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Prebendalism suffocating reform in Uganda

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Prebendalism suffocating reform in Uganda

Let us send all top government officials to a sabbatical of two years.Trust me when they come back in May 2020, we shall have a progressive debate on the way forward!

While people in leadership positions are enjoying Uganda’s economy, the majority struggles to find sufficient meals a day.

While people in leadership positions are enjoying Uganda’s economy, the majority struggles to find a meal a day.

In the past three years, I have delivered 78 public lectures, 29 talks and 17 paper presentations. I have also written 106 newspaper articles, and made countless live and recorded radio and television appearances. In most of my writings and talks (over 90%), I wrote/talked about Uganda’s economy.

I have spoken to Cabinet and Parliament of Uganda,top military and police colleges across the country, academic conferences and workshops, political foundations, professional groups, business executives and entrepreneurs, rotary clubs, and a cross-section of multi-selected groups.

I have also addressed regional and international conferences on subjects related to Ugandan and Sub-Saharan economies.

While running around the country, I have noticed a few trends. First, in almost all the lectures, talks, paper presentations, columns, and radio and television panel discussions, my audiences have largely agreed with my presentation of the facts about Uganda as well as the diagnosis of her economic challenges.

Second, debates have mainly been on prescription, particularly how Uganda’s economy can be transformed(but not what needs to be done per se).

Third, on average, politicians (on both sides), middle and lower-level bureaucrats and the general public agree that Uganda’s economy is not working for majority of Ugandans, and most importantly that it is more likely the economy will either remain the way it is or even worsen.

A study that revealed what Ugandans think

On the other hand, top bureaucrats in government and its agencies, officials working for international financial institutions (such as the IMF, World Bank and African Development Bank) and Western aid agencies (USAID, DFID, UN, EU etc.),as well as top executive bankers, believe that Uganda’s economy has since the reforms of 1990s been transforming, and that despite a few challenges the economy is on track.

Towards the end of 2016, I headed a team that was hired by a German political foundation, Friedrich-Ebert-Stiftung (FES) to examine the main features of Uganda’s economy (specifically its industrial policies) and their implementation.

We spoke to cross-section of who-is-who in the management of the economy as well as politicians, academics, bureaucrats, private sector executives and civil society.

This single study corroborated much of the anecdotal evidence I provided above. Most importantly, the study confirmed me why, as Ugandans, we have failed do what we know needs to be done to transform our country.

First, what do we know? My interaction with Ugandans, rightfrom you, Mr. President, to a manufacturer in industrial area to a trader down town Kampala to a smallholder farmer in a typical Ugandan village, has taught me that Ugandans agree we over liberalised the economy.

Allowances keep bureaucrats afloat

Most Ugandans now know that the strategy to get government out of the way and allow the economy to flourish, create jobs, eradicate poverty and inequalities, and get it integrated in the global economy (through private sector-led strategy) has failed.

However, a few elites are saying the policies have succeeded, mainly because those few elites have benefited and continue to benefit from this skewed economy.

Uganda’s economy is structured this way: over 65% of it is concentrated around the capital city and/or government installations in central Uganda.This is where the elite, particularly government bureaucrats work, reside, and own property. The rest of the country (over 80%) hosts just about 35% of the economy.

Although Uganda’s economy is being depicted as a private sector-led economy, reality is much of it is either foreign owned and managed or public. Of course the bureaucrats work in the public sector.

Although official public sectorwages are not so different from those offered by private sector, the bureaucrats use corruption (which is the standard way of doing business in public sector)as well as budgeted for travel allowances and per diem to boost their earnings.

Growth impeding corruption

Before 2010, when Uganda’s corruption used to be ‘productive'(where stolen money was used as a means of primitive accumulation whereby the thieves invested in productive sectors of the economy within Uganda), it generated growth that trickled down to the villages of Uganda leading to some dramatic poverty reduction.

In recent years when the population and the state became more nosy and noisy about corruption, it turned predatory (the stolen money was either invested in difficult-to-trace speculative activities or shipped out of the country), the corruption impeded growth.

A simple survey will reveal that most accounting officers in government and top politicians have their wealth in the following properties: rental apartments in Kampala, Wakiso, Mukono, and Mpigi districts; office blocks and mini-shopping malls in the same areas; and land covered by commercial forests or just fenced-off some where in the countryside.

How does this affect the economy?

First, economists categorise the above-mentioned capital ‘assets’ as non-tradables – you cannot export them. This has lockedUganda’s scarce capital resources in things that do not fetch the country foreign exchange.

Secondly, public resources are transferred (through corruption) from where they would cause optimal multiplier effect to low multiplier activities. This reduces the rate at which the economy would grow.

Bureaucrats are comfortable to think

Thirdly, and perhaps more importantly, the people who should initiate economic reforms are currently too comfortable to think about alternatives. The bureaucrats budget for themselves a number of perks ranging from free fuel and cars (including pick-up trucks), housing, health, travel, and other allowances.

They use these bonuses to run their private farms and/or businesses. In effect, the perks are used as business/farm subsidies. A bureaucrat or a top politician may not find it difficult to supervise their farm every weekend using government vehicle and fuel.

In the meantime, other Ugandans have to hustle to run their businesses or farms at (unsubsidised) market costs. They often find such risks and costs typically too high to be worth it, let alone being competitive.

They, thus, opt for alternative investment opportunities that are less risky and immediately profitable, but unfortunately not the right-mix for Uganda i.e. import trade, real estate, and construction. These sectors do not create jobs yet they worsen Uganda’s balance of  trade.

Importantly, Mr. President, because your political authority is based on patronage and various forms of rent-seeking(which political scientists call,neo-patrimonialism), you are stuck. You do not know where to start to reform government and the economy.

What is prebendalism?

I have a practical solution for you. You are stuck because of what political scientists call prebendalism. This is a political system where elected leaders and government workers (I prefer calling them bureaucrats) feel they have a right to a share of government revenues, and use them to benefit their supporters and hangers-on.

Reform in Uganda is not being stopped by politicians. It is the bureaucrats who are scaring you, Mr. President, telling  you how you might lose power when you reform government and the economy.

Mr. President, as I have elaborated above, we should not be surprised that the bureaucrats are comfortable with the status quo. It is working for them. Unfortunately they are very few. The economy is not working for majority of  Ugandans.

Secondly, as Prof. Dani Rodrikloves put it, “Let us not forget that government officials must have the incentive to do the economically ‘correct’ things”. We should not presume omniscience or altruism on the part of the bureaucrats.

Therefore, my suggestion is simple: send all the bureaucrats,who are claiming how “the economy is robust”, to a sabbatical of two years. In their places, employ other Ugandans with comparable or even better qualifications.Trust me when they come back in May 2020, we shall have a very progressive debate on the way forward.

Importance of domestic politics

In that period, Mr. Mutebile(who perhaps has not bought a litre of fuel in the past 30 years using his own money) will understand that market failures in Uganda can manifest themselves into a warning fuel gauge.

In that period, the Mutebiles and their disciples will learn that markets in Uganda are sending entrepreneurs the wrong signals-invest here, not there, and yet should have invested there.

Most importantly, when they turn jobless, the bureaucrats will learn that allocating resources in an economy according to comparative advantage, as revealed by market prices, would be socially suboptimal.

They will learn that the private sector they talk about for fun (but have never practiced in an open-furnace) needs the state to facilitate it with subsidised investment funds, particularly in activities whose short-term risks exceed potential (uncertain) long-term development benefits.

They will appreciate that the comfort of their bottom-less public wallets has all along blurred their vision for state schemes that compensate for uncompetitive cost structures for firms while learning takes place.

Finally, the proposed sabbatical will also help you, Mr. President, to appreciate the importance of domestic politics in shaping the incentive structure for businesses and other activities. In the end you might realise that your “eleven strategic bottlenecks” hindering Uganda’s (and Africa’s) socio-economic transformation could easily be collapsed into one – failure to build strong institutions.

 

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Ramathan Ggoobi

Ramathan Ggoobi is Policy Analyst, and Researcher. He lecturers economics at Makerere University Business School (MUBS) and has co-authored several studies on Uganda's economy. For the past ten years, he has published a weekly column 'Are You Listening Mr. President' in The Sunrise Newspaper, Uganda's Leading Weekly

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