THE PROBLEMS OF THE ECONOMIC DEVELOPMENT OF UGANDA

APPROVED:

MajoJLr Professo r

Minor Professor

Chairman of the Department of Econonu."cs~

Deanvof the Graduate Rnhonl ,4 /yv~

Ebangit., Zerubbabel 0. , The Problems of Economic

Development of Uganda. Master of Arts (Economics) , May,

1373, 100 pp.? 6 tables, 2 figures, bibliography 67 titles.

The issue of economic development is a subject which

in recent years has attracted the attention of many academicians

throughout the world. However, the subject itself is far wider

and more complex than it would appear at first sight since

the human, social, and political elements of economic development

should not be forgotten. In light of this, academicians

throughout the world are unable to devise what one may label

"uniform economic models" that could be applicable to all

situations in the world, Given the problems of economic development, tne purpose

of this thesis is to examine, analyze, and reevaluate the

impact of human, social, economic, and political problems on

the economic development of Uganda. The strategy adopted in

the study of the problems involved in the economic development:

of Uganda is historical. In short, the study examines past,

recent, and present literature* on economic development of

Uganda. The preface to the body of the thesis presents a

general format of the study—the approach, the methodology,

the delimitations- and the significance,

The first chapter in general considers the topographic

features of Uganda, the heterogeneous groups', of people that reside in Uganda, historical perspective of Uganda' from the invasion of its culture in the 18701s to the attainment of complete independence on October 9, 1962,

The second chapter focuses attention mainly on the economy and its problems. It examines, analyzes, and reevaluates the impact of agriculture on Uganda's economy, the dependence upon exports, unfavorable natural resources position, the role of the Uganda Electricity Board in the economic development of Uganda, the importance of the basic transport network and market facilities in development, and the historical perspective of the banking system in Uganda and its failure in the past to stimulate economic development, and its role now in the economic development of Uganda.

The third chapter, like the second one, considers the economy and its problems. It discusses the problems of human resources in economic development, with emphasis on the shortage of manpower with critical skills, political instability and near economic stagnation, Uganda's external and inter-territorial trade, sources of public revenues and expenditures, the role of public and private investment in economic development. The fourth chapter is concerned with development planning. It examines the three 5-year development plans instituted immediately after independence» their financing, implementation, and problems encountered, in executing the plans. The fifth ana the final chapter sets out some brief conclusions and presents recommendations. It argues candidly that the agriculture sector will continue to over-

shadow the economy of Uganda for some time to come, unless

radical changes are instituted. THE PPOBLEMS OF ECONOMIC DLI\TELOPMENT OF UGANDA

THESIS

Presented to the Graduate Council of the North Texas State University in Partial Fulfillment of the Requirements

For the Degree of

MASTER OF ARTS

By

Z&rubbabel Oj imam Ebangit, B. Sc, Denton, Texas May, 1973 TABLE OF CONTENTS

Page

jRjj*' ACE ..»•». •«.»»•»» » . * j.X.X

LIST OF TABLES . . . . iX

LIST OF FIGURES . x

Chapter

I. INTRODUCTION . * * *

The Country The People Historical Background and Government Structure

II. THE ECONOMY AND ITS PROBLEMS ...... 23

Structure of Economy Dominance of Agriculture Agricultural Prices and Marketing Industry, Power and Mining Tourism. Transportation Money and Banking

III. THE ECONOMY AND ITS PROBLEMS (Continued) . . . . 54

Human Resources Education Health Services Recent Developments and Current Position of the Economy Total and Per Capita Incomes .Exports, Imports and Inter territorial Trade • Private and Public Investxasnt

IV. DEVELOPMENT PLANNING . . . 79 First Five-Year Development Second Five-Year Development Plar The Outlined Third rive-Year Development Plan V. CONCLUSIONS . . 91

T5 V-N /-+ *-S.^ —l 4— 4 j". Srt LIST OF TABLES Table Page I. Uganda: Gross Domestic Product at Factor Cost, 1960 Prices . . 29 II. Uganda: Agriculture Production, 1968-70 .... 3 III. Uganda: Production and Sales of Electricity, 1958-1967 ...... 42 IV. The Health Personnel in Uganda, 1969 62 V. Uganda: Principal Domestic Exports, 1967-1968 . 68 VI. Uganda: Foreign Trade by Principal Country • (Excluding East African Trade), 1966-1968 . . 71

IX LIST OF FIGURES

Figure Page

1. The Republic of Uganda 3

2. Average Annual Rainfall of Uganda by Climatic Zones 5

x PREFACE *

According to Pinto and Santos (64, p. 198) , the problems stemming from economic development are obviously among the most important topics of discussion in the world today. This subject leads to the issue of economic challenge, a problem which dees not confine its impact to solely underdeveloped or developing countries of the world, but rather extends its • tentacles to all countries regardless of their economic development- However, the degree of challenge varies from country to country.

While the developed nations of the world are faced with the problems of unchecked inflation, fluctuating economic growth and unemployment, the underdeveloped countries, on the contrary, are in acute predicament. These countries are faced first with the problem cf raising the standards of living of their peoples, but in the meantime, they are ambushed by a host of other economic problems that plague all economies of the world. In this connection, all developing nations do experience recurrent deficits, sluggish economic growth, underemployment, maldistribution of National Domestic Product, soaring inflation, and sometimes near economic stagnation. Uganda, in this respect, finds itself in the orbit of developing nations of the world. For this reason, it is

iii IV stained with all the problems already indicated above. In fact when it emerged as a sovereign nation on October 9r 1962, some authors have observed that it entered into a decisive moment in its economic history {29- p. 1). The same authors furthermore have remarked that the obvious task that confronted the nation and its people was to make rational economic choices. Thus, the immediate task that faced the government was "to determine whether a basis for a rising standard of living is established or whether per capita incomes under the pressure of increasing population actually decline" (29, p. 1).

Given the problems of economic development, the primary purpose of this study is to examine, analyze and evaluate the effects of these problems on the economic development of Uganda. The magnitude of this topic has made it imperative to limit the scope of this work to selected aspects of the economy. Even with this cautious selection, the topic, nonetheless, defies any resolute attempt to examine it in depth. From a research point of view, it is almost impossible to acquire adequate and reliable information on the current structure of the economy. It is equally difficult to find data about the role of various institutions in the country and their auxiliaries. For this reason it was necessary to limit comments on the important aspects of the topic to a few general statements based on very few examples. The main emphasis is placed on the problems the country has encountered V in its endeavoxir to raise the standard of living of its people, and eventually generate rapid economic development. This thesis is divided into five chapters. The first chapter presents a general background of the country, the people and its governmental structure. It describes briefly the topography of the country and its heterogeneous people. It also gives a short historical perspec Live of the country from the period of British rule to Independence. Chapters

Two and Three focus on the economy and its problems. Both chapters demonstrate, using a number of concrete examples, how Uganda's economy is plagued by many problems; for example, dominance of agriculture, lack of vital mineral deposits, the paucity of savings, the undeveloped human resources, political instability, ignorance, poverty, and diseases. While the first chapter intends to be as general as possible, the emohasis in Chapters Two and Three is on detailed, descriptive, analysis and comprehensive presentation of available data. In Chapter Four, an examination of planned development programs is explored. It points, however, the inevitable consequences the government and the people have to meet in order to realize the benefits of a rising standard of living. Chapter Five concludes the thesis and also presents some recommendations the government could adopt in order to mitigate the rampant economic ills that have retarded economic advancement in the country. VI

The methodological basis of this thesis is an examination of the past and recent literature on political and economic trends in the country. Towards this end, it was necessary to collect information and data from diversified sources.

American, East African and British textbooks and periodicals, newspapers, and statistical abstracts served as major sources of information. *As any work of this nature, this study is strained by numerous difficulties arising from the question of reliability of source material. To skirt and minimize any inevitable flaws resulting from divergent presentation of fact, a number of sources were often consulted and compared, and the most accurate version selected for presentation. It should be noted, however, that almost all tables in the thesis are adapted from primary or secondary sources. The availability of material and information on the topic varies considerably. Data on the American source material is relatively accessible, but that on British sources is scarce. Similarly, data on Kenya and Tanzania was difficult to get. These limitations have, of course, influenced the conception of this study, and to some extent handicapped its exploration in depth.

This thesis has been written at a time when Uganda is in political turmoil. The prospects ox: a stable government to emerge within a short time are very remote. But, it can only be hoped that those in authority now will allow true democratic processes to determine the fate of the country. ViX

Yet, if they assume that only "their coverranent can resolve all the economic ills in the country, they, too, will commit political heresy• CHAPTER I

INTRODUCTION

The Country

Uganda is a country of fascinating contrasts. The late Sir Winston Churchill aptly described it. in these words: Uganda is a fairy tale. You climb up a railway instead of a beanstalk, and at the end there is a wonderful new world. The scenery is different, and, most of all, the people are different from elsewhere to be seen in the whole range of Africa. . . (8, p. 86). To Churchill, Uganda was a "fairy tale/' But, Uganda today is the basis for a thriving tourist industry. And for people from all over the world (who may be relieved to find that they need to travel by neither railway nor beanstalk, but rather by a jet airliner)—it is a holiday paradise. Furthermore, had Churchill described the scenery from the air, probably he would have described it differently. In this connection, a visiting Mission from the World Bank had this impression about Uganda's scenic view from the air, "strangers approaching Uganda by air usually feel a lift of the spirit when they catch a glimpse for the first time of the rich greenness of the fertile north shore of Lake Victoria" (29, p. 5).

J* More prosaically, Uganda is a country of about the size of Oregon or Ghana, with the area of S3,381 square miles. It lies astride the Equator on the great central African plateau nearly 300 miles from the east coast, and it rises from 3,000 feet to 5,000 feet above sea level (24, p. 7). Uganda is unfortunate because it has no outlet to the sear it is landlocked. Of its total area, about 16,000 square miles are open water. This is mainly its share of Lake Victoria. Uganda is bisected diagonally by River Nile and lakes and waters of the Lake Kioga system (see Figure 1).

Lake Victoria, together with the northern tip of Tanzania and the independent Republic of Rwanda forms the country's southern boundary. Uganda's northern frontier is with the Republic of Sudan, which stretches across a belt of wild and sparsely populated area. To the west lies the Congo and here the boundary runs northwards from the Bufumbiro Volcanoes in extreme southwest, through Lake Edward, soaring over the snow peaks of the Ruwenzori Mountains and down again through the centre of Lake Albert. The principal feature of the eastern border with Kenya is the vast whale-backed mass of Mount Elgon, an extinct volcano (16, p. 1). Few of these boundaries are natural ones. Most of them are merely lines drawn on the map long ago by the country's former colonial rulers, in seme cases with the unfortunate result of having separated ethnic groups.

The Climate Despite its location in the tropics, Uganda's climate is tempered by an average altitude of over 3,000 feet. Thus 3

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figure 1. The Republic of Uganda much of the country enjoys a mean annual temperature of

71°F., and good prospects of obtaining about 50 inches of rainfall a year. In this direction, the World Bank Mission to Uganda once remarked: The altitude provides much of the country, despite its location astride the equator, with a generally pleasant climate. This has aptly been described as like a perpetual European summer with a hot sun, cool breezes and showers of rain (29, p. 5). While rainfall does at times occur at all seasons of the year, especially in the Lake Victoria zone and the mountainous regions of the west, the climate pattern, however, does not vary greatly. In actual fact, there is a dry period between the end of November and the middle of March in the north, and June to August in the south. Most of the rain in this case falls between March and November, although a short break occurs in June and July, particularly in the rather dry belt which stretches across the country from

Ankole and Karamoja (16, p. 1). However, as some authors have put it: Only 22 percent of the land gets less than 30 inches of rainfall a year, the minimum required for productive agriculture. Seventy-two percent of the country obtains between 30-50 inches of rain per year and six percent over 50 inches (see figure 2). Thus, whereas rainfall ranges from an annual 'minimum of about 15 inches in the extreme north- east to over 80 inches on Sesse Islands, most of the country can rely on 30 inches or more in an average year (24, p. .14). $

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Figure 2, Average Annugl. Rainfall-'of Uganda by Climatic Zones The scarcity of rain in the northeastern part of the country has sometimes plunged that region into serious droughts, and it has often deprived it of beneficial harvests. While the northeastern region is an exception, the rest of the country usually expects rain in the last weeks of the main dry season—which coincides with spring in the temperate zone of the northern hemisphere.

Vegetation Uganda is covered with wooded savannah, in which trees and shrubs are scattered through short and tall grass dominated by "hyparrhenia" species. These species are typically centered in the midlands and the northern region of the country. Hence, it is not surprising that the first impression of the visitor to Uganda is one of greenness. The presence of Lake Victoria in the southern region has a marked effect on the climate of southern Uganda. As usual, a belt of generous rainfall stretches from some depth along the northern shores of Lake Victoria. In the past, this area, as one author has put it, supported tropical rain forest where broad leafy canopies shut out the sun and giant trees soared 150 feet in the air (16, p. 2). It should be stated, however, that the original vegetation has been drastically modified by cutting, burning, cultivation and grazing. Elsewhere in the country, original forests still maintain their features. A recent study undertaken by Herrick's team (24, p. 15), revealed that about 8 percent or 5,770 square miles of Uganda's land is under forest reserves. This study noted that this portion of the country includes all the chief timber producing forests and the catchment hills. The same study mentioned above (24, pp. 15-16), went on to point out how forest distribution varies throughout the country. For instance, it noted that areas around the lakes are always infested by enormous tracts of swamp forests. In this direction, the area around Lake Kioga is a case in point. Furthermore, the study indicated how forest distribution on the highlands is markedly different. For example, Mount Elgon in the east is forested, whereas the highlands in the west and southwest support a luxuriant grassy growth with the exception of the partly jungle area of Bunyoro plateau, located east of Lake Albert, Extending also from Lake Victoria to the Ruwenzori range, the study showed, are. rolling meadows and with decreasing rainfall towards the northeast, savannah grass lands become poorer. Some noticeable features of the surviving blocks of the former forests still exist in the west, and, moreover, innumerable patches of small forests can be seen all over Buganda and parts of the eastern region. To the extreme west, on Mount Ruwenzori,. a blanket of an immense forest is preserved to protect river catchments? others, more accessible in Toro, Bunyoro, Ankole, and Buganda are sources of valuable timber. Besides this, there is also an untapped 8 forest reserve on Mount Elgon? however, its inaccessibility, makes it difficult to exploit its resources (24, p. 16).

Soil In his book, Higgins (19, p. 209) argues that economic development depends on what he calls "environmental determinism."

According to this theory, one of the factors that determines

economic development in a particular country, is the nature of soil that country has been endowed with by Nature. For example, he contends, "tropical soils are poorer and more fragile than those of temperate regions, and hence, apt to give low yields per acre" (19, p. 210). This would imply that Higgins assumes that this kind of soils do not. provide the basis for productive agriculture in the tropics. Certainly, his contention, nonetheless, does reveal some substance of truth, but his argument cannot be accepted to be valid in every respect. For there are some countries within the tropics that have fertile soils. Uganda is a case in point. In this direction, Herrick writes: Compared with those of most tropical areas the soils are, on the whole, fertile, Those of Mobira forests and Lake Victoria zone are among the most productive in the world, yielding two economic crops a year. Yet there are many contrasting soils in the country (24, p. 15). Similarly, Sir Churchill (8, p. 89) noted, "The planter from the best islands in the West. Indies is astonished at the richness of the soil. ... As for our English garden products, brought in contact with the surface of Uganda they simply give one wild bound of efflorescence or fruition and break their hearts for joy." As Herrick remarks in the above passage, some parts in Uganda do have poorer soils than the rest of the country; nevertheless, the significance of this soil is relatively small, and hence would not retard economic development throughout the country. Another noticeable feature of soils in Uganda is that ironstone is widely distributed through all types of soil. This ironstone is usually called "murrain," and it makes excellent gravel roads. It is also found at different levels in the ground and in different forms. The loose murrain, for example, may be found from one to forty inches beneath the earth. Besides this, the solid ironstone, too, is usually found close to the surface of the earth. Further- more, this ironstone may extend many yards below the earth, and it is useful for building purposes (24, p. 15).

It should be pointed out, however, that some parts of the country do suffer from soil erosion. The active agents responsible for it are: storms, overcropping and overgrazing, but since the land is mostly a plateau, erosion from runoff is minimal. However, the abundance of heavy rainfall always keeps the growth of the protective vegetation cover, particularly elephant grass which covers most the south and builds and restores soil fertility and structure. Another equally effective device that has stemmed down soil erosion is shifting cultivation and intensive terrace cultivation 10

that has been adopted by many farmers (24, pp. 15-16), While still on the same subject, Hickman and Dickins (23, p. 30) report similar conclusions.

The People The population of Uganda is estimated at about 9.5 million people, of whom all except about 10,000 Europeans and about .100,000 Asians (Indians, Pakistanis, and Goans), are Africans (20, p. 2). At this juncture, it must be pointed out that the Asian population has been almost halved by a recent government order to expel nearly 50,000 Asians

holding British passports. These Asians are alleged to have been engaged in what the government calls "economic sabotage." However, the charge remains to be substantiated by concrete evidence, or else the whole issue is nothing but a political smoke screen, designed to conceal government1s mismanagement of the economy (54, p. 1). After the census of 1969, Uganda's population showed an increase of 47.7 percent in the ten year period from the 1953 census figure of 6,500,000 (20, p. 2). Although Uganda is not overcrowded, the average density is about 109 people to the square mile. Since overcrowding is influenced by a variety of geographical and economic conditions in the country, it follows that population distribution varies throughout the country. For example, Kigezi District has average density of 260 people to the square mile, while 11

Karamoja District has the lowest average density of 16 people to the square mile (20, p. 2). Other studies have shown similar conclusions (24, pp. 67-68). Hickman and

Dickins (23, pp. 212-213) argue that climatical and soil conditions are responsible for this wide variation in population distribution throughout the country.

Although it is not immediately apparent, the observant visitor quickly becomes aware of the diversity of tribes and languages which make up this progressive nation.

According to the census of 1959, there are ten tribes with populations in excess of 200,000 people. Besides, there are six other tribes which number more than 100,000 people, and there are many other small tribes with distinct traditions.

It is estimated that there are altogether forty tribes in this emerging nation. The major tribes include the Acholi,

Baganda, Basoga, Iteso, Langi, Lugbara, Banyankole, Batoro,

Kakwa, and Madi {16, pp. 9-10).

Uganda, like many other emerging nations in the world, is plagued with the problem of language. The nation has no common language of its own; instead, English has been adopted as the official language throughout the country. Besides this, there are six major languages that are recognized; namely, Luganda, Ateso, Basoga, Lungoro-Lutoro, Luo, and

Akaramojcng. In addition to this, there are many others that are not recognized (24, pp. 77-92). 12

p Historical Development It was over one hundred years ago that the first British explorers, Speke and Grant, reached Uganda and paid their respects to Kabaka Mutesa I at his court at Rubaga. Eighteen years earlier the first Arab trader, Anted bin Ibrahim, had visited Kabaka Suna's court; and, according to Sir Apolo Kagwa, it was in the reign of Semakokiro who died in 1815, that manufactured goods, blue cotton cloth,and wire, were first seen in Buganda (31, pp. 116-117). These events marked the tentative beginning of the era which has now concluded with Uganda's emergence as a sovereign state. But for centuries before this, a series of tribal immigrations, spreading mainly from the north, had established two widely differing political or social structures in what is now Uganda. In the north and east, restricted from, easy movement by the Nile, the Lake Kyoga waterways, the Nilotic and Nilo-IIamitic peoples were organized in small village and clan communities with no great overlords. In the west and south the Bantu peoples formed a number of Kingdoms or chiefdoms, each with a strongly centralised form of administration and a paramount rule of aristocratic caste. According to strong traditions in Bunyoro at least, the ancestors of these rulers also came down from the north (16, p. 3}. The Kingdoms were abolished in 1967, but the last Kabaka of Buganda was the thirty-sixth in dynasty. The Babito dynasty which ruled in Bunyoro and Toro went to the 13 fifteenth century and was in turn preceded by the mystical Bacwezi. In this connection, Banyoro traditions name two Bacwezi kings, and, even before them, eighteen kings of the shadowy Batemuzi dynasty. After some two centuries of leadership by Kitara (as Banyoro was then called), Buganda attained a position of pre-eminence during the nineteenth century and it was the strength and orderliness of its government which led to that state becoming the base of operation for Arabs and the European missionaries, traders and administrators (39, pp. 110-112).

The inevitable incursion of British influence in Uganda was the result of exploration prompted by two entirely different motives. In one case, it was the purely inquisitive quest for the source of the Nile by Speke and Grant, which eventually led to the visit of Stanley to Kabaka Mutesa's court. In the other, it was the humanitarian desire of Sir Samuel Baker to put down the Arab slave trade to the south of the Egyptian provinces in the Sudan, and the need to establish some military authority to prevent its revival (30, pp. 117-119). The third motive, it may be said, was dictated by what Hughes calls: The mixture of jingoism, philanthropy, and greed which led to British ventures in East Africa is revealed in a typical letter from Johnston to another Empire builder, Cecil Rhodes. He wrote of the 'necessity of extending the British Empire within reasonable limits over countries not yet taken up by European powers to provide new outlets for our manufactures and to afford further scope for British enterprises® (26, p. 25). .14

This passage clearly does reveal that the spirit of mercantilism evidently was behind all exploration ventures and the need for the sphere of influence in East Africa.

In November, 1875, two dispatches from H. M. Stanley were printed in the Daily Telegraph in which he drew attention to Uganda as a fertile field for Christian effort (1, p. 67).

As a result, the first Protestant missionaries arrived in

Buganda in 1877, and were followed two years later by Roman

Catholic missionaries (26? 35, pp. 147; 10-121). However,

Mutesa's early friendship, which was based on the hope of support against expansionist's aims of Egypt, rapidly cooled when he saw that military activities formed no part of the missionaries' aims. Subsequently, under the rule of Mwanga, the Christians and also Muslims converts were persecuted; later still there was grave strife between the Catholics and

Protestants which culminated in the Battle of Mengo in 1892

(39, pp. 121-138).

Meanwhile, control of the British sphere of influence in East Africa had been assigned to the Imperial British

East Africa Company in 1888. However, in Uganda, the pioneer- soldier and empire-builder (Lord Lugard) was made responsible for establishing the Company's influence in the region. His appointment to assume the Company's interests in Buganda was acknowledged by Mwanga in 1890 (26; 28, p. 149; 23).

Unfortunately, the widespread civil wars that left an unstable situation in Buganda, prompted the Company to evacuate from the country. It considered the situation too explosive to 15 cope with. However, in 1393, Sir Gerald Portal assumed the obligations and responsibilities of the Company on the behalf of an extremely reluctant British Government (39, pp. 139- 140). Following the takeover of the Company by Sir Gerald Portal, Britain officially established a Protectorate over Buganda in 1894 and this was extended to Bunyoro, Toro, Ankole and Busoga two years later (26; 39, p. 149; 140)• In the early 1890's, the old animosity between Bunyoro and Buganda revived and it was particularly charged by Kabarega's violent hostility against foreign influence in Buganda. For example, he exploited the religious rivalry that was ripe in Buganda. He went ahead and supported the• Muslim faction that mounted an offensive against Buganda. His partial act led to military campaigns against Bunyoro, and as a result, its territory south of the Kafu river and Nkusi rivers was ceded to Buganda and the transfer, despite his intense opposition, was confirmed by subsequent Buganda Agreements. Thus began the "Lost Counties" issue between Buganda and Bunyoro, and it persisted until after independence (24; 39, pp. 40-41; 197-198).

Meanwhile in 1897, serious troubles ensued in Buganda and Bunyoro. In Buganda, Mwar.ga with the help of some of the chiefs, rose against the British, but he was defeated, and the infant Daudi Chwa became Kabaka under a Regency headed by Kagwa. However, Mwanga and his old enemy Kabarega joined forces to harry the British; for the time being, both 16 were supported by Sudanese troops which had mutinied against their authorities (26, p. 149). But the mutiny was instigated by, as Johnston puts it:

These companies had just returned from the pursuit of the runaway Mwanga in Budau, for Mwanga, after ineffectually plotting for the overthrow of the British authority, had fled into German territory. Exasperated with fatigue and wiih continual severance from their wives, to whom they are much attached; doubtful of the honesty of the Administration, owing to the delayed payment of their wages; scared at the possibility of being lost in unknown lands far beyond their ken; they determined they would not form part of the escort of Colonel McDonald's expedition. They decided to put their grievances before an English officer at Kampala. He refused to listen to them. . . (26, pp. 236-241). The mutiny would have been probably averted had the officer in charge of the companies at least met some of the grievances put before him. However, the officer may have been under strict orders not to show any partiality with the troops; nevertheless, their grievances were real.

Mwanga"s rebellion and the mutiny of the Sudanese troops led to the reorganization of the Protectorate under

Sir Johnston Harry in 18S9. Agreements were made with

Buganda, Toro, Ankole, in 1900 and 1901, and the rest of the Protectorate was firmly consolidated by 1919 (24, pp. 42-44).

Recent Political Developments Although until 1967 the traditional native authorities enjoyed considerable measures of autonomy, Uganda had to some extent been developed as a unified country with the organs of the central government geared towards becoming progressively more representative of the people. Thus, the Executive and Legislative Councils were first established in 1921 to assist the Governor. However,.as David Apter observes, such action was long overdue (1, p. 162)-. At any rate, it was a welcome move and step in the right direction. The Executive Council was composed of ex officio and official members of the government. At the time of its inception, there were no unofficial members who were appointed to sit in the Council. But, its two most important figures, besides the Chief Secretary, were the Chief Medical Officer and the Financial Secretary. For the Legislative Council, it consisted of four officials and two Europeans and one Asian. But the Asians declined to cooperate with the Governor because they wanted parity representation in the Council; for this reason, there was no Asian when the Council first met. It should be noted here that there was no African who was appointed to sit in the Legislative Council (1, p. 163). The introduction of parliamentary mechanics in 1921, did not open the door for African participation in Legislative meetings. As a matter of convenience this arrangement never materialized until 1945.

From 1921 until 1945 the Legislative Council underwent few major changes. For example,, the first Africans entered the Legislative Council in 1945, when membership was increased to fourteen—seven government officials and seven non-officials (two Europeans, two Asians and three Africans). Henceforth, the Council experienced constant modification (1; 39, p. 167? 18

• 206). As time passed, membership of the Council was increased again in 1947, and in 1959, when Africans were given parity with combined European and Asian unofficial members. Political strife which had persisted between the Buganda government and the British government was evidenced by the Buganda Lukiko1s (parliament of the former Kabaka's ^Government) refusal to put forward names for nomination to the Legislative Council; thus they maintained their reluctance to accept one form of close association with the central government institution of the Protectorate (26, p. 179). Throughout, the 1950's constitutional advance was swift. However, in the latter part of 1953, a major constitutional crisis developed in Buganda which led to the withdrawal of recognition from Kabaka by the British Government, and consequently, led to his deportation to Britain. But the

.impasse was ended when a new Buganda Agreement was drawn upf inter' alia, it redefined Buganda's status as a Province of Uganda, and it cleared the way for Kabaka's return in 1955 (26; 39, pp. 167-171; 208-209).

After 1955, rapid constitutional changes followed which paved the way for Uganda's eventual complete Independence on October 9, 1962 (24; 26, pp. 60-63? 174-193). Under the leadership of Dr. A. Obote, an energetic and uncompromising nationalist, Uganda entered into a period of sudden political changes. For instance, on the First Independence Anniversary 13

President, and Sir Edward Mutesa was appointed to the

Presidency (39, p. 211).

In 1966, serious misunderstandings developed within

Obote's Government. The schism led to the arrest of five of

Obote's Cabinet members on February 22, 1966. As one might expect, the crisis offered Obote an opportunity to assume all powers of the Government in Uganda. Without delay, he announced that he had assumed the full powers of the

Government. To this effect, he followed two days later by suspending the Constitution of 1962 (24; 37, p. 181? 83).

When the dust of the crisis had settled down, Obote, once again having plotted his political graph, introduced an intermim constitution which was approved by the National

Assembly. As the rules of the game go, Obote was immediately sworn in as executive President of Uganda, replacing Sir

Edward Mutesa (24, p. 181).

At this juncture, it should be stated that the Baganda, who had viewed Obote's politicking with cynicism, rejected the interim constitution. To reciprocate the ouster of Sir

Edward Mutesa as the President of Uganda, the Buganda Lukiko passed a resolution in which it demanded the withdrawal of the Uganda Government from the territory of Buganda by

May 30 (24, p. 196).

The decision by the Lukiko to expel the National

Government from its territory raised the fever of tension between Buganda and the Central Government. Consequently, 20 sporadic rioting and fighting in many rural areas of Buganda erupted. These riots were directed purposely against Central Government installations ana police outposts. Accordingly,, on May 24, 1966, the Central Government forces seized Mutesa's palace at Mengo. Mutesa, now deposed from his throne, fled to London,where he died in November, 1969 (24, p. 196).

After acting as a watchdog for it, Obote apparently had designed to make the nation a Republic within a short time. History provides a documented record for this assertion. For example, the 1966 Constitution was replaced in 1967. Under the 1967 Constitution, which came into being after acrimonious debates in the National Assembly, on September 8, 1967, Uganda became a Republic. Hence, it abolished all tribal kings. Under this Constitution, the Republic was vested with a strong central administration under a powerful presidency (3; 24, p. 3; 181). Whatever may be said, none can deny the fact that Obote's handling of the 1966 crisis and the ouster of Sir Edward Mutesa placed Obote into an implacable situation with the Baganda. To the Baganda, Obote was their archenemy, but to the rest of Uganda, he was considered as a true nationalist, who was determined to see Uganda run on democratic principles and not on feudal and separatists' dreams. At this point, one may wonder whether Obote utilized dictatorial mechanics to achieve his goals. Meanwhile, one analyst has noted : In the midst forest of Uganda tribal politics, however, Obote, has proven himself to be a maneuverer whose foresight and cunning have invariably overturned the most ingenious strategems of his enemies. When his political fortunes were at their lowest ebb, and just as he appeared to be losing his grip, not only did he surprise his opponents by creating the Commission of Inquiry, but he took the brilliant gamble of assuring that its composition was beyond his political control, free to scrutinize his personal probity as it pleased, Then he turned the attention of the country from the debate over his honesty to the controversy over his new constitution (37, p. 85). Obote may have not been a true dictator, yet, the ghost of a dictator seems to have haunted him as this passage reflects. For example, he outwitted his enemies in his own Cabinet and arrested them, as mentioned before. And on certain occasions he consistently outwitted the Kabaka, who had never really had the stamina for the power game in the first place. Although Obote may have thought he was now able to outwit his enemies, he, nevertheless, did become a victim of plots and tricks similar to those he had used before. In this direction, the military overthrew his Government after a bloody conflict on January 13, 1971. As always is the case, the Military accused the civilian government of corruption and nepotism (16, p. 8). Upon assuming the government, the Military Government declared that it would not turn the government into the civilian hands until it had put the affairs of the country in order. But experience has shown that the Military Government will not be able to achieve this goal. Already, 22 it has plunged the country into fear and insecurity, particularly as a result of its expulsion of Asians from the country. Under these conditions, the country has been placed into a precarious situation from which it. may not be able to recover soon. In view of this, economic development has almost been brought to a halt. Indeed, economic development is closely linked with political stability and the ethos within which it operates, as Bhagwati notes (6, p. 202). But currently, Uganda is engulfed with fear and insecurity. In such a case, the government is the only force capable to create stable conditions under which fear and insecurity could be reduced. Adopting a similar tone, Curie wrote, "What we would wish for all people is first and foremost the diminution of pain, suffering, fear and insecurity" ( 8, p. 2). It follows then that whatever government is in- power, has the responsibility to eliminate or diminish all these components. One may argue whether the present government of Uganda is in a position to create a climate in which it is possible to diminish this ill-fare, evidence has shown that it has increased ill-fare instead of reducing it. CHAPTER II

THE ECONOMY AND ITS PROBLEMS

The Structure of the Economy Uganda's economy has been and still is marked by the presence of two distinct sections, the modern market economy and traditional African (5, p. 4). The traditional economy, which is mainly peasant agriculture, is the back- bone of the national economy. A quick glance at the statistics clearly testifies to the accuracy of this statement. In this direction, agricultural products earn 80 to 90 percent of Uganda's foreign exchange and 90 percent of the population works on land (17, p. 5). In view of these statistics, it is not surprising to note that even the World Bank Mission to Uganda commented: Uganda remains an agricultural country; two- thirds of gross domestic product is derived from farming and over 90 percent of all exports are produced from land. Agriculture is still in large part subsistence farming (mostly done by women with hoes) with a growing, but as yet smaller, prooortion of total output for the market. . . "(29", p. 15). Although agriculture does overwhelmingly dominate the economy, Uganda is not designed to remain an agricultural country as this passage infers. On the contrary, it was the colonial power which had shaped the country to remain predominantly agricultural. The British authorities who had 24 ruled the country for almost seventy years were not interested in developing the economy beyond a subsistence level. Instead, as Seidman puts it, "The British were eager to encourage • production of raw materials in Uganda for their home industries" (51, p. 7). Similarly, Mukherjee bitterly contends that the British intentionally subjugated the economy to serve their interests (42, pp. 166-184). Moreover, like any other country in Africa, Uganda was tailored to furnish the metropolitan country with its raw materials and to serve as a new market for its manufactures. . In this connection, Woolf succinctly notes: Their writings and speeches show that they conceived of an African 'colony' as a source of wealth to the 'mother-country,' because it furnished a new market for the European industries, and a place where European capital could be lucratively invested (66, p. 53). In line with such objectives, Uganda was destined to concentrate on agricultural production of raw materials and foodstuffs which could not be grown in the temperate zones, and besides, it acted as a dumping market for unwanted wares from the mother-country.

In addition, since the ruling power had conceived of Uganda as a potentially expanding market for its home industries, the administration tended to pursue policies which discouraged competing industrial growth in the Protectorate. For this reason, a very small share of the Gross Domestic Product of Uganda was, by the time of 25

Independence, produced by this sector, viz., 3.2 percent was the only contribution which this sector added to the economy (51, p. 11).

It is worth noting that similar policies were implemented throughout the continent by imperial powers. In view of this, foreign companies and their interests operated under the umbrella of the public objectives. To this end, Hunton wrote: ". . . have had an ever increasing incentive to employ the public policy, the public purse and the public force to extend their field of private investments, and to safeguard and improve their existing investments" (27, p. 80).

Such was the drama of the exploitation of the continent. The drama which went on unchecked until the pendulum for Independence swung, only then were the interests of the colonial powers modified in the end. Along with such . development the economies as a whole were restructured to serve all the people.

Meanwhile in Uganda, the limited industrial sector (the modern market economy) was at the time of Independence largely run by non-indigenous groups—Asians and British companies monopolized this sector. In this view, the indigenous people always benefited from this sector through employment. However, as Kamarck has well described: In their attempt to make a profit or get their capital back, some companies and concessionaries indulged in activites that resembled plundering of the territory under their control more than it did economic development (34, p. 13). *> 6

The point to be stressed here is that none of the foreign companies which operated in Uganda or elsewhere on the continent were interested in developing the country or the continent per se. But rather, these companies v/ere only interested in appropriating Uganda's wealth without ploughing back any profits for its development. While Kamarck has presented an accurate documentation of the deleterious acts committed by some companies, he, nonetheless, has omitted some pertinent information pertaining to the amount of wealth which these companies removed from Africa. In this line, Hunton estimates that almost twenty billion dollars worth of mineral deposit, besides other products were extracted from Africa without injecting back any profits for its development (27, pp. 68-72). Thus he wrote: Twenty billion dollars worth of minerals, more or less, from sub-equatorial Africa and additional massive quantities from other areas—and yet they say Africa is poor. If by that is meant the mass of the population, it is certainly true. But why should the people be poverty-stricken when the continent's sub-soil yields such wealth? The answer is obvious: the mineral riches and the profits therefrom are taken by non-Africans (27, p. 73). Hunton has hit the nail on its head. Without intellectual snobbery, he has negated the usual assertion that Africa is a poor continent. But, poor, in what manner? Is the poverty of the continent the result of its own fate or what? Certainly, had colonial powers planned to develop Africa 27

today would be a different Africa. Besides, had such sums drawn away from the continent, and especially, from Uganda, been at the disposal of a responsible Government of

Ugandans, such sums would have transformed the face of the .

country in a decade. The country would have had those things which it is now critically seeking for, viz., schools,

factories and hospitals.

As indicated earlier that agriculture is the backbone

of Uganda's economy, it follows that its impact in the

economy is reflected by the growth or deterioration of the

economy (20, p. 5). In fact, between 1946 and 1952 the

economy enjoyed a healthy rate of grov?th under the stimulus

of export earnings, resulting mainly from large rises in

the prices of two major exports, cotton and coffee. But

the rate of growth declined drastically in the mid-1950's,

and the national output was virtually halted between 1957

and 1962. The stagnation of the economy was due to sluggish

export earnings, which in turn depressed investment in the

economy. However, the adverse effect which the economy

felt was offset by Government's increased expenditure during

this period (24, p. 221).

Accordingly, the impact of the agricultural sector, is

further reflected in the national gross domestic product

(GDP). For example, as Table I presents the accurate

picture of economic growth during 1966 and 1969, the

agricultural sector as may be seen, played a key role in 28

this steady growth. According to Table I, the average growth rate of the economy over the period 1966 to 1969 was 6,3 percent per year in real terras (21, p. 11). However, in 1969 the economy realized a healthy growth of U Sh 7329 million at constant prices, an 11 percent increase from the previous year's levels. The expansion in 1969 mainly came from agriculture as a result of a record coffee crop and

L sizable increases in the output of cotton, tea, sugar, and tobacco (21, p. 1.1) . It should be noted that commercial agriculture is the largest contributor to the economy, accounting for 45 percent of the monetary gross domestic

product at constant prices in 1966-1969 period. Services (transport and communications, rents, and miscellaneous services), the second largest sector, fluctuated at 15 to 19 percent of monetary gross domestic product, while whole- sale and retail trade declined its share from 18.6 percent, accounts for 5 percent of GDP, And about 25 percent of overall GDP is generated by the subsistence sector.

The general pattern in developing nations today is that the Government should always play a significant role in the economy of its country (24, p. 223). The Government of Uganda's participation ir. the economy of its country is channeled principally through its statutory corporation, the Uganda Development Corporation (UDC). UDC was established in 1952 with the objective of promoting the economic and industrial development of Uganda (20, p. 6). This organ was 29

TABLE I UGANDA: GROSS DOMESTIC PRODtfOT AT FACTOR COST, 1960 PRICES (In Million U Sh1)/

— Industry 1966 1967 1968 1969 Monetary Economy: Estimate Forecast Agriculture 1,222 1,268 1,278 1,440. Cotton ginning, coffee curing and sugar manufacture 139 142 131 156

Forestry, fishing and hunting . 55 63 70 79 60 63 63 64

Manufacture of food products .. 28 32 34 37 Miscellaneous manufacturing ... 126 136 148 163 65 67 69 | 64

Construction 74 80 103 116 Commerce 434 419 419 197 Transport and communications .. 167 182 190 197

Government 131 1.24 137 141 Miscellaneous 303 335 335 366

83 85 90 94

Total 2,887 2,990 3,088 [3,376 Nonmonetary Economy: Agriculture- 846 878 911 950

Forestry and fishing 116 119 . 124 128

Total 962 i 997 1,035 Ii/oTF

Gross Domestic Product 3,849 3/988 4,123 4,45 4' U Sh 1 = $0.14

Source: Adapted from Overseas Business Report, June 1970, p, 5, 30 empowered to undertake investment in areas of production into which private enterprise was unwilling to venture its resources. Another Government agency is the Uganda Export* and Import Corporation. This agency is principally concerned with the import of essential food, clothing, and other qualified supplies. However, the Uganda organization rules on the importation of all products into the country, for which it collects a commission (21, p. 11).

The Dominance of Agriculture Uganda is a "nation cf farmers," one author has remarked. (67, p. 19). The importance of agriculture to Uganda is quickly brought home by a glance at the statistics of the industry. It accounts for more than half the gross domestic product, and for between 80 and 90 percent of overseas earnings. And approximately 90 percent of the population, including one-fifth, of wage earners derive their livelihood from the land (21; 24, pp. 11-12; 235).

Just as statistics impress the casual observer with the overwhelming importance of agriculture on Uganda's economy, equally important to note is the fact that this sector is more or less plagued by a host of problems. In this context, the sector, though beyond its control, is often harassed by vagaries of weather and fluctuations in world markets (21, p. 9). Hence, Uganda's dependence on export oriented agricultural products deprives the country 31 of its ability to control the destiny of its economy. In this connection, Mukherjee once bitterly notedt

Her one-sided economy, dictated primarily by the inner-imperialist rivalry between the British and American monopolists over the demand and supply of cotton, decided her unstable position and her chronic dependence on the metropolitan country (42, pp. 173-174).

Mukherjee's charge was valid, say, ten or more years ago, but the position of cotton today has changed. For this reason, to label a similar charge on either the British or American will have no foundation upon which to base such allegation.

However, Uganda:s dependence on agricultural export earnings has made the country susceptible to adverse effects.

For instance, sharp shifts in coffee prices over the years have strongly affected the economy. Furthermore, cotton output is prone to drastic changes resulting from climatic

factors. Therefore, rampant, unpredictable fluctuations do make direct impact on disposable private incomes, but in

the meantime such shifts also extend their effects on

available public finance, and further influence fluctuations

in Government expenditure (47, pp. 320-323). Similarly

Bhagwati. has concluded that instability in export earnings

"poses problems of domestic and international adjustment

which few economic administrations in the underdeveloped

countries are either trained or equipped to solve" (6, p. 61).

At this point, it should be noted that the Uganda

Government is therefore, attempting to increase diversification of its economic structure through expanding manufacturing and other industrial activities. In addition, the Government is also trying to strengthen and broaden the rural sector to withstand periodic market, weather and price shifts (21, p. 9). While the agricultural sector is declining in importance, its overall production yields per acre are not encouraging. This low yield per acre, one could attribute to the poor quality of soil; on the contrary, low yields in this industry are the result of poor farming practices emanating from archaic methods used by peasants (40, pp. 78- 79) . To increase efficiency and productivity in this sector, one author has noted that favourable conditions should be available to stimulate such performance. In this instance, he cites: "farmers increase their performance when prices increase," they also should have access to the factors of production, they should be exposed to fresh techniques of production and farmers should have unrestricted access to markets for their goods and their consumer goods (32, p. 26). Adopting a similar line of argument, Kamarck contends: "Rapid progress in agriculture can be achieved only by moving ahead on many fronts" (34, p. 90). At this juncture, it is worth noting how the Uganda Government is overcoming some of the problems cited above. High on the list of Government's priorities, for example, is the promotion of other cash crops besides cotton and 33 coffee. Table II shows the contribution that cash crops are putting into the economy. Moreover, the Government has planned to accelerate the mechanization of the agricultural sector. At the time of Independence there were only thirty- nine tractors in the country, but by 1968 there were 878 and the number today is certainly much greater. In addition, a variety of other modern agricultural equipment is also at the disposal of Uganda farmers (67, p. 19). At this point, it may be added however, that the archaic farming methods in Uganda are undergoing a revolution today.

TABLE II UGANDA: AGRICULTURE PRODUCTION 1968-70

(In metric tons)1 1968 1969 1970

Coffee 133,000 247,000 170,000* Cotton 345,000 423,000 468,000' Tea 15,000 17,000 18,000 Sugar 152,000 138,000 140,000 Tobacco n. a. n. a. n. a.

•Provisional 'In 480 lb. bales n.a. Not available Source: Adapted from Overseas Business Report, June, 1972, As reported in Statist Teal Abstract,- 1970. 34

As Table II discloses, coffee is Uganda's leading crop, accounting for one-fourth of the total value of the cash crops and providing the largest source of foreign exchange (21, p. 13). Trailing behind in importance is cotton. Cotton was once Uganda's leading crop, but its leadership was overtaken by coffee. Since then, cotton has declined in importance. However, it provides about 30 percent of Uganda's export earnings (21, p. 14), and about 60 percent of the country's population derives some income from cotton (20, p. 7). The crop is widely grown all over the country, on small peasant "shambas." The imporance of these two cash crops to the economic development of Uganda is very immense. For example, Livingstone and Ord have noted: The economic history of Uganda, therefore, is very largely one of the development of peasant agriculture, and this as we saw in chapter 3 is based on cotton and coffee (36, p. 113). Galloping behind .coffee and cotton is tea. Tea is Uganda's third most important crop and fourth largest export. For instance, it accounted for 6.1 percent of total exports in 1968, when compared with 3.2 percent in 1962 (20, p. 7), It is estimated by 1975 tea output will reach 45,000 metric tons (21, p. 15). Sugar is Uganda's fourth largest cash crop. It is predominantly grown on estates. There were approximately 46,000 acres devoted to sugar cane production in 1968. But the Uganda Government is considering plans to establish at least two more estates (21, pp. 7-8). Although OS most of the sugar produced in Uganda is traditionally for domestic consumption, a substantial portion is exported to

Kenya. While four major crops have been emphasized in this section, it must be pointed out that other crops still provide minimal incomes to Uganda farmers, viz., tobacco and ground nuts (20, p. 8).

r Agricultural Prices and Marketing

The story of export agriculture is simple. Two crops dominate the scene. As noted before in the preceding lines, both cotton and coffee are entirely grown on peasant "shambas."

But the export of these crops is particularly vulnerable to fluctuations in world market prices (47, p. 338). Given these circumstances, the Uganda Government could not just sit idly by without rallying to the cause of its peasants.

In this connection, the precarious world fluctuating prices also prompted the World Bank Mission to Uganda to comment:

. . . it is not at all surprising that the Government has had to concern itself with the impact of the fluctuations in the world market prices of these crops on the growers and the economy generally (29, p. 17).

The importance of agriculture in the economy, as had already been stressed, was a matter that the Government could not leave to the gymnastics of the market forces.

For this reason, the Lint Marketing Board and Coffee Marketing

Board were created by an Act of Parliament. These organs were empowered to administer the bulk purchases and marketing of these crops during World War II (30, p. 304). 36

The decision by the Government to subsidize coffee and cotton prices was borne on the conviction that without inducement, the production of these vital crops might decline, and further, the Government realized that variations in domestic incomes resulting from shifts in world prices had to be mitigated (30, p. 304), as such variations may be

felt in public finance. Since their establishment, the boards have done their job extraordinarily well; however, they have also encountered numerous problems. For example, the Coffee Marketing Board k has faced the problem of finding markets for the increasing v coffee output. Uganda as a member of International Coffee Agreement is allotted its quota, but Uganda's output has exceeded its export quota (30, p. 308). Similarly, the Line Marketing Board has encountered recurrent losses ever since 1961 and 1962, but the considerable resources of the Fund were exhausted in 1965 and 1966. Since then the price paid to cotton growers went down (from U sh 0.60 to U sh 0.40 per pound) at the beginning of 1966/67 year crop (30, p. 307). In light of the continued uncertainty in market conditions throughout the world, Uganda's economy, for that matter, will for some time to come continue to be harrassed by forces beyond its control. Nevertheless, government's decision to steer away the economy from over dependence on agriculture, will in the long run save the country from frequent economic stagnation. 3?

Industry

Many theorists would argue tenaciously that low-income nations would maximize the potential of their economies, if such countries would adopt the doctrine of comparative advantage and specialization. In short, low-income countries should particularly concentrate their economic activity on the production for export of commodities whose production involves relatively low intensities of capital and skill (45, p. 41). The curious irony about such argument, the low-income countries might say, is that many of the theories in currency today have been invented or proposed by economists from the industrialized nations. In view of this, developing countries

!• always view with suspicion such theories, regarding them as a plot designed to keep them under the thumb of industrialized nations. For that matter, economic planners from developing countries often disregard the. persuasiveness of such theories, and see their mission as being dictated by economic as well as political motives (6, pp. 165-166). Given such argument, Uganda sees industrialization as a key to economic progress. In this instance, it sees manufacturing in national output as an element that would increase productivity per workers, along with this, manufacturing increases rapidly the economies of scale, and further, the manufacturing industry does interact with agri- cultural industry (15, p. 10). 33

As noted earlier, Uganda's industrial capacity at the time of Independence was quite minimal; however, this situation has been altered. For example, industrial activity- manufacturing and processing, mining, construction, and power- contributed in 1969 an estimate of Shs. 661 million (1 Uganda shilling equals approximately US $0.14) to the national income, compared with Shs- 498 million in 1966 (21; 24, p. 10; 261).

In its rapidly expanding Industrial sector, Uganda is fortunate in having either natural or specially created conditions which are ideal for the establishment of new business and the growth of existing ones. With a fertile soil, good climate, as already noted in Chapter I, and a policy of greatly increased agricultural production, the country is well equipped to cater for the needs of a growing industrial population. Additionally, and aided by farm mechanization already mentioned, there is a ready supply of labour, and a labour force which increasingly has a growing content of skilled workers (67, p. 27).

Like the agricultural sector, the industrial sector, has also many problems to wrestle with. The small nature of the home market, for example, has beer? a major limiting factor in restricting the expansion of industry (29, p. 20). Herrick, on the other hand believes that any future expansion of the industry will be limited by, besides the small size of the market, the absence of a class of African industrial 39 entrepreneurs, the shortage cf domestic capital and its inaccessibility tc the sea (24, p. 262). Likewise, Seidman contends that Uganda's industrial sector is confronted with significant problems, viz., the rate of capital formation in manufacturing has appeared to be declining, as forecasted in the Development Plan in 1967-68. Moreover, he continued, industry has remained highly dependent on imported raw materials, which are mainly composed of last state assembly.

The continued importation of such goods, Seidman argues, will constitute a drain on the balance of payment (52, p. 28).

At this point, it is important to- note that expulsion of almost 50,000 Asians from Uganda (many of whom were badiy needed skilled and professional workers in the country), has

left the industry as a whole in bleak picture (55? 60, p. 1,3?

48).

Power

The raw'material of any industrial revolution is a

ready source of fuel, but Uganda, as Herrick has. well

couched it: "With no local sources of fossil fuel, the

country depends on hydroelectric power? imported oil, and

firewood for its energy requirements" (24, p. 281). The most important measure in this connection has been the

establishment by the Government of Uganda Electricity Board.

This body is charged with the sole responsibility for

generating and supplying electricity throughout the country 40

(67, p. 36). At present the major hydroelectric.power plant is located at Owen Falls Dam on the Victoria Nile at Jinja (20, p. 11). The construction of the Owen Falls hydroelectric scheme, which is capable of producing 150,000 kilowatts, has enabled Uganda to have one of the most extensive trans- mission networks of any developing country in the world (67, p. 36). However, the potential of the scheme is not fully utilized. Furthermore, in order to supply electricity to rural areas, smaller plants with a capacity of 3,300 kilowatts each have been built at Arua, Kabale and Moroto (30, p. 311).

When the Owen Falls power plant was first built, it was expected to provide inducement to the development of industry. The government, for example, had hoped the availability of ample energy at a reasonable price would attract foreign investors, and eventually lead to the rapid establishment of secondary industries. Even though several important industries mushroomed around Jinja, such as the copper smelter, steel works, and textile mills, the anticipated industrial development did not materialize as envisaged (24, p. 282). However, the building of the power plant in Jinja was not a complete failure. On the contrary, the scheme has had its tangible successes. For instance, in the two decades of its establishment, the Uganda Electricity Board 41 has managed to reach all the major towns in the country, while at the same time exporting power to Kenya (67, p. 36). Further, it can be noted that the Board is now embarking on a realistic programme of rural development.. Another noticeable success of the power industry can be ascertained from the volume of its output. For instance, as Table III clearly shows, total output has increased from 278.4 million kilowatts in 1950 to 735.4 in 1970. As shown in Table III, exports to Kenya accounted for approximately 34 percent of Uganda's sales. Moreover, domestic consumption of electricity has increased significantly, rising by 46.7 percent between 1963 and 1967. Because of the increased consumption of electricity at home, the Uganda government has planned to construct a 600 megawatt hydroelectric station at Murchison Falls on the Nile. It is estimated that this new plant, if built, would produce about four times the capacity of the Owen Fails generators (20; 21, p. 11; 28). The concluding note about this industry is that it has made impressive contributions to the development of the industrial sector; furthermore, this contribution is matched by the aid electricity has given in raising the standard of living of ordinary people. 42

TABLE III

UGANDA: PRODUCTION AND SALES OF ELECTRICITY 1958-1967 (Millions of Kilowatts)

Power Station Sales Use and Trans- Total Year Local To Kenya mission Losses I Generated

1958 162.73 89.95 25.76 278.44 1958 185.45 129.39 31.04 345.88 1960 202.43 160.09 33.94 396.46 1961 209.17 191.29 34.38 434.84 1962 228.79 188.90 35.45 453.14 1963 270.62 189.91 36.47 497.00 1964 293.23 177.63 50.14 521.00 1965 332.09 190.48 49.44 572.01 1966 375.64 203.04 56.25 624.94 1967 397.08 241.98 65.04 704.10

Source: Adapted from Overseas Business Report, June 1970 as reported in Uganda Statistica1" Abs t r a c t, 1968, Ministry of Planning and Economic Development, Entebbe.

Mining From our review of industry as a whole it can easily be seen that one of the greatest areas of potential industrial exploitation is mining (67, p. 31). Evidence has shown that Uganda is meagerly endowed with minerals. However, mineral exploitation, though a limited source of foreign exchange earnings, does not play a key role in the economy. Moreover, the proportion of gross domestic product that comes from this industry is minimal (24, p. 279). In view of this, a quick glance at the statistics accurately tells the story as it is. 43

In this context, as Hansen has well recorded, "minerals are of relatively minor importance in Uganda's economy,, contributing less than two percent of gross domestic product" (21, p. 21). Extending this analysis, it should be noted that the only consolation the Uganda government gets from this industry is that, in 1969, blister copper accounted for 12.3 percent of export earnings. And happily, copper makes up almost 90 percent of the value of total mineral production and is the source of all foreign exchange earnings from the mineral exports (20, p. 9). While a wide range of minerals are known to exist in Uganda, so far only a few have been exploited besides copper; namely, gold, beryl, tin, phosphates, limestone, tungsten and salts (67, p. 31), are being exploited. For some time to come, it could be concluded that. Uganda's economy will continue to be overshadowed by agri- cultural sector as it has done in the past. This belief rests on the evidence that Uganda is ill-endowed with vital mineral deposits, which from practical purposes sometimes provide a basis for rapid industrialization when carefully used. However, recent United Nations aerial geophysical surveys over 12,000 square miles of Uganda have shown the existence of promising mineral deposits—manganese, lead, and additional copper (20; 57, p. 9; 18). Sven with these latest discoveries, the prospects for Uganda's economy 44

9 transforming into an industrial economy within a short time are remote. This assertion stems from the fact that the existence of such minerals beneath the earth, does not guarantee that their exploitation will eventually change the picture of Uganda's economy overnight. However, the exploitation of these minerals will certainly generate some industrial activity in the country»

Tourism As indicated in Chapter I, Uganda is the basis of a thriving tourist industry today. Again statistical evidence attests the accuracy of this assertion. In 1969, for instance, visitors to Uganda totalled 73,980, of whom 70,359 declared themselves to be on holiday. While the tourist industry in Uganda cannot match that of Kenya or Tanzania, it nevertheless generates.an estimated U Shs. 160 million foreign earnings (21, p. 26).

The growing importance of this industry adds another chapter to the economic development of Uganda. Already it has become the fifth largest foreign exchange earner. To some extent, its continued expansion is dependent upon the provision of better and large facilities (24, p. 297). In light of this, drastic steps have been taken to not only better and enlarge the present facilities, but also new lodges have been built on areas of scenic attraction. For example, better lodge accommodations have been built in 45

Kidepo National Park, Murchison National Park and Queen Elizabeth National Park (24, p. 297).

Transport and Communications In any developing country, internal and external communications are obviously matters of vital importance to a country (67, p. 34). Uganda, for this matter, realizes that its economic development depends on its fairly well- developed transport and communications system (30, p. 312). The main arteries of Uganda's transport and communications system are, in order of importance, railways, roads, inland waterways, and airlines. To date, the railway network opened the landlocked borders of Uganda to the outside world in 1902. Indeed, this year also marked the beginnings of the commercial life of Uganda (44, pp. 180-188). Since 1902 the railway system has furnished the major transportation between Uganda and its other East African countries. Besides linking Uganda to other parts of East Africa, the railway system is Uganda's outlet to the seaport of Mombasa in Kenya. It is through this outlet that Uganda's foreign trade passes (30, p. 312).

Internally, the railway system provides transportation services to the copper mines at Kilembe, and to the important cotton growing areas of the northern part of the country (20, p. 11). Akin to the railway system is the road network of Uganda. One author has noted: "Indeed, without a good road 46

system, the economy wcnild have to remain very largely at

subsistence level, little hope for either industrial or agricultural advance" (67, p. 34). This quotation clearly describes what Uganda looked like almost seventy years ago.

It was the coming of the modern market economy, and the

establishment of a good road network that facilitated the

development of Uganda.

It can be argued that Uganda1s economic development

would be impossible without some kind of good roads. For

example, with more than one million separate agricultural

holdings spread throughout Uganda roads are essential for

the marketing of crops, whether for home consumption or

for export. In addition, roads play a major part in public

service, viz., as a factor in the development of tourist

industry, and for national security (67, p. 34).

Happily, Uganda has a road system which is generally

accepted as being the best in East Africa. However, these

roads are good by African standards, but uneconomical in

the long run from the standpoint of road and vehicle main-

tenance. It follows that the resulting increased

transportation costs adversely affect the prices of commodities

and produce for exports. Similarly, these roads also suffer

from inadequate bridging (24, p. 276).

Under its Second Five Year Plan 1966-71, Uganda had

planned to improve and upgrade its road system. In fact,

by 1971 the road programme consisted of the improvement of 47 many miles of main roads ana the construction of feeder roads, in light of industrial and agricultural development (67, p. 34). The road and railway system, it should be pointed out* is supplemented by inland water transport on Lake Victoria, Lake Albert, and the Albert and Victoria Nile, and by air transport providing both domestic and .international services. In recent years, the volume of lake transport has diminished, resulting from the extension of the railway system to the northern region of the country. However, internal air traffic has increased considerably. As may be expected, the increased internal air traffic has been stimulated by increased tourist traffic to the parks and game reserves (30, p. 313).

In Uganda, the main channels of communication between the government and the people are through the media—Radio and Television. But all Radio and Television services are operated by the government (21, p. 32). The complete ownership of all radio and television services gives the government advantage over the people. It can use these tools as a means for promoting its policies, but also such tools can be used for propaganda purposes—an inevitable ideal. Besides this, the press supplements radio and television functions. 48

Money and Banking Before independence, the Banking system in East Africa served the interests of its colonial master. The banking industry, so to speak, was in the hands of expatriate banks. But. political independence which was achieved in East Africa in early 1960*3, fundamentally altered the needs and the position of the dependent economies of East Africa (19, ' p. 504). However, during the period of political

independence, as Gershenberg well describes it; Commercial banking in Uganda, as throughout most of Africa, can be criticized for not having made a greater contribution towards indigenous economic development. The Banks that operated in the colonies were branches of foreign banks established to facilitate the development of exports desired by colonial power and only incidentally to development of an indigenous economy. Financing was mainly limited to providing short term self-liquidating loans to exporters of raw materials and to importers of consumer goods (19, p. 505). As this passage describes, policies adopted by foreign banks within Uganda, were policies that were in tune with the imperial desires. Moreover, it was inevitable that the Uganda government could not tolerate the control of its financial interests by foreign elements operating within its sphere of sovereignty. Before independence Uganda's monetary interests were regulated by East African Currency Board—a tool of imperial power. This organ was empowered to provide for and control the supply of money within Uganda, Kenya and Tanzania. The main weaknesses of this Board were that: it was not equipped 49 with principal powers by which a central bank could usually influence a country's monetary mechanism. Moreover, it did not function as a banker to four East African Governments; instead, commercial banks performed this role. Furthermore, it had no jurisdiction over the commercial banking system.

In addition, it did not set reserve requirements or lend to commercial banks. Under such conditions, the Board could not influence the credit policies of commercial banks pertaining to the terms of the nature or quantities of loans made (24, p. 350).

Thus, the limited powers of the Board placed complication on the general effort to mobilize East African credit resources for economic development. In light of this, three

East African Governments decided separately to establish national central banks. Accordingly, the Bank of Uganda was established by an act of National Assembly in May 1966, and on August 13, 1966, it became operational. The Bank, by the Act of Parliament was empowered to perform all the duties that a central bank usually does. In short, it had

to issue legal tender currency, maintain external reserves to protect the internal value of that currency, and promote

stability and a sound financial base conducive to balanced

and sustained rates of economic growth. Further the Bank

acts as a banker to the government and to the commercial banks. Additionally, it regulates monetary and credit 50 processes to ensure whether they are in tune with government economic policy (24, pp. 350-351). While the central bank acts as a banker to the government and to the commercial banks, the commercial banks act as custodians to the general public. In 1968 there were nine commercial banks that conducted services in the country. Seven of these banks were branches of the foreign institutionss Earclays Bank D. C. 0.; National and Gindlays Bank, Ltd.y The Standard Bank, Ltd.? all British, the Bank of India and the Bank of Baroda, both Indian? Ottaman Bank, Turkish? and the General Bank of Netherlands, and Uganda Commercial

Bank (20, p. 15).

Since the attainment of independence, the banking

system has witnessed a period of unprecedented changes. For instance, the Uganda Government by an Act of Farliament turned the Uganda Credit and Savings Bank into a full-service Commercial bank. The act was prompted by several reasons. First, it was designed to reflect the symbol of independence, as a witness to Uganda's sovereignty. Second, it was designed to provide added competition to already existing expatriate banks. Third, it was to provide loans to small businesses run by Africans under less stringent terms (19, p. 506). It is doubtful whether the bank has been successful in carrying out these objectives. It is not clear, for instance, if it has generated a competitive spur to the other commercial banks, or in providing loanable funds for small African businessmen. However, the bank has obviously served as a mirror of Uganda's sovereignty (19, p. 506).

Another change that the banking system witnessed since independence, was the creation of a central bank for Uganda in 1966. Prior to this date, Uganda's monetary affairs were regulated by the East African Currency Board (19, p. 510), as already noted.

The creation of a central bank, as pointed out before, did mean a fresh look at the entire commercial banking practices in the country. In this respect, another more radical change since independence occurred in 1969.

Accordingly, by an Act of Parliament of 1969, all expatriate banks incorporated in Uganda were required to have a paid up capital in cash of at least two million shillings. . But banks which were incorporated outside Uganda were prescribed a minimum capital of ten million shillings, and these liquid assets had to be held permanently in Uganda (19, p. 512).

The Act was further amended to provide for local incorporation of all banking and credit institutions operating in Uganda

(21, p. 38) .

However, in Obote's slouching towards socialism program, as Gershenberg coins it, a 60 percent nationalization of banking functions were announced in May 1970. But later, when Obote's regime was ousted by the army in January 1971, the public sector holding in commercial banks was reduced to

49 percent (19; 21, p. 79? 38). 52

In conclusion, one wonders if the enactments of various legislative acts, or the creation of new institutions has made any significant impact on both the operation of commercial banks and the economy as a whole.

Certainly, the impact of the regulation of the operations of commercial banks has been, as Gershenberg observes,

"surprisingly effective." Fcr example, the same author notes

that the reduction of bank credit to non-essential categories was much greater than what the government had envisaged

before (19, p. 521). Furthermore, as already noted, the

expatriate banks tended to invest their accumulated capital

in Europe rather than in Uganda. However, the regulation

of their operations meant that they could not commit their

funds outside the country freely as they had done in the

past. As a result of these changes, the expatriate banks

are now committed to develop Uganda economically, though

with reservations (19, p. 513).

In all the above discussion, one thing can be said to

be missing in commercial banking and that is—"dynamism."

In short, the commercial banks have continued to operate

in conformity with what has gone in the past. For example,

expatriate banks still make relatively short term loans and

make advances to commercial sector for export-import

purposes (19, p. 520) . With such a conservative approach

to lending, it is equally true to say that a new generation

of bankers is needed to man commercial banks. Bankers, 53

especially with great insight are needed to replace those elements in banking system who subscribe to the view that a "banker ought to sit in his office and be available to customers on demand" (19, p. 520). Unless bankers in Uganda see themselves as catalysts, the role of the commercial banks in Uganda's economic development will continue to be channelled through narrow participation. In noting the missing elements in commercial banking in Uganda, one is reminded of Cairncross1 observation of the general practices of British banks, when he said: Banks often reared in Anglo-Saxon tradition are usually chary of taking an active part in industrial development and have sometimes expressed rather doctrinaire views about the wisdom of using their depositors' money for long-term investment in industry (7, p. 169).

Certainly the attitude adopted by all the commercial banks in Uganda is that of the typical British banks. However justifiable the British case may be, Ugandan banks, it may be argued, should not marry to practices which do not promote the best interests of the economy of the country. CHAPTER III

THE ECONOMY AND ITS PROBLEMS (Continued)

Human Resources When the World Bank mission to Uganda handed down its report to the world organization, it noted that the growth in the stock of useful skills and knowledge possessed by the people of a country shared equal importance with a rise in the standard of living and growth in the stock of plant and machinery (29, p. 113). Adopting a similar line, Professor Harbison wrote:

The wealth of a country is dependent upon more than its natural resources and material capital; it is determined in significant degree by the knowledge, skills, and motivation of its people—i.e., its stock of human capital (32, p. 71). The crucial problem facing Uganda today in its economic development is the shortage of skilled manpower. In view of this, the above passage, for that matter, demonstrates in vivid terms why more or less economic development depends on the stock of human capital. Thus, the implication here is that a nation should be concerned about the stock of its human resources, just as it is concerned about its capital accumulation. Unfortunately, Uganda with a population of about 9.5 million has approximately 312,000 wage earners. This is

54 55 about 2 percent of the total population, while 90 percent of the population works on "shambas" {21, p» 35). Evidently Uganda is confronted simultaneously with two persistent manpower problems. First, it is faced with the shortage of persons with critical skills, viz., engineers, technicians, scientists, teachers, doctors, managers, nurses, craftsmen and many others (11; 22, p. 12; 45). Second, it is confronted with the issue of unemployment, though at this juncture, it is a minor issue; however, Uganda has the problem of underemployment.

The evidence of underemployment in the country has been, for example, noted by Seidman. To this end, he noted? Underemployment is, however, common. It has been estimated that the average working day is about 5-6 hours during the season; only in peak working periods is available labour fully occupied (51, p. 13). The urgent task before Uganda in this case is to produce an army of skilled workers and to utilize the available manpower to its capacity, But in the meantime, the Uganda government should encourage and assist the limited class of indigenecus entrepreneurs with some form of financial aid. Of course, this aid will depend upon the potential ability of each entrepreneur in question. It follows that the limited size of this innovative element in the country reaches to the core of McClelland's hypothesis. McClelland, for instance, hypothesises that a society with a generally high level of "n" Achievement will produce more enercretic 56 entrepreneurs who, in turn, produce more rapid economic development (41, p. 205). Precisely at this stage of economic development, Uganda should not wait until it has reached "n" Achievement stage hypothesised by McClelland. Moreover, if the Uganda Government is to spur vigorous economic development, it should certainly embark upon heavy investment in human resources; as indicated before, the Uganda government should particularly invest in human resources, whose critical skills are in dire need at this moment of Uganda's development. In essence, the government should invest, in the education and training of personnel, viz., teachers, doctors, scientists, managers, technicians, and many other professionals; however, the road to an early realization of the returns on such investment, always looks remote and unpromising, yet returns are inevitable in the long run. It is encouraging, though, to cite that the Uganda Government has already launched ambitious programmes designed to produce the urgently needed skills and personnel in the country. In this direction, it has extended and restructured the educational system it had inherited from colonial past (24, p. 113). Frankly, Uganda had at Independence an educational system which was only inadequately developed, but it was also wrongly oriented. It had a very small number of. local graduates, and only 31 percent, of the established posts in 57 the civil service—and those at local level were held by local people. Furthermore, University intake was discouragingly low, viz., about 250 students were admitted to the University' a year, and intake to secondary schools was no more than

2,200 per year. Moreover, only about 435,000 children were, enrolled in aided primary schools, less than 40 percent of the relevant age group. It was obvious that at this pace,

Uganda's hope of ever producing adequate trained manpower to cope with rapid development was very slim indeed (24, pp. 114-

117) .

In light of this, immediately after Independence the

Government recognized that one of its highest priority aims must be rapid expansion and reorientation of education at all levels. With this objective in mind, the Government gave top priority to higher and secondary education; it did this purposely so that the immediate development of the country would not be held up by bottlenecks, and a rapidly increasing number of crucial posts in the public services could be held by Ugandans. Additionally, it realized the urgent necessity to give adequate attention to the expansion of primary education, so that more and more children could be given the chance to lead a more meaningful and fuller life, and to play their part in shaping the new Uganda (67, pp. 38-39).

So far, the discussion given in the preceding lines has been primarily centered on the primary, higher and 58

University education. But, one should not get the impression that Uganda is neglecting specialized training. On the contrary, the Government has already invested enormous funds in the training of specialists. For example, as one author writes: Already many departmental schools for training the fields of health, agriculture, engineering, surveying and several other areas have been opened to meet the need for middle level manpower. In addition, a number of technical and commercial colleges have established to cater for technicians and skilled manual workers (67, p. 39). Certainly, the achievement in educational expansion at. all levels has been enormous. This has been as a result of the fact that Uganda has, in recent years, and is still today, spending a greater proportion of her national income and budget on education than almost any other developing nation in the world. For instance, approximately 6 percent, of the country's national income and 28 percent of total government recurrent expenditure is allocated to this area (16, p. 11).

In conclusion, it is no exaggeration to say that Uganda is now reasonably optimistic that the future problems in the field of education which are bound to crop up in a growing system will, given the same attention and determination, be certainly overcome (67, p. 39). An anonymous author has remarked that, "if education is one side of the welfare 'coin1* in all progressive countries, then the provision of forward-looking health service is the 59 other" (67, p. 41). Similarly, Pedro Belli has quoted Jacob Viner in these words: The first requirement for high labor productivity under modern conditions are that the masses of the population shall be literate, healthy, and sufficiently well fed to be strong and energetic, In many countries, I feel sure, if this were achieved all else necessary for rapid economic development would come readily and easily of itself. I also feel sure that whenever this has not been accomplished ... it is not necessary to look for other factors ... to explain the pervasive poverty and slow economic growth (4, p. 1) . Although physical, and cultural factors are responsible for the backwardness of many regions in the world, however, low productivity in these regions, is certainly the result of illiteracy, poor health conditions and malnutrition as noted in the above passage. From health point of view, Uganda is infested with numerous diseases. Indeed, the main health problems are communicable diseases, malnutrition and poor environmental conditions. The obvious causes, it can be stated of health problems in the country are: a low standard of living, a high general and health illiteracy, inadequate nutrition, poor housing, lack of safe water and basic sanitation, spread of various dangerous organisms, and extremely limited health care services. For example, one doctor renders services for 15,000 inhabitants, and 1.8 hospital beds serve 1,000 inhabitants (24? 29, pp. 135-144; 374-377). Uganda's most notorious, human killing disease is malaria. Herrick and his associates, for instance, have 60

concluded that in 1967 the number of cases and deaths reported outnumbered the combined number of cases and deaths reported from all other diseases. As a result of poor health, the same authors conclude that "the ability of people to perform labor is adversely affected, and human productivity is generally affected" (24, p. 142). Similarly, Walker (46) arrives at similar conclusions. Besides the notoriety of malaria fever in the country, the presence of sleeping sickness in some areas of the country had up to 1.940 hindered the exploitation of virgin lands. But, as a. result of the successful war which was waged against the villainous insects (tsetse flies) responsible for the malady, many areas since then have become inhabitable? a case in point, is the South Busoga Resettlement Scheme, a subject to which Watts has given scholarly treatment in his k00^' ?he; South Busoga Resettlement Scheme (65) . In light of this, it was and still is imperative that the Government cater for some health services urgently needed for those in need of them. Given this situation, the colonial power during its rule did organize health services on four levels; national, regional, district and local. The district administration for example is responsible for the health services on the district and local levels. It should be pointed out here that the present system of health organization and administration has certain weaknesses and deficiencies; for instance, there are no organized public 61

health services (Institutes of Public Health) so much needed

to cope with the health problems facing the country (16 „

p. 13).

It was indicated at the beginning of this chapter that

Uganda has a chronic shortage of trained manpower. This

shortage is particularly present in the main categories of

health personnel contributing their services for economic

development of Uganda. As Table IV reflects, the shortage

of health workers of all categories, especially those of the

professional level, constitutes a major obstacle to any

planned action in this area. Moreover, the uneven distribution

of health personnel, with a marked concentration in urban -

areas, adds to the problem (16, p. 13) . As seen from the

table, the Government is more or less the virtual employer

of most of the health personnel. However, there is a powerful

private sector, particularly in the medical field; pharmacy,

for example, accounts for 76.8 percent of the trained

personnel. Similarly, dentistry accounts for 66.7 percent,

and nursing for 49.6 percent.

Also a large portion of the professional physicians work in the private sector, and they account for 45.7 percent of the total number trained in this field. In view of these

facts, the question of health manpower does call for careful

consideration. It is only safe to say that the situation has received due attention from the Government (67, pp. 41-

42). 62

TABLE IV

THE HEALTH PERSONNEL IN UGANDA—1969

Category Sector Total Per , Number Inhabitant Government Private %

Physician 647 14,700 351 296 ;45. 7 Medical Assistant 368 25,800 368 - - Dentist 42 226,200 14 28 66.7 Pharmacist 56 169,600 13 43 76.8 Nurse 1,001 9,500 927 74 7.4 Assistant Nurse 2,516 3,800 1 1,268 1,248 49.6 1 Midwife 715 13,300 715 ; - Assistant Midwife 1,892 5,000 1,252 640 33.8 Health Inspector 154 61,700 | 150 4 2.6 Health Assistant 459 28,700 459 —

Source: Adapted from "Excerpts," as reported by Embassy of the Republic of Uganda, Washinaton, D. C., March, 1971, p. 13.

Recent Developments and the Present Position of Economy

From the political standpoint, Uganda has had no period of political harmony since the attainment of Independence.

When the new government assumed power in 1S62, it inherited unresolved issues. For instance, the case for the lost counties in Bunyoro cited in Chapter I was unresolved. The settlement of the dispute by a referendum became an emotional issue in Buganda and consequently, it led to rioting in the region and the downfall of Kintu's government in Buganda.

Besides the interests of traditional Buganda, other aggressive interest have plagued the Uganda Government. In this connection, Karamojong tribesmen have constantly carried 63 out extensive raids on neighbouring people? further,, other

ethnic elements have sought autonomy from the central

government (13, p. 331).

While tribal interests and tribal politics occupied

the Government's mind, its attempt to form a federation

between Kenya, Tanzania and Uganda was further frustrated,

by some skeptical elements within its own ranks (50, pp. 91—

105). The proposed federation (the subject which received

wide publicity within East Africa and overseas), was torpedoed

by Uganda's unwillingness to surrender its sovereignty on

the key issues of citizenship and foreign affairs in the

proposed federation (50, pp. 131-133).

The dream for an East African Federation was certainly

a step in the right direction. From economic standpoint,

had federation corne to being, it would have created a large

economic market in the region, it would have attracted

foreign capital; and it would have eliminated virtually all

the restrictions that exist today between the states (24; 35,

p. 316-13). However, the failure of the federation to

materialize plus tribal agitation within Uganda, as already

noted, did create political uncertainty in the country.

Moreover, as 1968 came to an end, Uganda entered into

a period of radical economics. For example, Obote announced

in November 1968 what he described as the "Move to the left"

(53, p. 4)» As expected, the announcement was received with

mixed emotions. To the ordinary man, the announcement did 64 not have any significance because since independence, it may be said, he had not received an equitable share of the fruits of independence? instead, he received a little slice of the national income. Thus, the announcement, it can be argued.,. was addressed to especially, the well-to-do class and a handful of educated elite who receive a big chunk of the national income (18, p. 83). Further, the proposal to move to the left was seen as a general plan by the government to eliminate the vast inequalities which had been inherited from the colonial and early independence periods, and to move the society in an egalitarian direction (38, p. 29). Obote's radical shift to socialism, in the opinion of Gershenberg (18) and Lofchie (38) did lead to his downfall early in 1971. But, none can deny the fact that Obote was a shrewd politician as cited earlier. In view of what has been noted in the preceding lines, the prospects for economic improvement throughout the country did not look good in 1971. For example, information released by U. S. Embassy in Kampala cited many crucial problems the economy was confronted with. In this context, the Embassy noted that the Government had a deficit of $20 million for the first half of 1971. The deficit was caused by accelerated Government expenditures, as the Embassy put it. In addition, Uganda's foreign exchange was below the legally required reserves. To this point the Embassy contended that the flight of capital and Government's increased expenditures 65 were responsible for the fiscal and foreign exchange problems (17, 1971, pp. 3-5). Moreover, the Embassy cited many other problems which it felt could slow down the overall economic development of Uganda. In this respect, it noted the inflationary pressures which were threatening to erode the buying power of the shilling. It also cited especially that the cost of living had gone up by 20 percent for the low-income groups and 12 percent for the middle-groups. Furthermore, the report went on to say that domestic investment had declined in 1971 (17, 1971, p. 6), and on top of this the recent expulsion of Asians, a point already cited, has hurt tremendously the economy.

Total Per Capita Incomes

At Independence, Uganda's per capita gross domestic product was estimated to be in the neighbourhood of $46 (28, p. 25). On the other hand, O'Connor puts the estimate at $44 (44, p. 11). In view of these facts, what can one expect a subsistence economy to achieve? However, since independence some progress has been achieved. For instance, per capita gross domestic product in 1969 was up by more than two times higher than it was at Independence. In monetary terms, per capita income was $105 (17, 1971, p. 2) in 1969. What conclusion may one draw from the above figures? Certainly, one may say that Uganda's economic performance 66 has been impressive- One author, for example, has gone to the extent of saying: "This steady growth in revenue has in turn permitted a similar rate of increase in Government's budgetary allocations to a total of Shs 991 million in current fiscal year" (67, p. 15). Additionally, it may be said, Government's attempts to raise capital revenue and especially to employ these funds to generate further development of the economy has been coupled with vigorous campaigns to contain expenditure in other areas (67, p. 16).

Exports, Imports and Interterritorial Trade- It will be clear from what has been said earlier that. the dynamic element in the development of Uganda has been the production and sale of goods in the overseas market. As it could be said, it is difficult to see how Uganda could have developed otherwise. Moreover, it seems that the expansion of mineral exploitation is still a prerequisite of any attempt to increase per capita incomes (46, p. 109). Thus far as may be seen, Uganda's economy is vitally dependent upon returns from agricultural and mineral commodities. Earnings received from these exports finance the expanding import requirements for the manufacturing sector (20, p. 18). Despite shifts in world prices for major exports, the value exports to countries other than Kenya and Tanzania reflected on the whole, a steady increase between 1967 and 67

1968 (24/ p. 301}- Table V accurately shows the nature of this growth. According to Table V, approximately 90 percent, of the value of external exports was derived from foodstuffs " and agricultural raw products. In spite of Government's attempt to diversify the export base as cited earlier izi Chapter II, coffee and cotton together persistently accounted for over 75 percent of external trade in 1968. Coffee alone accounted for 54.7 percent of Uganda's export earnings in 1968; in the meantime, cotton provided 22.6 percent. In all, the value of the two major exports increased in 1968, this situation was brought about by increased world market prices (20, p. 18).

At this juncture, it is relevant to emphasize that coffee and cotton are the key primary determinants of Uganda's national income, and account for approximately one half of the recorded cash income earned in agriculture, as already cited in Chapter II.

Copper exports, the third largest export earner increased in value from 109.3 million shillings to 111.5 million shillings, and percent-wise it rose by 2.0 percent in 1968, and its share of the domestic export remained as in the previous year. In contrast to the rapidly growing export volume, it is worth noting that the values of exports are subject to violent fluctuations. These, of course, result from massive price shifts in the world markets for cotton and coffee 68

CO vo I rv tii- £ *D Ml -P •H C^i 4-* ml a *H £j in o CO 0^ GD VO r^. rH ON KO • • CO a a) 0 a> • c T- • « * « • U ^(DU CO CVJ CNt ft 0^ CO r* r-- m 00 r*i «s 6 S3 rH rH rH CN ro 00 rH H •d M (d H M CM a, I *4 fedi 9 Pi 0) o

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9 (29, p. 28). Their cumulative effect produces peak exports. F02: example, as one author notes: Increased production of primary products in 196S points to a pick up in Uganda's economy following a two year slump. Coffee and cotton remain dominant; as go production, exports and world prices of these two crops, so goes—to a large extent—Uganda's economy (17, 1969, p. 3).

Accordingly, the exports of tea and hides and skins expanded fairly steadily and both benefited from generally favourable price shifts that enabled them to strengthen or maintain their positions as export earners. It follows that the prospects for these commodities in 1968 seemed to be good, and, as a consequence, the reliance on earning powers of coffee, cotton, and copper was expected to continue to diminish gradually (24, p. 304). While Uganda's external trade has been expanding, its inter-territorial trade, too, has been increasing. For instance, the value of exports to Kenya and mainland Tanzania expanded by 83 percent between 1961 and 1969. However, this value may be much higher by now (24, p. 304). Unlike the predominantly agricultural external export trade, inter- territorial trade is mainly composed of light manufactures. The composition of Uganda's imports is in tune with its economic development, and the picture reflects the large imports component of development expenditure. A large bulk of imports is comprised of machinery, transport equipment and various manufactured products, the rest consists of 70 chemicals, fuels and certain food items (29, p. 28). The curious irony about the nature of imports is that no price fluctuations analogous to those on the export side usually occurs, but rather import prices do tend to rise, thus- volume and values move fairly parallel (24, p. 304).

In considering Uganda's foreign trade, it will be recalled that trade is divided into two segments: (1) trade with countries outside East Africa, and (2) inter-territorial trade with Kenya and Tanzania. In 19 67, Kenya and Tanzania's share of Uganda's total foreign trade amounted to 40 percent.

In 1968, the position remained unchanged in the sterling area. However, Britain purchased 20 percent of exports.

As noted in Table VI, Japan purchased 10.2 percent of

Uganda exports, which is largely copper (20, p. 19).

As Table VI reflects, the United States is the single largest export market for Ugandan goods. Great Britain, as may be seen, is the major supplier in the Ugandan market, providing 26 percent of imports in 1968. During the same year, the Kenyan share of Uganda's market provided 95 percent of imports within the East African community. Other active exporters to Uganda were West Germany with 8.2 percent of the market share in 1968, Japan's share was 8.1 percent, and Italy 4.1 percent (20, p. 20).

The East European share of Uganda's market was and is still negligent compared to the western share. For instance,

in 1 Q&K fVifi r* ^ 4- TT~ ^ ~ ^ .L, ~ X. ~ 1 JT ~ J •** - TABLE VI UGANDA: FOREIGN TRADE BY PRINCIPAL COUNTRY (EXCLUDING EAST AFRICAN TRADE), 1966-1968 (in 000's U-*-)

Country Exports 1966 1967 1968

United States 17,039 14,086 16,382 United Kingdom 12,271 12,322 15,117 India 1,817 2,742 3,176 Germany 2,543 2,332 2,789 China (Mainland and Taiwan) 1,334 1,509 1,841 Netherlands 1,817 2,164 1,806 Hong Kong 1,674 1,400 1,097 Japan 3,265 5,810 7,826 Other foreign Countries 24,176 19,271 15,437

Total 65,936 64,636 65,471

Country Imports

United Kingdom 15,488 14,243 14,633 Japan 2,314 2,657 4,720 West Germany 4,803 5,250 4,751 United States 1,963 1,357 1,656 France 1,650 2,784 1,934 Italy 1,900 1,562 1,572 Other foreign Countries 2,194 1,903 2,361 Unallocated transactions 12,635 11,512 12,361

Total 42,947 41,328 43,813

U = U. S. $2.80 . Source: Adapted from Overseas Business , June, 1970. 72

was 6,6 percent; however, in 1967 this share declined to approximately 5 percent (63, p. 156).

While a common market exists between Uganda, Kenya and

Tanzania, the share of each member in this pool is unequal.

For example, in Arowoyolo's own words, "Kenya has generally

dominated xntraterritorial trade; its share of intraterritorial

exports amounted to 65.7 percent" (2, p. 7).

For this reason, it is important to note that the

imbalance of trade between Kenya and her partners in the

common market has for many years caused friction between the

states (46, pp. 119-121), In fact, the subject has always

stimulated rancorous debates among member states (24, D. 314).

Despite its imperfection, as one author has put it (14, p. 79),

the common market arrangement between the three states has demonstrated its advantage by promoting development and industrialization within the region (24, p. 314).

Government Revenues and Expenditure

The size and the composition of Government's expenditures to a large extent, form indeed, two main determinants of the speed and the direction of Uganda's economic development

(24, p. J65). Thus, the combined local and central government's budgets in x969, amounted to 616 million shillings (21, p. 10).

ThiS amount, it should be stated, amounted to about one quarter oi monetary domestic product at current prices. The blue print so to speak of Government's expenditures is usually 73 embodied in two budgets which are cire.wn annually, vis., recurrent budget and capital budget (24, p. 365). The recurrent budget as may be shown, reflects routine functions, such as administration, law, order, defense, and economic and social services. On the other hand, the capital budget "outlines the annual phasing and implementation of the country's current development plan" (24, p. 365).

Like any nation emerging from colonial tutelage, Uganda is confronted with a financial dilemma. To this end, the World Bank mission to Uganda once commented: "The relation- ship between the domestic product and the level of government expenditures is not a one-way street" (29, p. 31). Thus, the crucial problem which evidently has faced the Uganda Government since independence has been the inadequacy of revenues with which to finance rising levels of recurrent and capital budgets (24, p. 365). Currently, Uganda's internal resources are insufficient to generate adequate funds to meet a satisfactory rate of economic growth (64, p. 54). For this reason, the Government relies on external resources as well for economic development of the country. Briefly, there are several avenues through which the Government raises public revenues internally. Internally, public revenues emanate from taxes, creation or borrowing from the central bank, and domestic borrowing from the public (24, p. 35). External avenues are in form of foreign loans and grants. At the time of writing this 74 thesis, Uganda's external debt amounted to $12S million

(17, 1971, p. 2), and this vras approximately 58 percent, of the total public debt.

Even though the tax structure in Uganda has been reformed, it is still inadequately .responsive and not sensitive to increases in national income to enable public revenues to expand in the usual manner (24, p. 365)•

Uganda's tax system is handicapped by its overreliance on export and import duties; for this reason, it has failed to generate sufficient revenues to finance rising levels of recurrent and capital expenditures (29, pp. 31-32). Besides export and import duties, Uganda's other sources of public revenues are: income tax, development tax, excise tax, licenses, fees and fines (47, pp. 374-379).

In examining the features of the tax structure in.

Uganda, one finds many defects embedded in the system. For instance, the fiscal system relies heavily on export and import duties. The reliance on such duties, therefore, very often contributes considerable instability into the fiscal system because export goods are vulnerable to fluctuating world market prices (47, pp. 378-379).

Furthermore, the tax system only draws a small portion of the public revenues from duties levied on domestically made consumption goods and services and from personal and corporate taxes (24, p. 365). In addition, the tax system penalizes the low-income group. Accordingly, Herrick and 75 others have contended that the low-income group pay higher taxes than either the middle class or the upper urban dwellers. Thus they wrote: Low-income rural, residents, particularly coffee and cotton producers, generally pay higher proportion of their incomes in taxes than middle and upper income urban dwellers (24, p. 365). Indeed the uneven taxation of the people in general has promoted inequality in taxing practices rather than producing an equalitarian tax system (36, p. 423). Moreover, the uneven collection of taxes does create a situation whereby persons subjected to higher taxes in this case evade paying their taxes (24, p. 367). So far the preceding discussion has mainly focused on the sources of public revenues, and effects associated with some of these sources. However, a brief examination on how the Uganda Government spends its revenue follows below. As already indicated, Government expenditures are always reflected in its recurrent and capital budgets. In the post independence years, government expenditures have risen astronomically. For instance, recurrent expenditure arose from Shs 502.6 million in 1962 to an estimated Shs 1121 million in 1970/71. Similarly, capital expenditure arose from Shs 96 million to an estimated Shs 512 million in fiscal 1971 {21? 24, p. 39? 372). The general increased expenditures, it can be concluded in recurrent and capital expenditures was and is still 76 attributed to the attainment of independence and heightened economic development in Uganda (24, pp. 372-376).

Public and Private Investment As noted before, government's participation in the life of the economy is funneled through its statutory corporation. Already the corporation has demonstrated its influence In. the life of the economy. For example, the corporation owns 4 0 subsidiary companies throughout the country. Moreover, Uganda Development Corporation participates heavily in investment through equity holdings, loans and the provision of buildings in joint enterprises with private investors

(17, 1971, p. 11). In addition to this, the UDC has interests in diversified fields. To this end the U. S. Embassy in Kampala noted: The UDC1s operations extend over a wide range of activities in agriculture, agro-industry, ranching, tourism, industry and mining. It holds fixed assets valued at $85 million and employs 25,000 people. . . . During 1970 UDC associated factories were completed for jute bag manufacturing, the first phase of a new cement complex, and extensions on shirt and cotton textile factories. The UDC's hotel corporation completed a 60-bed extension at Murchison Falls and two new hotels and commenced work on six others as a part of a $21-million program. . . (17, 1971, p. 11). Obviously one raised in the school of orthodox economics would vigorously argue against government's participation in industrial investment. The point here is that people in developing countries do look to the state and expect it to do something to alter their situation (36, p. 393). 11

9

As may be seen in the preceding quotation, the extent, of government's participation in industrial activities is quite varied, and besides, it invests heavily in social services, viz., education, law, health, defence, road construction and maintenance, and number of other services.

In addition to direct industrial investment, the Uganda

Government in 1970 decided to acquire 60 percent share in the equity capital of 84 major companies in the country (17,

1970, p. 6); however, this decision was reversed after Obote's government was ousted from office in early 1971.

The role of private investment in Uganda is unquestionably indispensable for economic development of the country. For this reason, the Government recognizes the importance of protecting the interests of private investors whether domestic or foreign (67, p. 29). In order to attract foreign investors into the country, a Foreign Investment (Protection) act was passed in 1964 (20, p. 17).

The main features embodied in the Act included the following incentives, the right to transfer out of Uganda, at prevailing rates of exchange, as Hansen documents:

(1) profits after payment of relevant taxes; (2) an approved proportion of the net profit from sale of all or any part of the approved enterprise; (3) the principal and interest of loans specified in the certificate; (4) any compensation due to be paid under the provisions of the Foreign Investments Act; and (5) duty free imports of raw materials and equipment, accelerated depreciation of capital assets (20, p. 17). s

The wording in the above passage evidently shows the

good faith the Government attaches to the role of foreign

investment in the economic development of Uganda. It.

recognizes without any shadow of doubt the vitality of

foreign capital. However, this faith has been shuttered by

recent developments in the country. A case in point is the

recent expulsion of almost 50,000 Asians from Uganda. Further- more, government's threat to take over all the British firms

operating in the country has seriously questioned the

credibility of the military regime (55; 60, p. 48; 13). CHAPTER IV

DEVELOPMENT PLANNING

First Five-Year Development Plan 1961-66

The terms "planning" and "plans" are alien to Uganda, but both concepts have been in circulation for quite a long time, "though with varying degrees of esteem" (62/ p. 20). However, the notion of "development" with its colonial aroma is what is important in this connection to Uganda (62, p. 22) .

To begin with, it could be said, British authorities, who had ruled Uganda for approximately seventy years, initiated a 10-year development plan after World War II. The plan which was drawn up, covered the period from 1946 to 1955 (36, p. 430). This plan was succeeded by another extending from 1955 to 1960 (24, p. 228). As will be explained later, both plans differed quite markedly from the First Five-Year Development Plan, 1961 to 1966.

In essence, both plans embraced the concepts of micro- economics and macroeconomics. In this instance, both plans placed priority on productive sectors of the economy and secondly, they emphasized the improvement of social services (36, p. 431). In order to discover for instance, how money was spent on these projects, one is invited to peruse the

79 80

¥ accounts of the. World Bank Mission to Uganda (29), Livingstone and Ord (36) , and Herrick and Co-authors (24) to cite only a -few. Basically as Herrick documents, "spending was concentrated on education; later, as development spending increased proportionally greater amounts were devoted to roads and buildings" (24, p. 228). What emerges out from these plans, for instance, is the lack of comprehensiveness. Of course, such overall development of the economy could not have been instituted by the colonial power whose interest tended only to develop the country at a "chameleon" speed (36, pp. 430-31). Perhaps one may wonder why the years 1961 to 1966 are regarded as being the First Five-Year Development Plan for Uganda. Further, one may argue that Uganda had development plans prior to the First Five-Year Development Plan. True, many plans so to speak had been instituted in advance of the 1961 to 1966 plan. However, the striking difference between this plan and those that preceded it, apparently lies not in technique, but rather in content and authorship. The first Five-Year Development Plan 1961-66 was an outgrowth of the World Bank's effort. In short the plan came into being basically upon the proposals of the World Bank .Mission to Uganda (29, pp. 38-42). As indicated earlier, this plan differed from all that preceded it, in that it was produced by a neutral element (the World Bank). In its content, it encompassed ail the major aspects of the economy, but especially it emphasized the need to accelerate the growth of gross domestic product, while in the meantime diversifying the economy and ensuring a fair distribution of the nation's cake of wealth (29, p. 37-43). In this connection, the Mission said: The mission's recommendations are intended to provide the basis for such a development program over the five years, 1961/62-1965/66. Even if these recommendations are followed, we cannot promise that there will be immediate spectacular results. But with reasonable luck the rate of growth should accelerate and gross domestic product should increase on the average by 3-4 percent a year. ... If the program is carried out successfully, we would expect the rate of growth to accelerate even further. . . (29, p. 39). As the wording expresses, a note of caution permeates the entire Plan. As may be thought, a development plan in this case is not a therapy which could be applied to all the prevalent economic ills and thus produce immediate relief. On the contrary, the Mission saw the plan as an economic formula designed to point the course of action to be adopted in such a way that, if implemented, it would bring about inevitable results.

How successful was this Plan? and how was it financed, and what problems were encountered in its implementation? Before answering any of these questions, one is reminded, to begin with, that any success of any plan depends on the ability of the government "to marshall the full weight of her human and material resources both to meet the difficult economic problems" it faces (29, p. 37). With this view in 82 mind, it can be said in responding to the first question that the Plan, despite the slow start did succeed beyond what was hoped to achieve. For example, as Herrick documents,"

"the rate of growth of total output was 9.3 percent a year in current prices compared with the Flan target of 4.5 to 5 percent (24, p. 229). In servicing the plan, it was estimated that 35 percent of capital formation would come from foreign contributions (47, p. 372) and the rest from internal sources. Similarly, in its projection, the Plan forecast a total investment of Shs. 1,880 million over the five-year period, but at the end of this period, gross capital formation amounted to Shs. 2.3 billion. This was slightly higher than the plan had projected. Further, the Plan projected Government investment to amount to Shs. 860 million (including Shs. 120 million in additional recurrent expenditure), semi-public sector to amount to Shs. 580 million, and the private sector to amount to Shs. 440 million (24, p. 229).

The answer to the third question stated above may be put this way—four main areas of difficulty emerged from this Plan. First", the implementation of the Plan was constrained by lack of sufficient funds and qualified personnel. For instance, a sizable number of foreigners who had worked for the government left the country immediately before and after independence. This situation created a shortage of technical and administrative staff (24, p. 229). S3

9 The second problem arose from delays in receipt of foreign financing. These delays were probably caused by political changes which were, in this case, not certain from the point of view of foreign donours {40, p. 202) • In addition, difficulties were encountered in mobilizing local resources, to supplement foreign aid (24, p. 229). A third problem was that as expansion accelerated. Herrick contends that the insufficient preparation of the Plan created bottlenecks. Thus he noted: In addition insufficient forward project preparation and financial planning hindered the reallocation of funds from projects stopped for some technical or administrative reason to projects delayed because of shortage of money "(24, p. 229).~ A fourth difficulty, which is linked with the third problem, stemmed from the fact that as investment expanded in all directions of the economy the public service under- went radical changes. For instance, expatriates were replaced by local personnel, and, moreover, the manning of the service was below the established norm. Furthermore, vacancies appeared in strategic posts which could not be filled by reallocation of local manpower resources (40, p. 373) .

In conclusion, despite the slow start in the Plan's execution, the problems encountered in many projects, especially in agriculture and road construction which were carried forward to next plan (24, p. 230), the plan did produce impressive results, as indicated before. 84

Second Five-Year Development Plan 1966-71

In discussing the First Five-Year Plan in the preceding pages, one is reminded of Rostcw"s pre-conditions for taks-off which barely existed in Uganda before independent® (49/ p. 1?)»

Accordingly, the colonial power for that matter, had prepared

Uganda to a certain extent for take-off phase immediately after independence. For example, during the colonial

The creation of the preconditions for take-off ^ was largely a matter of building social overhead capital-"- railways, ports and roads—and of finding an eeonorflie setting in which a shift from agriculture and trad© t© manufacture was profitable. . . (49, pp. 17-18)«

True, British authorities promoted these precondition! only to meet their plans, but they promoted the infrastruetur© unevenly. However, mention has been made in the pr@viou§ chapters about Government's decision to steer the §eon©ffly away from overdependence on agriculture. In light of thii/

Rostow's astute observation in the above passage clearly reflects his analytical insight into the nature of economic growth. Moreover, the First Five-Yoar Development Plan took-off from the economic setting the British had laid before

While the First Five-Year Development Plan was designed and drawn up by the World Bank, the second Plan, on the Other hand was planned and drawn up by the Central Planning Bureau,

The Planning Commission was headed then by a Prime Minister, and aided by eight Ministers plus other influential persoftaiiti

(24, p. 30). What were the main features of this flan? Or in what way was it different from the first Plan? 85

The Second Five-Year Development Plan was different from the first Plan in that it embraced "all sectors of the activity—-public and private, economic and social, national and regional" (24, p. 230). These sectors were not given equal weight in the First Five-Year Plan. Moreover, the Second Five-Year Plan in reality was the first of three five-year plans designed to cover the period 1966 to 1981. Additionally, the Plan aimed to increase the monetary output by approximately 41 percent (a growth rate 7.2 percent per annum, an increase of 25 percent, on per capita in monetary incomes (67, p. 16). It might be added that studies under- taken by Herrick and others (24) arrive at similar conclusions.

From the standpoint of a 15-year perspective, the Second Five-Year Plan set priorities which were to echo during this period. In this direction, the Plan envisaged the manufacturing industry as a major spearhead for development (17, 1970, p. 4). In short, the Plan considered it imperative to create a modern economy capable of self-generated and self-sustained growth. The emphasis which the Second Five-Year Plan placed on the modern economy was in this connection designed to alter the economy (24, p. 231). Structural change in the economy was to result from decreased attention given to the production of primary products—crop and animal husbandry, forestry, fishing, and hunting. In contrast to a reduction in the value of primary 86 production the Plan anticipated an increase in the value of all industrial activites—-chemical, iron and steel, cement, and sugar processing industries, and similar increases in the value of tertiary activities were anticipated (20, p. 21) . At this point, it is important to note that the Plan envisaged the achievement of social and economic justice. To realize such justice, the distribution of the cake of the national wealth was structured in such a way that those who v/ere receiving less had to receive more by increased wages. In this way, the plan hoped to create an egalitarian society (24, p. 231). The implementation of this Plan was more or less similar to the execution of the First Five-Year Plan. In actual fact, the Plan depended on two sources for its financing--domestic and foreign funding. In this connection, Arkadie and Ghai noted: Whereas the Uganda Plan assumes that the foreign contribution will only be 35 percent of all capital formation, in both the Tanganyika and Kenya Plans this figure rises to just over one-half. On the other hand, the assumptions in the Uganda Plan require much higher local savings, particularly by the Central government (47, p. 371). It is interesting to note that although the Plan was, in essence, not vulnerable to the vagaries of foreign private investors or aid donours, it was nonetheless dependent upon the ability of the Uganda government and the Uganda public to achieve high levels of savings. And, it can be argued 87 that this Plan actually marked the take-off stage of economic development of Uganda (48; 49, pp. 102-103; 39-40). Although it sounds repetitive, it is relevant to -y mention that this Plan, likewise experienced similar problems which the first Plan encountered in its execution. In fact, the planners of the Second Five-Year Plan did recognize that in one way or another constraints were bound to emerge, and for this reason, anticipated aggregate targets were not likely to be achieved (24, p. 33) . As indicated before, the Second Five-Year Plan depended to a large extent on imported items for its development expenditure. It follows that Uganda's overdependence on foreign sources of supply, did exert strain on Uganda's currency (67, p. 17). As a matter of fact, the crucial problem of Foreign Exchange became critical as the Plan entered its closing stages. In this context, the U. S. Embassy in Kampala wrote: Although the spectrum of problems confronting the new Government is broad, the fiscal and foreign exchange situations present the greatest cause for immediate concern. Capital flight, a reduced trade surplus and accelerated Government expenditures, especially in the military sector, had drawn down the country's foreign exchange to the point that the central bank, the Bank of Uganda, was by June unable to maintain its reserves at the legally required level and was compelled to amend its statute (17, 1971, p. 5) . Evidently, the issue of foreign exchange did warrant concern. Further, the inability of the central bank to maintain its legal required reserves with the International 88

Monetary Fund, and its decision to amend its statutes, certainly painted Uganda's foreign exchange situation woefully,

* And, it must be added that the creation of shortages in foreign exchange and legally required reserves, placed the Uganda Government in an embarrassing picture before the World, and of course, as one might say, this situation quite certainly endorsed Government's mismanagement of the economy. In order to mitigate potential balance of payments difficulties, the Government instituted in this case, stringent policies. For instance, the inflow of foreign capital was encouraged, restrictions were imposed on certain items, the government felt could be substituted by manu- facturing in home industry, and promoting export earnings (24, p. 233). Other notable problems which affected the pace of development were, as cited in the First Five-Year Plan: Government's inability to mobilize internal resources because of the paucity of domestic savings and limited investment avenues, delay in foreign financing, and a shortage of skilled and trained manpower. The upshot of all this is that numerous bottlenecks emerged, which in turn affected Government development expenditure (24, p. 233). It is doubtful, in view of the; problems noted above, whether the projected targets in this Plan were achieved at the end of the Second Five-Year Plan. For example, it was 89 estimated that the monetary gross domestic product was to increase at 7.2 percent a year from Shs. 3,954 million in 1966 to Shs. 7,070 million in 1971 (24, p. 231). The absence' of adequate information from Uganda, as stated in the preface, makes any appraisal of the Second Five-Year Plan difficult- Nevertheless, it may be hoped that the projected goals in the Plan were met.

The Outlined Third Five-Year Plan 1971-76 The Third Five-Year Plan is one of a five-part, 15 year development program which has an overall objective of doubling per capita income during its 1961-1981 period (21, p. 50).' This Plan embodies what the Government hopes it will achieve at the end of this Plan. In essence- the Plan envisages the investment of Shs. 7 billion for the five-year period. It hopes to generate in this respect, six percent average annual growth rate of real gross domestic product (17, 1971, p. 9). In addition, the Plan intends to promote economic and social "justice" and further generate increased employment (21, p. 50).

In examining the outlined Plan, one comes across what the Government emphasizes as the central issues which merit special attention in this program. In this connection, the Plan intends to promote as Hansen documents: (1) "expanding markets particularly for exports; (2) increasing development spending; (3) maintaining a healthy balance of payment 9 0 position; (4) developing natural resources; (5) creating rapid growth in manufacturing, construction, and tourism; (6) diversifying the agricultural sector; (7) strengthening Uganda's infrastructure; and (8) expanding training and job opportunities" (17, p. 50). The success of the plan depends on its implementation rather than its consistency as noted before. For this reason, it is therefore too early to venture to appraise the implementation of this Plan at this time. Nevertheless, it is expected that this Plan will certainly be affected by numerous bottlenecks which the previous Plans experienced. In this case delays or with- • holding of foreign aid is likely to occur; a shortage of technical and administrative staff will obviously continue to harass the program; the paucity of domestic savings and limited investments outlets will certainly frustrate Government's attempt to mobilize domestic resources to substitute for delayed foreign aid, and last but not least, the present chaotic picture of the Government of Uganda will probably affect the pace of development of the whole economy. CHAPTER V

CONCLUSIONS AND RECOMMENDATIONS

Because this thesis is somewhat short, it has not been possible to explore in detail all the points selected for investigation. However some points have been treated in great length whereas others have received passing comments. In this respect, the study has stressed most of the key and significant elements with the economic development of Uganda. It has especial],y singled out what the writer thinks are the main problems retarding the economic development of the country. It is appropriate to point out that Uganda's economic development was initiated with the planting of a railway line between Uganda and the coast in 1902. However, accelerated development, it may be stated, began with the attainment of independence in October 9, 1962. Since then economic progress in the country has scored limited successes (31, p'. 531). Nevertheless, this heightened development is but just the beginning of Uganda's economic advancement. Yet the actual development of the country, i|t should be said, still lies ahead, shrouded with many problems. In this connection, the institution of Five-Year Development Plans have very timely set the stage for Uganda's economic transformation of its 92

In spite of the government's concerted effort to

establish an industrial base and modernize the economy, Uganda in this respect, is not near to the point where the increase in capital and skill becomes automatic. It is no exaggeration therefore, to mention that the economy is still dependent on fairly archaic peasant agriculture, although the government has instituted diversification programmes in the economy. Furthermore, the size of domestic product of the nation is still overridingly determined by two factors: the incomes of the cotton and coffee growers and the measure of public expenditures on recurrent and capital account.

Accordingly, other economic activities taken together, still do not reflect any significant degree in the economy. As a matter of fact, cotton and coffee incomes have in'fact been the determining elements in the economy rather than the size of public expenditures. Eoth, cotton and coffee in this connection were responsible for a period of remarkable economic boom in the early 1950's and similarly, they also have determined recent recessions and economic growth.

With the institution of Five-Year Development Plans, Uganda's economy has the potential of long-range balanced economic growth. However, owing to the difficulties of agricultural shortages, shifts in world prices, reduced foreign exchange reserves, a shortage of technical and administrative staff, and the prevailing political instability >3 in the country, the overall economic development of Uganda will obviously be adversely affected in the future by thesa unpredictable factors. -

Given this picture, there are indications already at work which show that Uganda's economic growth in the 1970*3 will not match the experienced growth in the late 1960's? nevertheless, the country would undoubtedly benefit from diversification into non-agricxtltural economic activities and agricultural reorientation away from competitive coffee, tea, and cotton, crops which are produced as Uganda's export-earners.

At this point, it can be argued that in order to realize greater economic development with benefits accruing to th© masses of the populace, and further if the vicious circle r of poverty (ignorance—low productivity—high rate of population growth--poverty) (9, p. 247) is to be broken, it will most certainly require not only the concerted effort of the government, but also varying degrees of participation by governmental and parastatal organizations in the economy.

The. role of such organizations in the economy would be to play an increasingly important part in stimulating economic development in the country, especially in the areas where private interests do not exist.

Recommendations

If the economic development of Uganda is to be of any 94

9 first and foremost, the government should address itself to the task of mitigating pain, suffering, fear and insecurity in the country. In actual fact, the government should create the atmosphere in which peace and order reign supreme•

However, recent developments in the country have demonstrated the inability of the government to establish such climate.

The expulsion of nearly 50,000 Asians from the country, for example, has only increased fear and insecurity among the minority citizens (56? 61, p. 27i 24). Furthermore, political uncertainty in the country has generated unfavourable conditions which have in no small measure become limiting factors to the economic development of Uganda.

Second, if Uganda is to accelerate its economic development, the government should attempt to reduce or eliminate the effects of what Davis and Blomstrom call

"the Law of Persistent Underdevelopment." In short, this law simply states that an underdeveloped social system is locked into self-perpetuating low development until new social forces can be introduced to break the cultural chains which bind it (12, p. 371). In this case, the ability of the government to marshal1 both human and material resources will most probably provide it with the means to reduce the effects of this law.

Third, if Uganda is to relieve itself of foreign debt, the government should devise measures for overcoming the financial and monetary obstacles to development in Uganda 95

(59, p. 11). In this direction, special attention should be given in the work programme to the mobilization of domestic

»» finance, including improvements in taxation policies, administrative machinery, and technique, as well as institutions for mobilization of financial resources. Fourtht in order to overcome the critical manpower constraints, the government should pay special attention to the need to develop greater capability in training and research institutions, the transfer of scientific and technological skills and the training of personnel for various branches of public service, including the training of manpower planners and the training of professional instructors (59, p. 13). Last but; not least, efforts should be made on the part of the government to provide adequate institutional facilities to undertake exploration for an evaluation of natural resources; further the government should make the best use of United Nations expertise advice in this instance (58, p. 12). In addition, the government should correct the ineffective integration of natural resources development into overall development planning. SELECTED BIBLIOGRAPHY

1. Apter, David E.,' The Political Kingdom in Uganda, Princeton University Preset 1961. 2. Arowoyolo, Edward A., "Economic Co-operation in East Africa," New Africa, Vol. XII, No. 7/8, 1970, 4-9. 3. , "Uganda," Background Notes, U. S. Government Printing Office, Washington, D. C., 1969, pp. 1-5. 4. Belli, Pedro, "The Economic Implications of Malnutritions The Dismal Science Revisited," Economic Development and Cultural Change, Vol. 20, No. 1, October, 1971, 1-21. 5. Benveniste, Guy, and William E. Moran, Handbook of African Economic Development, New York, Frederick A. ~" Praeger, 1962. 6. Bhagwati, Jagdish, The Economics of Underdeveloped Countries, New York, McGraw-Hill Book Company, 1966.

7. Cairncross, A. K., Factors in Economic Development/ London, George Allen & Unwln Ltd., 1962. 8. Churchill, Winston Spencer, M£ African Journey, London, Hodder and Stonghton, 1908. 9. Curie, Lauchlin, Accelerating Development, New York, McGraw-Hill Book Company, 1966. 10. , Obstacles to Development, New York, McGraw-Hill Book Company, 1966. 11. Damachi, Ukandi G., "The Manpower Crisis: Education Is Out of Step with Meeds," African Report, May, 1972, pp. 12-19. 12. Davis, Keith, and Robert L. Blomstrom, Business Society and Environment, New York, McGraw-Hill Book" Company, i97i: " t 13. Diamond, Stanley, and Fred G. Burke, editors. The Trans- formation' of East Africa, New York, Basic~~Bobks", Inc., Publishers, 1966.

96 9?

14. Delupis, Ingrid Doimi di, The East African Community and Common Market, London", Longman Group Limited» 197*07 15. Ewing, A. P., Industry in Africa, London Oxford University Press, 1968. 16* t "Excerpts," Embassy of the Republic of Uganda, Washington, D. C. , March, 1971. 17* ' "Uganda," Foreign Economic Trends,- Department of Commerce, Washington, D.'c., 1969-1971. 18 Gershenberg, Irving, "Slouching towards Socialism: Obote's Uganda," African Studies Review, Vol. XV, No. 1, 1972, 79-94": —

19. / "Banking in Uganda Since Independence," Economic Development and Cultural Change, Vol. 20, No. 3, April, 1972, 504-5247 ~~ 20. Hansen, Susan P., "Basic Economic Data on the Economy of Uganda," Overseas Business Report, June, 1970, 2-22. 21. ' ; • , "Basic Economic Data on the Economy of East Africa (Kenya, Tanzania, Uganda)," Overseas Business Report, June, 1972. ~ 22. Hausman, W. H., editor, Managing Economic Development in Africa, Cambridge, The M. I. T. Press, 1962."™* " 23. Hickman, G. M., and W. H. G. Dickins, The Lands & Peoples of East Africa, London, Longman's Green & Co.7~Ltd77 1962. 24. Herrick, Allison Butler, Saone Baron Crocker, Sidney A. Harrison and others, Area Handbook for Uganda, U. S. Government Printing Office, Washington, D7 C., 1969. 25. Higgins, Benjamin, Economic Development Principles, Problems, and Policies," Revised edition, New York, W. W. Norton & Company, 1968. 26 Hughes, A. J., East Africa: The Search for Unity, Baltimore, Penguin Books LtdT", 1963. 27. Hunton, Alphaeus w., Decision in Africa, Revised edition, New York, International Publishers, 1960. 28. Ingham, Harold, Uganda: ' The Crisis of Nationhood, London, Her MajestyTs Stationary Office, 1960J ~ 98

29. International Bank for Reconstruction and Development, The Economic Development of Uganda, The Johns Hopkins "Press', 1*9 b2.

30. International Monetary Fund/ Surveys' of African' Economies, Vol. II, Washington, D. C., 1969. ~ 31. Jackson, Dudley, "Economic Development and Income Distribution in East Africa," Modern African Studies, pp. 507-531.

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