Uganda's Development Must Come From Within – Prof Niwagaba

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In short
Prof Nuwagaba said Ugandas current economic state is such that the major drivers of the economy, telecommunications and banking, which contribute to over 50 percent of Gross Domestic Product, are in the hands of foreigners.

Renowned economist Prof Augustus Niwagaba has said for Uganda to develop sustainably it ought to harness her development internally first and only use external development assistance and finance to leverage it.

 
Prof Niwagaba made the statement while delivering a keynote address at the Second Kampala Private Equity and Venture Capital Conference organized by Uganda Investment Authority (UIA) and partners this morning.


Private equity is a source of investment capital from high net worth individuals and institutions for the purpose of investing and acquiring equity ownership in companies. 


Partners at private-equity firms raise funds and manage these monies to yield favorable returns for their shareholder clients, typically with an investment horizon between four and seven years.


Niwagaba said any country's development must be initiated from within, citing the Asian Tigers like South Korea, Malaysia and Singapore that made strides by focusing inwards.
 

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Prof Niwagaba said Uganda's current economic state is such that the major drivers of the economy, telecommunications and banking, which contribute to over 50 percent of Gross Domestic Product, are in the hands of foreigners.
 
According to Prof Niwagaba, the best solution would be for the government to boost agriculture, which employs more people.
 
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This, according to Prof Niwagaba, is worsened by the fact that the economy is too liberal, allowing foreign investors to repatriate their monies 100 percent. Citing the banking sector, Prof Niwagaba said the top four banks, which he declined to name, control over 70 percent yet they are also all foreign-owned. 



Uganda's top five banks are Stanbic, Barclays, Standard Chartered Bank, Bank of Baroda and Centenary. What this means, explained Prof Niwagaba, is that the country's development is curtailed because the bank's interests don't rhyme with the development needs of the country.

 
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Uganda has 25 commercial banks but of these it is only Centenary, Crane, Post and Finance Trust that are indigenous. Prof Niwagaba said in order to boost small and medium enterprises, private equity would have been a good alternative but that sector is still undeveloped.

 
He said in order to develop internally, Ugandans must also start saving more and invest. That way, he explained, Ugandans will start creating and growing wealth which in turn would boost the country's development.
 
Prof Niwagaba added that one way out for Uganda is exports of commodities whose prices rarely get affected by external shocks like manufactured goods and services instead of traditional and unprocessed goods like coffee, tea, fish and cotton.
 
According to Niwagaba, it is also important that the government deliberately protects local industries in order to make them competitive. He said because of the too liberal policy, Uganda's steel industry is suffering stiff competition from cheap steel products from China. He said there is no countries that can industrial without protecting her own industries.
 
Additionally, said Prof Niwagaba, there are things that cannot be left to the private sector like agricultural financing, cheap credit to the private sector, land reforms and infrastructure. Dr. Frank Sebbowa, the Executive Director of UIA, said there is an urgent need to enable local companies access private equity as an alternative source of capital.
 
Jarl Heijstee, from private equity firm African Rivers Fund, said private equity is good in the sense that it provides both capital and partnership for the local companies, a thing banks cannot do. He said it is also important that private equity firms operate locally so the people can, as he put it, " see, touch and feel them".
 
Nonnie Wanjihia, from the East Africa Venture Capital Association, said there is a need to mobile local capital instead of waiting for capital from outside. She said presently Africa provides just one percent of venture capital, with much of it coming from North America, Europe and Asia.

 

About the author

David Rupiny
In his own words, David Rupiny says, "I am literally a self-trained journalist with over 12 years of experience. Add the formative, student days then I can trace my journalism roots to 1988 when as a fresher in Ordinary Level I used to report for The Giraffe News at St Aloysius College Nyapea in northern Uganda.


In addition to URN for which I have worked for five years now, I have had stints at Radio Paidha, Radio Pacis, Nile FM and KFM. I have also contributed stories for The Crusader, The New Vision and The Monitor. I have also been a contributor for international news organisations like the BBC and Institute for War and Peace Reporting. I am also a local stringer for Radio Netherlands Worldwide.


I am also a media entrepreneur. I founded The West Niler newspaper and now runs Rainbow Media Corporation (Rainbow Radio 88.2 FM in Nebbi). My areas of interest are conflict and peacebuilding, business, climate change, health and children and young people, among others."