THE PROBLEMS OF THE ECONOMIC DEVELOPMENT OF UGANDA

APPROVED:

JL Major Professor

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

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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,

2 0

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

2 9

TABLE I

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

Industry 1 9 6 6

—

1967 1 9 6 8 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 1 3 1 1.24 137 141

Miscellaneous 303 335 335 366

83 85 90 94

Total 2,887 2 , 9 9 0 3 , 0 8 8 [3,376

Nonmonetary Economy:

Agriculture- 846 878 911 950

Forestry and fishing 116 1 1 9 . 1 2 4 128

Total 9 6 2 i 9 9 7 1 , 0 3 5 Ii/oTF

Gross Domestic Product 3 , 8 4 9 3 / 9 8 8 4 , 1 2 3 4 , 4 5 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)

Year Sales

Power Station Use and Trans-mission Losses

Total I Generated Year Local To Kenya

Power Station Use and Trans-mission Losses

Total 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 Number

Per 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 Midwife 715 13,300 1 715 ; -

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

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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,

i n 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<S§

(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.

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