Cheeye’s analysis on Uganda economy wrong, misleading

Bob A. Kasango

What you need to know:

  • In the last 30 years, Uganda’s growth rate has been outdone by only Singapore.
  • Going by the Rule of 72, Uganda’s income per capita stood at $150 (Shs540,000) in 1986. At the sustained per capita income growth rate of 3.5 per cent per annum, it can only double very 20 years.

In his weekly column in the Sunday Monitor of October 15, 2017, Mr Teddy Ssezi Cheeye, in an opinion titled, “Museveni’s letter to Kyagulanyi: What are the real issues? Part I”, Cheeye raised a number of economic and political issues and answers them with his figures.

He quotes President Museveni at length and then goes on to challenge “President Museveni and his NRM intellectuals to mathematically show Ugandans how our Goss Domestic Product (GDP) has grown to over $25bn (Shs90 trillion) in the last 30 years and how they arrive at a GDP per capita income of more than $700”.

I am responding to the issues you raised not because I am an “NRM intellectual”. No. I have never been hired as one, but I am a Ugandan; so, I feel duty-bound to respond to your inaccurate mischaracterisation of facts and figures.

For ease of communication, I will not delve into the complex econometric calculus that you demand of President Museveni and “his NRM intellectuals”. It is clear to me from the onset though that even you, Mr Cheeye, while accusing President Museveni and his government of “lack of knowledge”, your article and conclusions are the offspring of little or no knowledge at all. And so I shall not get very granular on the subject.

I have over the years of reading and listening to critics of President Museveni and of African governments generally, come to the inescapable conclusion that most of these critics are just ignorant and blinded by anger.

In 1986, the GDP of Uganda as per the World Bank was $3.9bn (Shs14 trillion) based on the reigning exchange rate. Government then fixed the exchange rate artificially. The real exchange rate or what after the 1992 economic liberalisation is called the “market exchange rate” was then called the “black market or magendo” rate.
The magendo rate reflected the true value of the Uganda shilling against the US dollar – its actual purchasing power. Mr Cheeye ignores this in his “knowledgeable” exposé of NRM’s “lack of knowledge”!

In order to arrive at the accurate GDP figure, one would have to calculate Uganda’s rate of economic growth from 1986 until 1992 when the exchange rate was liberalised, which is a true reflection of the actual purchasing power of the shilling, and then establish the rate of growth in 1992 and deflate it backwards to 1986, to establish the actual GDP in US Dollars at the time.

We would then adjust the dollars to 30 years later and only then would one arrive at a correct statistical analysis of the GDP growth over the period 1986 -2016. It is simple arithmetic and basic econometrics.

Because Cheeye and his ilk do not possess this basic knowledge of econometrics, they do not understand the wider economic concepts of growth and development and it is difficult to engage in an informed debate with them in this forum.

Let us, for instance, take a quick look at Africa’s and the world’s economic trajectory since 1960 as a base year. There were 200 countries categorised by the World Bank as “poor” or “developing countries”, Uganda inclusive. Only two of those have transformed from poor to rich and industrialised over the period 1960-2016. They are South Korea and Taiwan. No other country has achieved that feat.

Of the 200 countries categorised as “developing” in 1960, 101 of them were categorised as “middle income”. Of these 101, Only 13 progressed from middle-income status to industrialised countries, with Botswana being the only Africa country to have made the grade.

Botswana was the only outlier in Africa largely because of its immense diamond wealth, a functioning democracy that found a way with inspired leadership and sound economic policies. The others were Brazil, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Malta, Oman, Singapore, Taiwan and Thailand. These countries managed to grow for 25 years or more uninterrupted at the rate of 7 per cent per annum or higher.

The point is, therefore, that the process of development is difficult and quite often tedious. Economic growth and development are a marathon, not a sprint. But the likes of Mr Cheeye would want Museveni to have engaged in it as a sprint. Even where it has been a sprint, there have been, as will always be, only one or two Usain Bolts like Taiwan and South Korea!

What it is about these countries that made them register these phenomenal and sustained high growth rates over a very long period of time? As you can notice, the list includes Japan, Brazil and the Asian Tigers – no surprise there!

In all of them as in the case of Botswana, it was very long periods of political stability and inspired leadership and, in the case of Japan, heavily financed post-war rebuilding played a major role.

Crucially, they benefitted from what in economics is known as the ‘Rule of 72’. Many people, like Mr Cheeye, cannot do logarithmic functions in their heads, but can do simple calculus like 72 divide by 8 and get almost the same result. Conveniently, 72 is divisible by 2, 3, 4, 6, 8, 9 and 12, making the calculation even simpler.

In economics, the rule states thus: If a variable grows at the rate of 1 per cent per annum, it will double every one hundred years and if it grows at the rate of 3.5 per cent per annum, it will double every 20 years. But if any variable under measurement grows at the rate of 7 per cent per annum, it will double every 10 years.

A rate of growth of 7 per cent per annum is about the highest rate of growth any country has registered in history, with the notable exception of China (in the last 30 years) and South Korea (1960-1990) that registered unprecedented growth rates of 9.8 per cent and 9.2 per cent ,respectively.

To arrive at the net GPD growth rate, the population growth rate must be discounted. In the case of South Korea, the population growth rate in that period was about 2.1 per cent per annum, making its real GDP growth rate 7.1 per annum per annum.

What Korea achieved in 30 years was managed by Britain in 180 years and the United States of America in 175 years! And so for Cheeye to argue that President Museveni has failed to “Singaporise” Uganda in 30 years is the same thing as berating our businessmen and women for not being like Mark Zuckerberg or Bill Gates at the tender ages they did or at all.

Under Mr Museveni whom the Cheeye’s and Kyandondo East MP Rober Kyagulanyi’s, or Bobi Wine, love to attack and belittle, GDP growth between 1986 and 2016 has been a respectable sustained 6.7 per cent per annum.

That rate has made Uganda the 17th fastest-growing economy in the world. If one excluded mineral rich nations that hugely benefitted from especially the oil boom of the 2000s, Uganda climbs to 11th position in the world and number One in Africa over the last 30 years.

That is not an easy feat to achieve, and these facts are readily available from the World Bank, International Monetary Fund (IMF) or the Central Intelligence Agency (CIA) or any other organisation of repute, because the likes of Mr Cheeye will be quick to say Uganda’s figures are cooked or that President Museveni bribed the authors!

The USA has the second highest per capita income (about $56,000 or Shs202m) of any country with a hinterland in the world, beaten only by Norway. To achieve this status, the USA sustained a per capita income growth rate of just 2 per cent per annum from 1900 to 2000.

What we learn from all this is that in order to be where the Cheeye’s would like Mr Museveni to have delivered us takes a very long and sustained period of uninterrupted high growth rates.

Under President Museveni, Uganda has registered an average per capita income growth rate of about 3.5 per cent per annum. By comparison, the only other country in the world that has registered the same rate for a sustained period of 30 years is Germany after World War II.

In the last 30 years, Uganda’s growth rate has been outdone by only Singapore.

So why is it that Uganda is still poor or do the critics think so? There are in my view four major reasons:

1. The process of development takes such a long time and 30 years, while seemingly long to the critics, is not as long as is requisite to achieve what the Mr Cheeye’s want Mr Museveni to have achieved.
2. Uganda transformed so rapidly that many forget or just do not know where the transformation began and where we are. So they do not appreciate the achievement.
3. Per capita income does not take into account investment in factors likely to impact positively upon development such as health, education or infrastructure and it is clear that Mr Cheeye ignores that too.
4. A rapidly high population growth rate that is, in the medium term, impacting negatively upon the GDP growth rate.

Going by the Rule of 72, Uganda’s income per capita stood at $150 (Shs540,000) in 1986. At the sustained per capita income growth rate of 3.5 per cent per annum, it can only double very 20 years. And that has about been the case. In fact, Uganda out-performed and defied the basic rule.

And so, Mr Museveni will never be the President that takes the credit for the foundation for a high income that he has laid. To achieve today’s Singapore per capita income as the Cheeye’s demand, will take at least another 40 years of the same sustained growth. It is a good ask, but very unrealistic to think that in just 30 years we should have Singaporised.

To the Cheeye’s and Kyagulanyis, I say: The criticism and demands are good as checks on government, and a lot may be wrong with our governance and management of public affairs, but it is not the doom and gloom you portray.