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H.E Yoweri Kaguta Museveni, President of the Republic of Uganda

Forging Local Economic Safety Nets: Uganda’s Road From Independence

Posted on 17 May 2012 by Gaurav Malik

H.E Yoweri Kaguta Museveni, President of the Republic of UgandaFifty years after her independence in 1962, Uganda has braved significant governance and economic challenges making her population one of the most resilient people of our age. With a young and fragile democracy at the advent of Independence, a rudimentary economy that was heavily dependent on raw cash crop export, Uganda set out with a promise of hope to its citizens. Endowed with significant natural resources, including ample fertile land, regular rainfall, and mineral deposits, the economy of Uganda had great potential, and it appeared poised for rapid economic growth and development. However, previous political instability and erratic economic management produced a record of persistent economic decline that left Uganda among the world’s poorest and least-developed countries. Various economic policies have been adopted in a bid to provide maximum benefit to the citizens and in order to grow the country from subsistence to an industrial economy. From the hardnosed capitalism policy of the early to mid 60s, quasi socialism of the late 60s, economic stress and deprivation of the 70s and rebirth of the late 80s, Uganda’s economic path has been characterized by turbulence.

Hon Adolf Mwesige Minister of Local Government, UgandaThe 1990s were characterised by strong economic growth, partly driven by external and internal factors and shocks. The Government’s liberalisation and privatisation policies, implemented since 1992, were intended to improve efficiency in the allocation of resources, and the management of business – both of which were expected to maximise economic growth. The economic policies and measures Uganda implemented from 1992 led to a significant improvement in the performance of the economy. From 1992 to 2000 real Gross Domestic Product (GDP) grew by nearly 7% per annum, on average. Growth in the agricultural sector was much slower than growth in industry or services, making it harder for people employed in this sector to move out of poverty. Major emphasis was put on infrastructure rehabilitation and inflation control, which was seen as the overarching condition for investment and, consequently, economic growth. Annual underlying inflation rates fell from 26% in 1992/93 to 5% in 1999/2000. In addition to controlling inflation and improving production price incentives through liberalisation, the Government created the Uganda Investment Authority (UIA), which was to identify investment constraints, propose appropriate interventions to address the identified constraints, and be a one stop centre for foreign investors so as to quicken business start ups. The UIA put in place an investment code that was mainly geared to attracting foreign direct investment.

To further anchor the economic policies and increase their benefit to the poor, the Government embarked on major shifts in the country’s governance structures especially at sub-national level. In 1992 Uganda adopted Decentralisation as the main mode of governance. This was later to be buttressed in the Constitution (1995) and the Local Governments Act (1997). The policy devolved powers and functional responsibilities over decision-making and service delivery to popularly elected local governments.

Notwithstanding the good economic performance from 1992 to 2000 that ought to have benefited all categories of people, including the chronically poor, and regardless of an elaborate institutional framework, sub-national development still faced a number of challenges. These were aggravated among other things by; over-reliance on public capital investments, a non-conducive environment for micro investments, poor access to financial services, high interest rates and a weak government-private sector interface for exploiting synergies.

A Joint Review of Decentralisation held in 2004 revealed serious departures between the obtaining economic policies and the benefits of the Decentralisation Policy itself. The major criticism at the time was the inability of the Government to exploit the comprehensive decentralized governance structures for more pro-poor economic development.

As a result of this policy interrogation, a new and sixth objective on Decentralization was agreed: “To Promote Local Economic Development in Order to Enhance People’s Incomes”.

“The purpose of local economic development (LED) is to build up the economic capacity of a local area to improve its economic future and the quality of life for all.  It is a process by which public, business and nongovernmental sector partners work collectively to create better conditions for economic growth and employment generation”- World Bank. LED offers local government, the private and not-for-profit sectors, and local communities the opportunity to work together to improve the local economy.  It focuses on enhancing competitiveness, increasing sustainable growth and ensuring inclusiveness.  LED encompasses a range of disciplines including physical planning, economics and marketing.  It also incorporates many local government and private sector functions including environmental planning, business development, infrastructure provision and finance, among others. It is premised on the network principle which promotes “structures of interdependence involving multiple organizations or parts thereof, where one unit is not merely the formal subordinate of the others in some larger hierarchical arrangement” (O’Toole 1997). In Uganda, Local Governments are continuously building networks with a variety of public and private agencies to plan, budget and implement custom-designed policies and projects geared at increasing the economic well-being of the respective communities.

The practice of local economic development is being undertaken at different geographic scales – namely through a national context, at and within the Local Governments. At the national level, LED is the main flagship for the 5 Year National Development Plan (NDP) whose main theme is “Growth, Employment and Socio-Economic Transformation for Prosperity”. The NDP subscribes to the Millennium Development Goals with particular emphasis on MDG 1- “Eradicating extreme poverty and hunger”. A draft LED Policy and Draft Strategy provide an overarching framework for implementing LED.    Districts and Municipal Councils are pursuing the inclusion of LED strategies into the mainstream development plans that govern resource allocation within their respective jurisdictions. The Local Governments play a LED promotional role in terms of providing the right economic infrastructure, governance framework and through stimulating business development services. On the other hand, individual communities and areas within a given local government are also encouraged to adopt specific LED strategies to improve their economic competitiveness.  As such, communities will continually improve their investment climate and business enabling environment and ultimately improve individual and taxable household incomes.

A number of best practices are merging and they include:

  • Ensuring that the local investment climate is functional for local businesses;
  • Supporting small and medium sized enterprises and
  • Encouraging the formation of new enterprises and attracting external investment (nationally and internationally);
  • Investing in physical (hard) economic infrastructure;
  • Investing in soft infrastructure (educational and workforce development, institutional support systems and regulatory issues);
  • Supporting the growth of particular clusters of businesses;
  • Engaging in conscious regeneration or growth (areas based initiatives  programme especially for the urban centres;
  • Supporting informal and newly emerging businesses;
  • Targeting special interest and disadvantaged groups.

The Decentralisation Policy, therefore, offers great opportunity not only to tackle poverty at household level but also to widen the tax base of the Local Governments. This in turn enables them to finance service delivery hence being accountable to their constituents.

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