21 November 2017

Uganda: How Can an Economy On Strike Resolve Strikes in Civil Service?


It is often said only God reaps where He did not sow. Otherwise, one has to be a thief. The ongoing strikes or industrial action by groups of civil servants, were actually preceded by industries taking such action. The growth rate of industry, when considered at the constant prices of 2009/10, declined from 11.3 per cent in 2010/11 to 3.3 per cent in 2016/17.

The growth rate for the whole economy declined from 9.4 per cent to 4 per cent, while agriculture declined from an already low position of 3.1 per cent to 1.6 per cent over the same period.

In the last two decades, the composition of the industry and manufacturing in the economy (GDP), have remained below 20 per cent and 9 per cent respectively. Besides, several manufacturing plants import all their major inputs and can easily be categorised as assembly rather than manufacturing plants.

The irony is that the decline in performance follows trillions of shillings worth of government investments in infrastructure intended to drive growth in the two sectors. Government even told civil servants to wait for such investments to trigger economic growth before they can ask for salary increases. Instead, the industries themselves have not appreciated government actions and are on strike. What has gone wrong? Did someone steal the trillions or was it a wrong strategy?

Meanwhile, as economic production reduced and the population continued to grow, the scramble for the smaller stock of goods and services pushed up prices. Higher prices made it difficult for households to maintain the basic standard of living, including civil servants, who ironically, are still the best paid in the economy. The situation must be worse for employees in the private sector and worst for subsistence farmers.

The index for changes in all prices indicates an increase of more than 20 percent between 2010/11 and 2016/17, which has undermined the welfare of all salaried employees, who have not received a similar increase in income.

Even without introducing the need for harmonising salaries, which is actually being misunderstood, there is a need to increase salaries for most civil servants as was the case of the Permanent Secretaries about two years ago.

I have argued before that a salary increase not only allows households to make welfare raising investments in education, production technologies and better health, but it also creates a market for manufacturing.

Did government drop the 5th component of the 10-Point Programme - building an independent, integrated and a self-sustaining national economy - or was it misled on the strategy?

The strategy of overemphasising infrastructure, including industrial parks, neglecting agricultural research and farmer organisation through cooperatives, and condoning corruption is very wrong.

Specifically, location of industries that Uganda should be prioritising is determined by raw materials such as agricultural produce, phosphates, oil and gas, iron ore, limestone, etc, rather than serviced industrial parks.

This should act as a guide for the infrastructure programme to avoid a repeat of Namanve that is almost full of warehouses and assembly plants. Surprisingly, several such parks have emerged along the Kampala-Jinja road with no major government support!

Increasing salaries of government employees should have happened in 2012 when inflation hit the roof and all prices never reduced even as inflation came down.

The stress on the government budget, arising from the strike of the economy itself, requires not only restructuring salaries, but also the entire set of government policies, programmes and budget.

Until that happens, increasing salaries, which must be done, will do more harm than good. The economy will simply go into full time riot mode.

Dr Muhumuza is a development policy analyst committed to inclusive growth.


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