13 August 2016

Retrenchment will balance our trade deficit with China

In one of her latest analyses, Ms Julian Barungi, a Research Associate at Ugandan think-tank ACODE, argues for the trade between China and Uganda to be mutually beneficial. Given the long established fraternal links between the two countries, which culminated in the current strong bilateral trade and friendship, China holds the secret to Uganda’s economic transformation.

Here is how: around the same time that Ms Barungi’s analysis was published, Uganda’s top political and technical leadership resolved, inter alia, to effect a retrenchment of civil servants in a bid to ensure service delivery. This retrenchment is long overdue. And once implemented, we will have a surplus balance of trade between Uganda and China. Only one catch though: our leaders diagnosed the right disease but made the wrong prescription. Poor service delivery is a result of the paucity of civil servants, not their numbers. Not only are government ministries, departments and agencies understaffed, but the few staff is underpaid, unequipped, untrained and demotivated, thus offering service delivery commensurate to what you receive when you offer peanuts.

We need one and only one retrenchment to make: we must retrench our Legislature. Simple. Estimates project the current house to cost us $300 million by the end of its five-year term. This is a conservative figure, which considers only the four key cost areas immediately known to us, namely MPs’ remuneration; MPs’ vehicles; MPs’ iPads and the proposed new Parliament building. Elementary economics tells us of opportunity cost.

By having a parliament, which rivals that of India (proportional comparison between the two countries gives Uganda 14 MPs), we are forfeiting what the $300 million would do. This partly explains our trade deficit with China. Trade, in its simplest form, means two parties exchanging what each party produces and the other party needs (the way barter trade worked).

China is a hitech power. Her friend Uganda is an ‘agricultural power’ ( at least potentially). Besides industrial might, China has the numbers. Estimated at 1.2 billion people. And this is where we must focus: the power of numbers.

Recall Kenyan politician Charity Ngilu’s ‘One-egg’ formula, as she nursed presidential ambitions? The ‘egg-secret’ was reiterated a few days back by veteran scribe Charles Onyango-Obbo, who argues that the road to heaven is paved with Ugandan eggs.

Ms Ngilu’s formula is simple: since we consume Chinese manufactures, let us request that our friends the Chinese allow each Chinese to consume one Kenyan (read Ugandan) egg once a month! This is 1.2 billion eggs exported per month.

See the connection now to the $300 million? Retrenching our Parliament means that this money reallocated will be invested in mega chicken ‘ranches’. By the end of the five years, we will have established 3,000 chicken ‘ranches’, assuming fresh capital investment each year. With each chicken ‘ranch’ employing 300 people directly, we will create direct 900,000 jobs over five years, an average of 180,000 per year.

At a conservative fob price of 4 US cents per egg, Uganda will earn $48,000,000 per month at the peak of this mutually beneficial fraternal trade. Given this income, instead of retrenching civil servants, even more will be hired. We will have a lean and effective Parliament, well facilitated, supported by a research institute and Research Fellows (not ‘assistants’).

Herein lies the secret to service delivery and balancing our trade with China. And Uganda will attain not just middle-income, but high-income status. Seriously. This is what a business unusual mindset, and strategy, are capable of yielding. Ask Anatole France.



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