{UAH} Pojim/WBK: As I was saying!!!!! Privatisation in Uganda was a mistake – expert

http://www.observer.ug/business/38-business/39014-privatisation-in-uganda-was-a-mistake-expert

Privatisation in Uganda was a mistake – expert

Written by Alon Mwesigwa

Last Updated: 31 July 2015

Eskom is one of the foreign companies that has invested in Uganda's power sector

Giving away control of key government parastatals to private individuals during the early days after Uganda had emerged from decades of political turmoil was a mistake, experts have said.

Discussing a 2015 Africa report titled "Industrialization through trade" at the Economic Policy Research Centre on Tuesday, Julius Kiiza, a political science don at Makerere University, described as "historically untrue" the idea that it is through free markets that poor countries will develop.  The UN Economic Commission for Africa (Uneca) wrote the report.

"Privatisation was [premature] for Uganda. It needed to hold onto its key parastatals," Kiiza said.

"Government has business in business; successful states have provided leadership in development," he said.

Advanced economies such as the UK and Japan used government interventions to protect domestic industries in the early stages of industrialisation. Kiiza gave an example of Eskom, a public entity from South Africa, which invested in Uganda's privatized energy industry.

In his state-of-the-nation address in June, President Museveni said he did not see the benefits of privatisation, especially in the banking sector, where he thought the private sector would be more efficient and bring lending rates down. Yet, the private sector has been more profit-seeking.

Uganda privatized most of the public enterprises in the early 1990s at the urging of the World Bank and the International Monetary Fund. Meanwhile, the report, which looked at 10 African countries, Uganda included, notes that it is not good to leave infant industries to the competition of the market.

"Their trade policies must promote dynamic efficiency of mature firms and promote efficiency of infant industries through temporary shields from international competition," says the report.

Particularly, the report points out that the continent is not creating enough jobs outside the poorly-funded agricultural sector and as a result, so many people remain poor. As the economy grows, more and more people are expected to move away from agriculture to services and industry, which are thought to pay better. 

In Uganda, 66 per cent of the population remains in the agriculture sector, carrying out mainly subsistence farming. The sector grew by a paltry 2.7 per cent in 2014/15 financial year.

The report says, the "East and southern African countries such as Uganda, Malawi and Ethiopia export the bulk of agriculture intermediaries, in most cases with little domestic processing and value addition."

Lindan Ndlovu, a trade consultant, said that for any country to grow, "there is need to go directly and aggressively into industrialisation; many people see trade as imports and that's why [African countries] are suffering with balance of payments deficits."
Hopestone Chavula, an economic affairs officer at Uneca, said: "Because most economies are stuck in agriculture, jobs were not moving out of the sector as fast as theory seems to suggest."

The report recommends that countries such as Uganda should have a trade policy that seeks to protect infant firms. Uganda's trade policy, which was launched in February 2008, seeks to eliminate barriers to trade and create a conducive environment for the private sector.

"African economies should start from the labour-intensive sectors and upgrade to medium and high-technology sectors," the report adds.

amwesigwa@observer.ug

Privatisation in Uganda was a mistake – expert

http://www.observer.ug/business/38-business/39014-privatisation-in-uganda-was-a-mistake-expert

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