The roots of Museveni’s economic optimism

STATE-OF-THE-NATION ANALYSIS

            The quality of the State-of-the-Nation speech has clearly deteriorated. It is no longer a platform where the President provides accountability of what is transpiring in his regime. This year, we saw the President failing to account for his promises of previous years and in stead, loaded with semantics and the gospel.

            The key features of this State-of-the-Nation speech for me were the projection of the economic path and the mediocrity with which corruption was addressed. The President stated that the GDP is growing at the rate of 5.1% annually; inflation rate tamed to 3.6%; foreign reserves grown to US$3.3 billion; export earnings are trickling in at US$4.9b and; remittances from Ugandans from abroad has increased to US$767.26 millions. Interestingly, the total size of GDP of Uganda has expanded to Shs54.7 trillion (Read Daily Monitor). Because of these improvements in growth, the President projected that Uganda is on steady path to a social transformation which will see it become a first world country by 2050.

            The President also hinted that NRM is an expert in fighting corruption, giving examples of the corrupt officials in the office of the Prime Minister and in Public Service who are now facing legal actions. needless to mention that, no matter how these fellows are arraigned, as long as Permanent secretary Pius Bigirimana is still at large, the entire corruption fight will be undermined. There were many rants, but overall, as a citizen and one of the Ugandans abroad who contribute to the economy, I found this rosy painting of Uganda’s economic path to be an exaggeration beyond imagination.

            I would agree with the President that Uganda can be a middle income country by 2017 and first world country by 2050 if there were structures put in place to reconcile the current legal and black economies. First, the rampant corruption and poor service delivery attitudes in Uganda undermines any genuine development efforts; secondly, the President deliberately failed to recognize the unequal wealth distribution that is creating distinct disparities between citizens and classes. In painting a rosy picture of Uganda's future, it is obvious that the President is not speaking for all Ugandans and worst so, not even for the majority 70% of everyday Ugandans.

            Obviously, the fight against corruption in Uganda has failed because corruption as a vice is also the self sustaining production of state functionaries. The moral or ethical exhortations against corruption by religious institutions have also failed. The legal processes such as enacting laws, establishing rules and framing anti-corruption policies have also failed. These failures are inherent in the corrupt practices that prevail at each stage of these processes, such that each piece of anti-corruption legislation that emerges, becomes banal from the onset.

Class analysis

            To fully understand the complexity of the President’s challenge, a class analysis would be appropriate. This would enable us to understand which class is placed where, in the chain-link of corruption. Uganda’s class stratification could be simplified to include the ruling class, the working class and the peasants.

            Most of Uganda’s wealth is distributed among the political class, who are also the most corrupted, forming the top 1% on the corruption pyramid. This group relies solely on economic extortion and handouts from the state. The working class (lumpen proletariat), micro-traders, and the public servants form the 29%. These act as the main transmitters/deal brokers, distributors of corruption and the bridge between the 1% and the majority 70% comprising of peasants and powerless peri-urban (slum) dwellers, beggars, layabouts and so on.

The rampant corruption perpetuated by the ruling class has created two sets of parallel economy running concurrently; the legal economy and the illegal or “black” economy borne out of corruption, tax evasion, looting and stashing money in foreign banks in Switzerland, Israel, Rwanda etc.

            Conservatively, we can estimate that the current size of the black economy is up to about 50% of the legal economy considering the billions of taxpayer’s money that have been siphoned off and those unaccounted for in the last decade alone.

Some statistics

            On June 5^th, 2013, the Daily Monitor published a report in which the Uganda Revenue Authority listed about 310 companies that are bound to default its tax obligation. Among them is Hot-Loaf Bakery belonging to the President’s younger brother, Amos Nzeyi. The total owing from tax defaulting from these companies was estimated to be in the range of Shs.170.26b. On June 23, 2012, the government newspaper – The New Vision reported that Ugandans have stashed Shs.400b in the Swiss National Bank alone. This excludes the moneys in other countries such as Israel, UK, US and investments in foreign countries, such as Rwanda, Kenya and India. Already, Uganda’s annual budget depends on 29% of donors’ funding, a significant portion of which is lost to corruption annually. In fact, estimates by World Bank are that Uganda looses US $300M of donor money to corruption every year. These, with a plethora of illegal economic activities that goes under the radar, such as illegal trade in arms, timber, mineral resources, especially gold from Karamoja, land transactions, payment to ghost public servants and bribes solicited from investors, could amount to about 50% of our legal economy. And, it is getting even bigger!

The hands behind it
The perpetrators of the black economy are known. This shoddy deal is ring-fenced at the upper echelon and ranking associated with ruling family, security operative, foreign investors and the lumpen proletariats. The working class is coerced into corruption because of political patronage by the ruling class. The peasants have come to honor the vice since the legal and just process of wealth distribution has collapsed under the weight of the predatory ruling class and their associates.

Implications   

            It is important to put the significance of this “black” economy in perspective. First, this money is absolutely private capital with no legal control over it and no public scrutiny whatsoever. It is not taxed and society cannot use it for public good, such as investing in transportation, energy or health sectors. It is, in its own right, capital as any legal wealth but circulating away from the reach of the public.  No one fully understands the volume of this capital as it has evolved over the years. The implication is that the current ruling class is holding much of their capital outside the state control and yet they continue to feast also on public resources in such a predatory manner.  It is this class, which is unpatriotic and treacherous to Uganda and Africa as a whole.

            The above factors cloud the prospects of Uganda becoming a first world country in 2050 or a middle income country by 2017. The root of the Presidents’ optimism may perhaps be inspired by the capacity of the black economy in the hands of the ruling class of which he is a member.

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