M7’s speech at the opening of the NRM cacus retreat in Kyankwanzi

A FILTHY HOUSE IN PAKWACH

By 1986, when the NRM took power, Uganda’s economy was only US$ 0.246 billion in size, we were collecting only 5 billion shillings (1.4% of GDP) in taxes, the infrastructure had totally collapsed (roads, schools, health units electricity, etc.), infant mortality was 122 for every 1,000 children born alive and the average life expectancy was 43 years of age. What is the situation now? The size of the economy is now US$ 20 billion, we have done a total of 1,355 kms of new tarmac roads and repaired 1,621 kms of old tarmac roads since 1986, expanded electricity generation from 60 MW to 812 MW today, infant mortality is now 54 per 1,000 born alive children compared to 122 per 1,000 born alive in 1986, average life expectancy is now 50.4 years for both female and male compared to 43 years in 1986 and the percentage of people below the poverty line is now 24.5% compared to 56% in 1986. Therefore, the economy has expanded more than 81 times since 1986.

However, this expansion has not covered all the sectors uniformly. Apart from the Government constructed infrastructure elements of roads, power stations, schools, health units, etc., the economy, the portions driven by the private sector, has done well in the areas of: real estate (construction), services (transport such as boda bodas, buses, kamunyes, shopping malls, hair salons, petrol stations, hotels and restaurants, tour operators, etc), plantation agriculture as well as large scale farming and tourism (numbers of tourists have gone from 98,405 in 1986 to 1,151,356 today). These four sectors and services in general (real estates, services, modern agriculture and tourism) have created 872,260 jobs. You all can see that these jobs are not enough. The expansion of education and health services has also created an additional …………. Jobs. The problem with education and health, however, is that they do not create wealth (money-income) in the short run. Education and, to some extent, health create capacity which may create jobs in the medium and long term period if they are well focused and harnessed. Healthy people work better if they are motivated and properly oriented. Healthy people can, however, also waste their productive time in bars, playing pool or watching European football matches even during working hours. In that case, the people will be healthy but not productive. Similarly, you can get educated people, either in liberal studies or sciences, but who fail to get an entrepreneurial frame of mind. Nevertheless, generally speaking a healthy society which is also educated is better than an illiterate and sickly one. However, the whole society needs to be re-oriented away from laziness and parasitism to production and generating of profits in the respective enterprises.

As already pointed out above, the sectors of construction, services, tourism and plantation as well as large scale agriculture have been growing very fast. Construction at the rate of 8.9% per annum, services at the rate of 7.7% per anuum, tourism at the rate of 8.8% per annum as well as large scale agriculture and plantation agriculture at the rate of 1.8% per annum(not so fast).
Two crucial sectors have been growing also. These two sectors are: subsistence agriculture and manufacturing. Manufacturing has been growing at the rate of 7% per annum. Subsistence agriculture should not only grow but should be completely phased out, to be replaced by small scale or medium scale commercial farming. The growth of manufacturing will completely transform Uganda. I have repeatedly given you the example of milk in North Ankole (Kazo-Nyabushozi). There are now 200 milk coolers in this area, handling 2,500 litres of milk per cooler per day. These now employ 1,600 people working in the coolers and about 100 people working as Bagyemuzi ─ the people that carry milk on the bicycles from the farms to the cooling plants. These cooling plants are located at the sub-county level or at lower levels of trading centres. As I told you , there are 70 coolers in the Trading Centre of Rushere alone. Rushere trading centre is in Kenshunga sub-county. The following are the trading centres found in Kenshunga sub-county: Kiruhuura, Nyakasharara, Rushere, Nshweere, Rutoma, Kitagyi, Katongore, Mugore, Nyanga and Mirama. This is what I would like to see in the whole of Uganda. Each sub-county must be a mini-industrial centre with milk coolers, fruit processors, honey extractors, vegetable oil extractors, silk fabric processor, coffee hullers, coffee roasters, tea factories, etc. etc. All the administrative centres at the sub-county level, provided there is electricity, must be mini-industrial centres. All these will be agro-based industries.

There are, however, other industries that are based or will be based on minerals, fisheries, timber, ICT, engineering (heavy and light), scientific discoveries, etc. The scientific discoveries are based on the human brains ─ the educated and empowered brains of our scientists. They have already started. The inventions by Dr. Muranga for the bananas, Doctors Tikodri and Musasazi for the Kiira electric vehicle, Dr. Kyamuhangire, the anti-malaria-larvae discoveries, etc. are part of the limitless gold mine based on our human brains ─ far richer than the oil which some people are spending on so much time. Oil is a good catalyst, a short and medium term enabler that will help us to build our infrastructure faster. The consumption capacity of our population and the brain power of our scientists are however, in the end, a far greater wealth than the minerals or the oil and gas. Those intoxicating our society with the stories of great wealth through oil are doing us a disservice. Up to now, we have confirmed 4 billion barrels in the ground. Assuming, over the whole project time, we shall pump out of the ground 2.5 billion barrels (because you cannot pump out all the oil), at the present price of US$ 100 per barrel, Uganda will get 250 billion dollars over the whole project time. Is this the money Uganda is going to depend on for all this time? How much is South Korea (a country half the size of Uganda) or Japan earning in exports per annum? South Korea is earning US$……. billions per annum. Japan is earning US$…. billions per annum. Neither of them has oil, gas, minerals or even serious agriculture. They both, mainly, depend on the brains of their scientists.

Manufacturing has grown at the rate of 7% per annum. It will, however, grow at a much faster rate since we have solved the problem of electricity, provided we also solve the problem of the price of electricity. The problem of high electricity prices must be addressed. On account of using private companies to build electricity generation plants as we did with Bujagaali working with Aga Khan the price of electricity ends up being high. While the private companies help us to build the power houses, they use money borrowed from banks with high interest rates. When these private companies integrate these bank interest rates and their own profits into the price of electricity, the price ends up being too high to be afforded by the manufacturer, especially. The Uganda Manufacturers Association (UMA) are already complaining about these high electricity prices. One way to solve this problem is for the Government to pay off these private companies so that they stop over pricing electricity. This should be studied. The real solution is for the Government to take on the sole responsibility of building the electricity dams. That is where the money from oil would come in handy. Our manufacturers need cheap electricity to be competitive. The price of electricity to the manufacturers in China is now 7.98 American cents per unit, in the USA, it is 7.11 American cents per unit, in Germany it is 11.94 American cents per unit, in India it is 10.50 Cents per unit, in Tanzania 5 cents per unit and in Uganda it is now 11.60 Cents per unit.

The other obstacle to manufacturing has been political interference by elements of the political class. This has affected the Dairy Corporation, Lugazi Sugar Works, Amuru Sugar Works, etc. There was attempted political interference in the Palm Oil project in Kalangala but we resisted it. Kalangala is now thriving. The Caucus of NRM in Parliament must take a stand on this sabotage. Then there are delays caused by the timid political elements and the indifferent, if not compromised, civil servants. This is affecting Kilembe Mines. There are groups that appear to have the capacity to, finally, revamp and up-grade Kilembe Mines. Officials (political and administrative) have, however, been tossing them up and down for the last two years. They hide behind PPDA laws etc. First of all, PPDA laws were not for investment promotion ─ to attract investments. There were, indeed, for procurement ─ buying goods and services for Government use ─ furniture for Government offices, cars for Government ministries, etc. This is a simple process where the Government (the buyer) is comparing offers from the sellers. To confuse this with attracting people with technology, entrepreneurship and money to invest in our country is to make a very fundamental mistake. Yes, there may be different investors that may be interested in the same area of investment. Quickly compare the proposals and the capacities of the interested companies (technical, entrepreneurial and financial) and decide. All the investors would, surely, be very happy with a quick decision so that they do not have to waste money travelling to and from Uganda endlessly. If we solve the problem of political interference, high electricity prices and delays caused by disoriented political or administrative officials, the manufacturing sectors, based on agro-processing, minerals, forests, fisheries, engineering and the innovation of our scientists, the manufacturing sector will boom, at least for the internal market, the market of South Sudan, Eastern Congo, Western Kenya, North-Western Tanzania, Rwanda and Burundi.

When it comes to exports beyond the above regional circle, then we must work with Kenya and Tanzania to modernize and repair the railway lines to the Sea as well as building new ones. The cost of transporting a container by road from Mombasa to Kampala is US$ 4,500 while by rail from Mombasa to Kampala it would be US$3,100. This is with our inefficient railway system as it is at the moment. How will it be with a properly functioning railway system? What is, for instance, the cost of transporting by rail for the same container over the same distance in China, India or Brazil? The comparable figures for China, India and Brazil are ………, ……… and ….… respectively. However, even the antiquated railway of East Africa is cheaper than road transport as shown above.

In spite of the bottlenecks of electricity, political interference as well as delays by the political elements and officials, Uganda now has 416,864 companies that are formally in the services sector comprised of the areas of hospitality (tourism), consultancy, education, health, transport, ICT, beatification (salons), etc. These are employing 872,260 persons. On the manufacturing side (the formal), we have 32,410 companies, employing 153,495 persons.

To conclude this aspect, I request this meeting to resolve to work with me on the issue of the price of electricity (knowing that we shall not lag behind again on the issue of generation), political interference as well as delays by political decision makers and officials.

The other gap in the economic transformation is in the area of continuing to preserve subsistence agriculture ─ 68% of the homesteads according to the census of 2001 were in subsistence farming. Subsistence farming means just growing food for the stomach but not earning meaningful cash. I have already talked to you before on this issue. I have given you written documents. We had 18 days in Entebbe of zonal meetings last year. Just to recapitulate what we discussed then, each homestead of 4 acres should organize commercial agricultural production as follows:
1. 1 acre for coffee (Robusta or Arabica as appropriate);
2. 1 acre of fruits (oranges, mangoes, grapes or apples according to the zones);
3. 1 acre of bananas or other food crops such as rice, cassava, irish potatoes (emondi) or millet (my preferred food);
4. 1 acre of elephant grass (ebisagazi, ebibingo) for the zero grazing cattle;
5. Chicken layers for eggs, improved goats and/or pigs in the backyards of the homes;
6. Mushroom growing even in the peri-urban areas; and
7. Fish farming – especially in the areas of Busoga, Teso and Lango. Recently, I commissioned a fish hatchery in Anyara, Kaberamaido. The farmer there told me that he could get 100 million shillings from the few ponds he has there.

I cannot conclude this speech without talking briefly about infrastructure (roads, electricity, the railway, etc). In the last budget packaging, I insisted on concentrating on the electricity and the roads. With the present rains, you can see what I was talking about. Some of the areas are impassable. The Minister of Works will address you. Nevertheless, it is clear that those priorities were correct. Where they were implemented, the situation is excellent. Where they were not, people are suffering. Let us learn from those mistakes. In recent discussions with some Members of Parliament (MPs), questions were raised as to what criteria is used to pick roads for tarmacking. The main method is relying on the Internal Rate of Return (IRR). This measures the profitability of projects, including roads. Here below are the different roads in Uganda with their IRR: Nyakahita-Kazo-Kamwenge-Fort Portal 22%, Fort Portal-Bundibugyo-Lamia 18%; Kabale-Kisoro 18%; Soroti-Dokolo-Lira 15%; Kampala-Gayaza-Zirobwe 18%, Kigumba-Masindi-Hoima-Kabwoya 18.80%; Rukungiri-Kanungu-Ishasha 5.60%; Muyembe-Nakapiripirit/Moroto-Kotido 5.80%; Masindi Port-Lira-Kitgum 18.80%; Gulu-Atiak-Nimule 18.10%; Vurra-Arua-Koboko-Oraba 16.90%; Olwiyo-Gulu-Kitgum 19.6%; Kapchorwa-Suam 12.10%; Mbale-Bubulo-Lwakhakha 16.00%; Soroti-Katakwi-Moroto-Loktanyala 13.90%; Mukono-Kyetume-Katosi 23.43%; Mpigi-Maddu-Ssembabule 15.20%; Villa Maria Ssembabule 20.33%; Musita-Lumino-Busia-Wanseko 19.50%; Kabwoya-Muzizi Bridge 15.40%; Kayunga-Bbaale-Galiraya 29.50%; Buwaya-Kasanje-Mpigi-Kibibi-Mityana 26.30%; etc. etc.

With funding from International Funding Agencies or Development Partners, they never depart from this principle. The road must have an Internal Rate of Return of above 12% to qualify for international funding. It is us who, when we are able financially, or can engineer a financing solution, that depart from this principle. That is how we tarmacked Mityana-Fort Portal road, Ntungamo-Rukungiri road, Muyembe-Kapchorwa road, Kapeeka-Matugga road, Moroto-Nakapiripiriti road (on-going or about to start), Isingiro road, Ishaka-Kagamba road, etc. Here we used the need to connect the different corners of our country or for some historical reasons (Luwereo war or the 1979 war) in spite the IRR being low. Even when the IRR is very high, such as in the case of Kampala-Masaka (53%) or Kampala-Mityana (18.3%), the external agencies do not come in because they also do not have enough money. That is why the Uganda Government had to do these roads itself (Masaka-Kampala and Mityana-Kampala).

Nevertheless, we have now found solutions for the 19 roads plus Masindi Port-Lira-Kitgum and Nabumali-Butaleja-Namutumba roads in addition to what is already going on in that sector. We have given road equipment to all the districts. The challenge now is to maintain the 11,000 Kms of UNRA roads (tarmac and murram). The Minister argues that the 280 billion shillings we give him for road maintenance and repair is not enough. The other portion of his budget goes on new roads funded wholly by the Uganda Government or in partnership with Development Partners. We are going to discuss this issue in this meeting.

I thank you, congratulate you on finishing 2012 and wish you a happy and prosperous new year.