Uganda’s Economic Journey Since Independence: Ups and Downs

It has been variously said, including by President Yoweri Museveni that Uganda was at the same economic standing as most of today’s Asian Tigers, particularly Singapore, in 1962. This is used to show how much Uganda has slowed down or reversed in Economic advancement since it got independence, compared to her former peers.

Indeed, according to macrotrends.com, at independence, the value of Uganda’s economy (GDP), was 450 million US dollars while Singapore’s was 830 million US dollars, quite small, though double that of Uganda. However, in terms of per Capita income, Uganda had 63 dollars, while Singapore, which became an independent state in 1965 had an average income per person of 472 dollars.

By 1971 just before Uganda underwent drastic economic and political changes, GDP had grown to 1.4 billion US dollars and per Capita income to 147, more than double in nine years. By now, Singapore’s per Capita Income had grown to 1,071 dollars which is a middle-income status even by today’s standards, as the resource-poor country positioned itself as an investment and tourism destination as well as a trade hub.

Today, an average earner in Singapore earns 72,000 dollars annually, 70 times more than a Ugandan. Uganda’s economy grew at an average of 6 percent between 1962 and 1971, as Milton Obote’s government maintained the pace inherited from the colonial government, led by agriculture, mainly cotton and tea.

By the mid-1960s, coffee was also becoming an important cash crop in addition to copper which had been discovered in 1950. The government formalized the cooperative movement which supported farmers with the supply of planting materials, marketing, and storage of harvest, as well as subsidized machinery like tractors.

The cooperative unions owned ginneries and coffee hulling factories which ensured stable and high returns for farmers, while the secondary markets, like export, were accessed through the national marketing boards. The formation of the East African Community in 1967 further strengthened the economy, through easier access to the coast and stronger service industries like banking and transport. 

It is suggested that the growing socialistic character of the government and prosperity of the masses was seen as a threat to the military, according to Michael F. Lofchie in “The Uganda Coup—Class Action by the Military”. This led to the 1971 coup by Idd Amin, but other accounts say the army commander’s action was to preempt an impending arrest for his alleged plunder of gold in Zaire (Democratic Republic of Congo). 

Amin embarked on his own reforms starting with the “economic liberation war” which says, holders of British passports, mainly Indians and Pakistanis, were expelled and their properties reallocated to indigenous Ugandans or nationalized. Many Asians had huge interests in agriculture and industry, especially food processing and textile which were to be confiscated. Most of the nationalized assets were put under the management of the Uganda Development Corporation, an agency created in the 1950s to promote industrialization in the country.

This somehow overwhelmed the agency which did not have the capacity to supervise the sudden expansion of the portfolio, according to the current Executive Director, Patrick Birungi. Economic growth slowed down but nevertheless continued until 1977. Amin’s policies increasingly soured relations with the other EAC members and at one time, Kenya President Jomo Kenyatta threatened to block the Mombasa-Kampala route if Amin continued to claim that parts of Kenya belonged to Uganda.

The US agreed to help Kenya strengthen its army in case Amin attacked, as well as the Israeli raid on Entebbe International Airport further isolated Amin before the collapse of the Community in 1977. The collapse meant that Uganda had to do more to access foreign markets. The high military spending had increased pressure on foreign exchange and led to high debt levels. In 1977, economic growth which had slowed down in the last few years, went into the negatives for the first time in independent Uganda, as industries collapsed over failure to get spare parts, raw materials, and expert skills. 

In 1977, Amin was accused of killing Archbishop Janani Luwum and rounding up US residents in Kampala, two incidents that forced President Jimmy Carter to impose sanctions on Uganda’s coffee considered the remaining lifeline of the economy then.

This abetted the smuggling of the commodity to Kenya, further denying the government the much-needed revenues.

In 1979, the war against Amin’s regime was the last nail and the GDP contracted from 2.96 billion dollars in 1977 (when high coffee prices brought some relief) to 2.1 billion, and further to 1.24 billion in 1980. The economy only stabilised after the election that returned Obote who promised new reforms, attracting the support of the IMF and private investors.

Among the reforms was floating the shilling, leaving foreign exchange rates to be determined by world market developments. Agriculture contributed most of the growth, at 17.5 percent, and by 1984, GDP had grown to 3.6 billion dollars.

However, disagreements over the budget policy saw the IMF withdraw assistance to the country. This coupled with the intensifying war between the government and armed rebels reversed the growth trend, and GDP had dropped back to 3.5 billion when the rebels led by Yoweri Museveni overthrew the government.

All through the previous decade, agriculture survived because more people had retreated to farming as other sectors collapsed. But this time, it was contributing 56 percent of the economy, compared to 11 percent by industry, while services accounted for 32 percent of GDP. The new government led by the National Resistance Movement embarked on fresh reforms for growth, including rolling out some policies they had introduced while still rebels in the south and western parts of the country they had captured before.

Among the promises were returning the economic drive to the private sector, fighting corruption, diversifying agriculture, and industrial products based on local raw arterials, returning confiscated assets to their original owners, supporting a mixed economy, and increasing investment in social services.

These promises attracted the World Bank, the IMF, and local and foreign investor confidence, and in 1986, the economy grew by 4.5 percent and 7.2 percent in 1988, but a drastic fall in coffee prices affected this growth to 1992. In 1987 an aggressive currency reform took place and the shilling was devaluated by 76 percent.

At the same time, the government introduced barter trade, exchanging products like maize and coffee for imports like sugar, oil, and equipment. The reforms and political stability in most of the country led to higher growth rates, but the privatization and liberalization policy attracted criticism that it was benefitting a few rich and politically connected.

These policies, however, led to the total collapse of the cooperative movement as they encouraged the growth of the middleman, and surviving economic support agencies like marketing boards were abolished. Services like the national bus company, the railways, and the national airlines were all replaced by private operators, which increased the cost of services to the common person.

By 2001, for example, both the Uganda Commercial Bank and the Cooperative Bank were no more leaving small and medium entrepreneurs to fend for themselves, and rely on government recovery projects and programs. The average growth of 6.7 percent per year was registered between 1990 and 2015, with the highest recorded in 1995 at 11.5 percent, and in 2006 at 10.8 percent when there were heavy investments in the energy sector. 

Over this period, the structure of the economy evolved from agriculture-led to services and industry. The contribution of agriculture now averages 25 percent from a high of 56, while industry contributes 22 percent, more than double the 1986 figure. Services have now overtaken the two sectors as the main contributor to the economy at 55 percent. 

Since 2011 growth has averaged about 4 percent, only being above 6 percent in 2018 and 2019. GDP has grown from 0.45 billion at independence to 45.7 billion dollars, 2022 as Uganda marks the 60th independence anniversary, and per capita income from 63 to 1,071 dollars, according to the Ministry of Finance, Planning and Economic Development.  

In the next several years, according to the ministry, the economy is likely to be led by the oil and gas industry, as well as technology, according to government authorities.

This will however depend on how successfully the government and the oil and gas companies manage to overcome the pressure from civil society fighting against the development of oil developments. They have until now assured the nation that the process will go on as planned, to realize the first oil by 2025.

To date, there is no functional railway service across the border, with the government raising money from lenders to rehabilitate the railway network. Generally, Edward Katumba Wamala says this is not a privatization policy reversal, but that there is a need for such infrastructure as demand grows.

“The country plans to export 22 million bags in a few years. How will you export it without a train?”, Wamala reasons. On the revival of Uganda Airlines, President Museveni said there was a need for the national carrier because Uganda had been mistreated by other countries with their airlines.

Other signs of policy reversal include the attempt at reviving the cooperative movement. Sheila Kawamara, the Executive Director, of the East African Sub-regional Support Initiative for the Advancement of Women, EASSI, says the current move “is a sham” because the Sacco’s being formed are not demand-driven but political. She said they cannot achieve what the 1960s and 70s Cooperatives achieved.

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