The tragedy of a non self sustaining national budget

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EDWARD KAFUFU BALIDDAWA

I believe there are crucial things that must be honestly addressed.

I only shudder when even us who are supposed to be national leaders allow to be conditioned to believing that there are things that we shouldn’t be talking about or we shouldn’t be offering any opinion on!

As an educated person and one who loves to see positive transformation of my country at least during my lifetime, I find this national apathy to things not only disturbing, but also disappointing.

As, the country embraces itself to receive the national budget for FY 2018/2019 in the coming days, the question that should be running in our minds is in regard to how far we might have come to making our national budget self sustaining.

One of the easiest indicators for this is to know how much of our national recurrent budget is financed by our own internally generated revenue.

Recently, Kenya president, Uhuru Kenyatta revealed that actually the Kenyan national recurrent budget is wholly and 100% financed by Kenya’s internally generated revenue.

The meaning of this is that the salaries of all the civil servants of Kenya are paid by the Kenyan generated income from taxes of Kenyan taxpayers.

This is a stark contrast to us in Uganda, where up to 40% of our national recurrent budget is financed by donors. If the donors withhold their funding for whatever reason, the net effect is that many of our salaried civil servants don’t get paid!

That is how bad the situation is for our country.

Having laid that state of affairs out, now I would want us to diagnose the reasons why we perpetually continue to find ourselves in this kind of precarious situation.

To set the stage for this discourse, I go back to Uhuru Kenyatta. Again in another press interview recently in Nairobi, he revealed that Kenya exports goods worth $700million to Uganda every year, while Uganda exports to Kenya goods only worth $150 million!

In other words, Uganda has a trade imbalance with Kenya of $550 million every year!

In fact, there is no wonder that in any given supermarket or shop in any location in any part of Uganda, the largest amount of commodities that will be found in that shop will be from Kenya.

These would range from Uniliver products such as Margarine, bathing soap (such as Geisha, Imperial, Lifebuoy), washing soap (such as OMO and Ariel), Cooking oil, Kimbo, Ketch up, Food spices, curry powder, sanitary pads, Vim, Mosquito Repellants, Baking flour, Baking Powder such as Sodium Bicarbonate, Processed Juice drinks, Gums (such as Orbit), Pain killers (such as Panadol, Hedex and Action), Razor Blades, Shoe Polish, Safety Pins (ebikwaaso), match sticks and many others.

It must be however noted that when the NRM government took over in 1986, there was utterly no consumables in the Uganda shops.

Everything was being brought in from Kenya. But with determination and government intervention, production for certain products was supported and resumed.

Some of those that benefited from this deliberate effort by the NRM government are, Kakira Sugar Works and Mehta Groups in Lugazi who started production of Sugar, Mukwano Group for Cooking Oil and Soap, Crown Beverages and East African Beverages for sodas and Beer respectively.

However, it appears that, somehow along the way the government focus on ensuring that there is production of the essential commodities was lost.

So now even after the thirty some years of our revolution, we are still relying on other countries to furnish us with commodities that make up our daily household requirements!

By the way, I must emphasize that, those commodities mentioned above are not the only ones that we import for our daily households needs. The list for goods from other places like China, UAE, South Africa and India is endless.

So in essence, our list of imports from Kenya, China, India and UAE is endless and so is our dependence on these countries’ goodwill and economic stability.

Interestingly, as already noted above, we as a country have little if not nothing, to export to those countries. Hence, our trade imbalance or deficit is not with only Kenya, but with everyone else!

Now, drawing from what the Kenyan President said, governments generate internal revenues from taxes on both goods and services in order to be able to fund their recurrent budget needs.

The biggest bulk of local taxes come from the manufacturing sector.

So for Kenya that has a strong manufacturing base, it is easy to see how they can be able to collect sufficient taxes into their revenue bourse as compared to our ever challenged manufacturing sector in Uganda.

So it is no wonder that the tax man at URA is nowadays scampering all over trying to see from where and whom to tax in order to even minimally meet the national targets.

It is worth to note that with the current EA customs regime, goods that are imported into Uganda from Kenya or any other EA state are not taxed.

So our URA tax man doesn’t get anything from a list of goods that come in Uganda from Kenya. That is where the crux of the matter is!

Because the factories manufacturing these commodities are not located in Uganda, so as a country, we don’t get to collect any Exercise duty, VAT, PAYE  or Income tax from these activities. More sadly, as a country we don’t get any jobs for our youths, hence no revenue for our people.

Now, how can we as leaders simply sit back and pretend or put on a façade that seems to posture that all is well!

My concern is that apparently in pursuit of our long held zeal of being the loudest proponents of the East African Federation arising from our ideological orientation for Pan-Africanism, we are inadvertently placing the economy of our country at the guillotine for our neighbors.

The importance of East African integration cannot be overemphasized, but this integration must be premised on the basis of fair play, where each member state is treated and is seen to be acting as an equal partner.

Recently, someone narrated to me the amount of brisk trade that takes place along the Uganda – Kenya border at Busia, which sadly most of which is not properly documented or formalised.

This trade involves Kenyans coming all the way from Nairobi to buy tomatoes in the gardens of our farmers as far as Busoga, Luwero, Nakaseke, Masindi and Mubende.

These tomatoes are loaded on to trucks and taken to Kenya to be processed into Tomato Paste such as Ketchup which is in turn exported back to Uganda as a premium product.

Kenya trucks headed to Uganda

The same is the story for the wheat from Sebei region which is later exported to us as finished first quality Wheat flour under the brands of Unga and Pembe.

But that is not all about the Busia trade. The brisk business with Kenya has gone to adversely pose a real threat not only to our environment, but also to our food security.

I am told that many very big people in this country are engaged in selling charcoal to Kenya which ends up into Somalia, Djibouti, Yemen and other Gulf states.

In the same breadth, the sale of maize grain and other cereals is a brisk business at the border with Kenya too.

Now, even if we are fervent proponents of the so called Free Trade within East Africa, this trade surely must be based on the fair principles of trade.

Continuing to embrace this apparent one way trade model may continue to adversely affect our economy and thus, our trade deficit with our shrewd neighbour will continue to enlarge and so will our dependence on foreign aid to fund our recurrent budget!

The net effect of this situation will only demonstrate that our long time quest to create an intergraded and self-sustaining economy will continue to be a mirage or an illusion.

How can we allow a tax free trade regime whereby our neighbors are the major beneficiaries and thus rendering our country a cash cow for them?

But paradoxically, even with the ongoing hype to extend incentives including free land bonanzas to the investors, there seem to have been no interest picked up in investing in the production here locally of those goods that we keep importing from Kenya.

This means that even if we were in the remotest possibility to impose taxes on those goods from Kenya, we would actually end up with a scarcity which would result in massive smuggling!

In summary, the current policies that are being pursued of free trade, in a way are continuing to encourage more manufacturing growth in Kenya particularly for the Uganda consumed commodities.

This means that as that manufacturing grows, our neighbours will continue to collect more taxes, create more jobs for their citizens and consequently encourage more investments in the country due to increased purchasing powers of the consumers and thus better living for the citizens.

What needs to be done?

In order to start on the path to addressing the sad situation spelt above, action must start immediately with the reading of this coming budget. The onus is on the Minister of Finance to take the bull by its horns.

It must be a government deliberate resolute focus to list down all those commodities that Uganda keeps on importing for the daily household consumption.

Once this is done, the Minister of Finance in his budget speech for this year should provide in specific terms the incentives and policies that will attract investors, both local and foreign in the production of those listed items.

Thirdly, the Minister should also spell out the steps the government is going to take to protect the local manufacturers from the onslaught of foreign products.

These steps should be such that they encourage the processing of grains, cereals and fruits locally into finished products that can be exported to markets both in the EA states and beyond.

Furthermore, there is need for government to come out in no uncertain terms to elaborate ways the current transportation method of using trucks for all our goods from the ports is going to be handled.

This is any area in which our country is losing out in regard to competitiveness and drain of foreign currency.

There must be serious concern within government that up to now, we as a country continue to rely on trucks to transport our life line raw materials and all exports.

This method is not only expensive, risky, time consuming but above all is a real burden on our road system.

The author is former MP

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