand in the region has not been as low as in Europe. We could have performed better if it had not been due to the mistakes by some of our actors in respect of delaying some projects such as Bujagali, the sugar projects of Amuru and Lugazi, the beef project by the Egyptians, the Nakawa-Naguru housing projects, Palm oil projects in Buvuma, etc.
It is this self-illusory arrogance and ignorance of various actors that is part of the problem. It would help our long-suffering country and continent if all the actors were to realize that as far as the economy is concerned, there are two sovereign actors: the consumer (the one who buys a product or a service) and the investor. All the other players, high sounding titles notwithstanding, are of no ultimate importance.
If enough buyers (local and foreign) do not buy what you produce, that is the end of your business. If an investor does not agree to put his or her money, skills and entrepreneurship in your country and goes somewhere else, that is the end of that effort.
Ignorance, however, misleads many actors to think that Presidents, Ministers, Members of Parliament, bureaucrats, etc, are the most important actors as far as the economy is concerned. This is dangerous self- deception. You have seen Governments and systems collapse because one set of the two primary actors has malfunctioned – the consumers and the investors.
With a country, owning natural resources, it gives it an importance provided those natural resources are of a unique and strategic nature and are to be found only in our country. We have coffee, for example.
However, coffee is not only in Uganda. Therefore, international coffee-roasters are not bothered to come to Uganda. They roast coffee from all over the world in other places. We have to roast the coffee ourselves. This has not been easy because our people did not have capital, technical know how and entrepreneurial skills.
This is what brings us to the issue of competitiveness of a country vis-à-vis other countries in terms of attracting investments and also winning markets. You must treat investors well and also treat consumers well if you are to survive in the modern world. You must ensure that investors have security, they have good infrastructure that will make their businesses profitable by lowering the costs of doing business in your country, they are not delayed by corrupt or self-
important officials, etc. This is where some actors have let down the people of Uganda by playing around with the two sovereign actors in the economy – the investor and the consumer.
It is this failure, this arrogance, that has caused our economy to only grow at 3.2% this year. Yes, the global economy is bad but our economy would have grown at a higher rate if it was not for this mistake.
These actors also squander the contribution of Uganda Peoples Defence Forces (UPDF) and the people of Uganda in bringing about stability. The peace we ushered in and the goodwill we have generated would have brought more development if all the actors were conscious of the two fundamental actors in a modern economy: the consumer and the investor; and if all of us were aware that our roles, high sounding titles not withstanding, is to search for, value and facilitate these two fundamental actors in a modern economy.
With the correct handling of the two actors, then, you solve the problems of employment, widening the tax base, provision of goods and services, foreign exchange earnings, social services, etc.
In spite of this obstruction, we have moved and we are now set to take off. Through many struggles, Bujagali is now about to be completed. We shall, for the first time since 2005, have no electricity deficit for, at least, the next two years. This is an opportunity we are not going to miss again. More mini-hydro stations will be built and they will generate 125 MW, we shall start using our crude oil to generate electricity, we shall build Isimba and start on Karuma. We shall never get electricity shortage again.
In my recent State of the Nation Address, I talked about the two categories (A and B) of roads that have been listed by the Ministry of Works to be worked on. We are determined to work on all the 19 roads under category A.
With the full knowledge of the importance of the investors to the economy, I will reactivate the Presidential Economic Council (PEC) that will be meeting once every two months under my chairmanship or that of the Vice President, in case I
am not present. Mr. Stephen Muyingo, my Senior Private Secretary in- charge of Economic Affairs, will be the Secretary to the Council. The Chairman of the Uganda Manufacturers Association (UMA) and that of the Private Sector Foundation as well as a number of other Private Sector players will be members. This is in order to eliminate once and for all the arrogance of the civil servants when they are designing policies. They always ignore the views of the Private Sector, as I pointed out above; yet they are the prime movers of the economy. Officials, in many cases, act against the interests of
our private sector. I have been told, for instance, that somebody licensed the import of poultry meat. Yet I have been promoting chicken production in the country. What is the interest of such an official?
PEC will harmonize such disharmonies. The Minister of Finance touched on the issue of nucleus farmers. These will be helped to provide tractor hire services to their neighbours. Also working with the private sector, we are going to ensure milling of maize within Uganda so that we export maize flour instead of exporting grains and, at the same time, produce poultry and animal feeds within the country.
I have instructed the Minister of Finance to study the usefulness of giving tax incentives to manufacturers who locate their factories up-country.
In conclusion, apart from the victory in the electricity field as well as the intensified battle in the sector of roads, the following measures will help to stimulate production and consumption:
(i) providing seeds and seedlings to the farmers for the eleven selected crops;
(ii) working with nucleus farmers to provide tractor hire services to farmers;
(iii) working with the private sector to ensure that maize is milled within Uganda so as to add value to it and also produce animal feeds within the country;
(iv) studying the possibility of giving tax incentives to factories that locate up-country;
(v) raising the tax threshold to 235,000 shillings so as to stimulate savings and consumption; and
(vi) integrating the private sector in policy formulation in the form of re-activating the Presidential Economic Council to which leaders of the Private Sector will belong.
Remember that while under feudalism, Kings, Princes and Generals were the cardinal actors, in modern economies the cardinal actors are the consumers and the investors. Governments are mere facilitators by providing peace, infrastructure and a conducive policy as well as regulatory framework.
I thank you.