About me.

Andrew M. Mwenda is the founding Managing Editor of The Independent, Uganda’s premier current affairs newsmagazine. One of Foreign Policy magazine 's top 100 Global Thinkers, TED Speaker and Foreign aid Critic

Monday, December 7, 2015

Besigye’s campaign promises in perspective

Forum for Democratic Change (FDC) presidential candidate, Dr. candidate Kizza Besigye and his supporters claim President Yoweri Museveni has destroyed Uganda and their campaign is to save the country from catastrophe. Yet Besigye is making campaign promises that will require trillions of shillings to fund. If Museveni has destroyed the country and its economy, where is Besigye going to get the money? He says it is available in our treasury but is being misused on a bloated payroll of political appointees. Inadvertently Besigye is acknowledging that Uganda’s economy under Museveni has grown tremendously and is now able to generate enough revenues to pay better wages to public sector workers.

Besigye is right. Museveni has presided over a rapidly growing economy. This has led to significant growth in tax revenues. For example, in 1990 when Besigye was in cabinet, government revenue was Shs 134 billion which, when adjusted to inflation comes to Shs 954 billion in 2015 prices. This financial year, Uganda’s tax revenue is Shs 11.3 trillion – that is a more than1000% growth in real terms (i.e. adjusted to inflation).

I am very critical of Museveni on his government’s record on corruption and poor performance in the delivery of some public goods and services especially health, education and agricultural extension services. But I reject Besigye's doomsday view that he has destroyed Uganda. Museveni’s presidency has been a success in some public goods and services such as supply of clean water, electricity, security, telecommunications and most recently national trunk roads. But his most important achievement has been on sustaining economic growth over three decades. Over the last 25 years Uganda has had the 11th fastest growing economy in the world, performing better than the growth miracles of the 20th century – South Korea, Taiwan, Botswana, Singapore, Malaysia, Hong Kong, Mauritius, etc.

I am also conscious of the fact that in spite of this growth Uganda is till a very poor country. In this budget Uganda will spend $150 per person, not enough to pay for a large basket of public goods and services to the quality we desire. But if the economy has been growing impressively well, why are our revenues still this small? Kwame Nkrumah said: “Those who would merely judge us by the heights we have achieved would do better to remember the depth from which we started.” Let us use this wisdom on Uganda’s record.

Uganda’s growth began on a very low base. In 1990 government revenue per person was $16.2 in 2015 dollars. This financial year, it is $ 97 revenue per person – a 500% growth in 25 years. If you think this is small, compare Uganda’s record against the USA. America was almost at the same level of revenue per person as Uganda is today in 1864 i.e. $117 (in 2015 dollars). But 26 years later i.e. in 1890 its revenue per person had grown to $178 in 2015 dollars – a 52% growth. Thus, revenue per person in Uganda over a similar period of 25years grew almost 10 times faster than in the USA. Even when we compare same period (1990 to 2015), Uganda performs much better. Revenue per person in USA has grown by 30% from $7,200 (in 2015 dollars) to $10,400 in 2015 while Uganda has grown 500%.

Now we can address Besigye’s promise to increase wages of government employees. First, public sector wages in Uganda suffered consistent decline in real terms from 1971 to 1987. But because of sustained economic and revenue growth, this trend began a steady reversal. In 1990, the least paid civil servant earned Shs 2,591 (Shs 18,446 in 2015 prices). The highest paid civil servant earned Shs 12,155 (Shs 86,537 in 2015 prices). Today, the wage of the least paid government employee has grown in real terms by 900% to Shs 187,000 while that of the highest paid public service official (head of public service) by 5500% to Shs 4.9 million. This is significant.

Yet public sector wages are still low hence a need for pay raise. A 1995 World Bank study showed that a primary school teacher in Uganda would need Shs 1m (or Shs 3.46m in 2015 prices) as a living wage. Besigye has promised to raise salaries for primary school teachers from Shs 408,000 to Shs 650,000 i.e. by 38.7%; secondary school from 720,000 to Shs1 million (28%); doctors from Shs1.2 million to Shs3.5 million (by almost 300%), police officers from Shs 350,000 to Shs 650,000 (by 71%). Given that Besigye cannot increase wages for some public sector workers and ignore others (because of the problem of moral hazard), his promises will increase the public sector wage bill by 40% from Shs3.0 trillion to Shs4.2 trillion i.e. by an extra Shs 1.2 trillion. Can Uganda afford this? If yes: at what cost?

Note: PriceWaterhouseCoopers does studies on wages in Uganda across all sectors comparing private and public institutions on an annual basis. So I asked them how bad public sector wages are relative to the private sector. They told me that outside of the top banks and telecom companies, public sector salaries in Uganda are competitive with those offered by the private sector. Indeed, most private schools, hospitals, security companies etc. pay their workers less than government pays its teachers, nurses and policemen.

Besigye has also promised to increase the budget for agriculture from 3% to 10% of the national budget. Next year’s budget will be Shs20 trillion. His agriculture will go from Shs480 billion to Shs2.0 trillion i.e. by 1.5 trillion. He has also promised to give a computer to each of the 1.5m students in secondary school. Assuming every laptop will be Shs1 million, the bill comes to Shs1.5 trillion. If amortized to three years, it is Shs500 billion per year. These three promises alone demand Shs 3.2 trillion.

Besigye claims he will fund all these promises by reducing ministers from 80 to 40, cutting the 378 Members of Parliament by a half, doing away with the 100 presidential advisors and assistants and 112 RDCs and their 70 deputies. I agree with Besigye on his desire to cut down on this obese political patronage. But the savings are miniscule relative to his promises. Ugandan ministers earn their salaries as MPs and there are only six who are not MPs. Therefore, even if Besigye cuts cabinet by half, he will only save on the cost of minister’s motor vehicles, each costing Shs400 million. Amortized for five years, it is Shs 266 million per year for 40 ministers. They also earn a monthly responsibility allowance of Shs 2m and Shs 200,000 for telephone calls.  Total savings per year here are Shs 1.3 billion.

Total wages and benefits for MPs this financial year are Shs127 billion. Even if Besigye cut parliament by half he would only save Shs63 billion. Total annual cost of RDCs’ wages is Shs4.5 billion, presidential advisors/assistants is Shs7.2 billion; plus allowances the total comes to Shs15 billion. He can also cut presidential donations of Shs80 billion. Besigye’s total savings bonanza amounts to less than Shs160 billion. I agree this money can do a lot of good. It can build 60km of paved roads, 4,000 classrooms or train 4,000 doctors. However, it is a drop in the ocean of Shs3.2 trillion on only three of his promises – public sector wages, agriculture and laptops for students in secondary schools.

Besigye has made an even broader claim i.e. that the public sector in Uganda is bloated. Is this true? There is an objective way to test this i.e. by looking at the necessary level of government employees per 100 citizens in other countries. The Sub Sahara Africa average is 1.9 public sector employees per 100 citizens, Latin America is 3.5, Middle East and North Africa is 4.0, and Asia Pacific is 2.4. Uganda is at 1.09. Another away is to look at the ratio of wages to GDP. This should not exceed 7%. Ghana is 11.3%, Kenya 12.2% and Uganda is 3.86%. Yet another way is to look at the ratio of total government wages to revenue. This should not exceed 30%. Uganda’s is 25.4%. In Ghana it is 41.2%, Kenya is 52% and Ivory Coast is 45.5%.

All these facts show that in spite of his oversized parliament, districts, advisors and assistants, Museveni is running a very prudent fiscal regime on public sector wages. His ratios meet the best fiscal practice globally. Indeed compared to Kenya, Museveni has ensured that his political hangers-on and civil servants earn modestly. This is contrary to the claims by Besigye’s group.  Indeed, this financial year, 33.5% of our nation’s total budget is devoted to roads and dams. I can claim part of this credit. In 2006/07 I worked with ACODE to campaign against the high cost of political patronage and called for funding of roads and electricity. It seems someone in government listened and acted.

If Besigye increases Uganda’s wage bill to Shs4.2 trillion that will make public sector wages 33% of next year’s projected revenue of Shs13 trillion – above the economically recommended ceiling of 30%. That is a slippery slope Kenya has fallen onto as 52% of its budget goes to pay public sector wages alone. In October, the Kenya government, with four times Uganda’s budget, had to borrow from abroad to pay its employees. Uganda has managed its fiscal regime very well. What is shocking (but not surprising) is the apparent inability of Museveni’s campaign team to defend their candidate’s record.

Yet there are better arguments to make against Museveni’s government. One of them is the very small growth in the tax to GDP ration from 11% in 1997 to 13% now. This is in spite of growth in both monetary and taxable GDP. If Uganda broadened the tax base and improved tax administration, it can collect about 18% of GDP in taxes. This would bring in an extra 3.8 trillion in revenue. What is needed to achieve this?
The other issue is growth in agriculture, which has been sluggish. Museveni is promising a return to the hoe. Should the hoe be our future or our past? Besigye is calling for increased funding of agriculture to 10% of the budget. But is government spending the missing catalyst in agriculture? Finally is industry. Without growing a manufacturing sector to export value added goods, it will be difficult (if not impossible) for Uganda to break from poverty and rampant youths unemployment. Museveni has talked big about this and done little. What are Besigye’s policy proposals on manufacturing?

Museveni’s campaign message (“steady progress”) is a call to maintain the status quo. Besigye says the status quo must change. He therefore has greater responsibility to show us his alternative vision. For now, most of his promises are of a transactional, not transformational nature. If met, it is because Museveni has grown the economy and government revenues to pay for them. Therefore Besigye should have the modesty of Isaac Newton when he said: “If I have seen far, it is because I was standing on the shoulders of giants.” If elected, President Besigye will build a greater Uganda largely because Museveni has given it a strong economic foundation.

This extended version of the last column was published in The New Vision of Monday December 7th 2015.

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