Uganda’s declining growth

We must also remember that there is always a gestation period between when construction of a dam or road begins and when it is finished and fully utilised to deliver the productivity growth dividend.

By Andrew Mwenda

So the immediate economic growth dividend must come from use of local factor inputs, employing local manpower and investing the profits in the domestic economy. One has to worry about Africa because whenever this continent is growing, someone is doing the work for us.

When the Americans, British, Germans, South Koreas and today the Chinese were building their roads, railways and dams, they used their own companies and people. Why does Africa rely on foreigners to build her infrastructure?

Returning to Uganda, more investment in dams and roads is sucking money out of the economy and sending it to China. It is true that once completed investments in Karuma, Isimba and the many road projects will drive economic growth. But this will happen in the medium term. In the short term, Uganda is suffering from a liquidity squeeze and slow growth which may become a long term problem if we do not develop local capacity to handle these large infrastructure investments using locally owned firms.

Uganda has little or no control over growth in China and other Western industrialised nations. However, it can reduce reliance on foreign contractors to do large construction projects. This would be through enforcement of local content rules and by developing a long-term strategy to build local firms. And most critically, Uganda (and Africa generally) needs to seriously rethink its obsession with Foreign Direct Investment (FDI) as a panacea to our development; especially when it dominates the commanding heights of our economies.

It is here that ideological hegemony has inflicted its worst effect on the African psyche. African leaders and citizens believe that to develop we need FDI and foreign contractors. Their benefits seem obvious: they bring in capital and technology combined with new management and organisational skills. But these short-term benefits are often realised at the cost of either killing existing local firms or undermining their development. Yet given a chance, local firms can grow and accumulate the same skills and competences in the long-term.

History teaches us that all economies that graduated from poverty to riches actually had to pay for poor quality work and products by local firms at a high price. This was the necessary short-term cost in order to grow national firms like Toyota and Nissan in Japan and Samsung and Hyundai in South Korea. It took Toyota 20 years of government subsidies and three near bankruptcies for it to grow into what it is today; the second largest automobile company in the world. Its growth was a result of Japanese government banning Ford and General Motors from setting up motor-vehicle assembly plants in Japan in the 1930s.

But the African – leader and citizen – is convinced that we need high quality goods and services and lower prices NOW. Yet had Japan and South Korea made such a choice, they would not have Toyota or Samsung, and they would not be as transformed. Africa should be willing to pay the short-term price for long-term transformation.

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