Uganda’s structural change and its implication for middle income

By Andrew Ojede

Economists agree that structural transformation (change) is a fundamental element of economic growth. This paradigm has been supported by many theoretical and empirical economic growth models. However, not all structural change can lead to prosperity. Instead, retrogression in the economy wide productivity growth can happen if labour shifts from high productive sectors of the economy to sectors with relatively low or stagnant productivity growth.

When I was doing some simulation exercises on a dynamic stochastic general equilibrium (DSGE) framework for the US economy, I took a break to look at some sectoral data on Uganda’s economy. Even though many growth and development economists seemed to have believed that globalisation and its associated outcomes would make rapid structural transformation inescapable, experiences from most of sub-Saharan Africa in general and Uganda in particular have so far proved otherwise. It is quite astonishing that the overall trajectory of de-industrialisation policies of the 1970s and 1980s continues to dominate throughout the past three decades of the NRM gospel of transformation.

Is the NRM policy of industrialisation working? Available data suggests very slow or complete lack of structural change happening, especially within industry and agriculture with labour share in industry remaining virtually flat for the last three decades. This has serious implications for the country’s goal of achieving middle income status given that there is very little investment in agricultural infrastructure, which is still a dominant sector of our economy.
Will the oil sector give a big structural break in terms of labour reallocation from agriculture to industry? If not, the current trajectory suggests that the roadmap to success could come from services rather than industrialisation.

Uganda’s service sector continues to play a significant role in our economy’s GDP growth. Though still very small, the data suggests some evidence of slow convergence in labour shares in agriculture and services in the past 10 years with labour shares in services increasing slightly while those in agriculture have infinitesimally decreased. This is consistent with findings from many growth economists that services were becoming a major contributor to GDP growth in low income African countries like Uganda in the 2000s. But a big chunk of our service sector still exhibits low productivity and is generally non-tradable. More policy reforms are needed, for instance, to boost service activities in banking, insurance, telecommunication, etc., in order to improve overall service productivity and henceforth increasing tradability of products from this sector.

For low income distressed economies like ours, stagnation in total factor productivity can be ameliorated through efficiency improvement in the work force to allow workers to master the process of technological change. The rapid shift in the world’s technological frontier is continuously displacing workers in developing economies like ours. Most of the growth in China, India, South Korea, Singapore, and other emerging markets emanated from rapid industrialisation. But what is not frequently mentioned, is that for industrialisation to rapidly occur in those successful Asian economies, it required their work force to be highly trained in order for them to quickly imitate and adapt to new technologies. While many major innovations originate from advanced economies, imitation and adaptation of new technologies that suit a developing country structure, is of paramount importance in preventing the lagging behind of workers and instead enhancing their vertical mobility from agriculture to industry and service sectors.

Most economies in Africa, including ours, were ill-prepared and not well equipped with the right infrastructure to take advantage of the global production networks and outsourcing from global multinational corporations.
What is more disturbing in contemporary times is that the speed by which automation displaces workers is inconceivable. It is already happening globally and it will get worst in developing countries. I recently visited an Amazon store near my office in Texas and I was not surprised to find robots moving pallets of goods from the warehouse to the shelves.

What came into my mind is that Ugandan child, who is not getting a 21st Century education, that will allow them to acquire necessary skills to be able to adapt to this rapidly changing environment. The question is, how do we want to train our young people so that they will programme, operate, and perhaps build these machines to be able to compete and remain relevant in the global economy? The government should refocus its attention and heavily invest in education. The school systems in Uganda at primary and secondary levels should be seriously overhauled and looked at as a buffer for high quality education.

During my most recent travel to Uganda in January, I was able to visit a few traditional premier secondary schools in the North, East, Central and West Nile regions. And by traditional premier secondary schools, I am referring to schools such as Comboni College, Dr Obote College, Nyakasura, Nabumali, Mwiri, Ntare, Mbarara High, Teso College, St Peter’s College Tororo, Ombachi, Kings College Budo, Namagunga, Nabbingo, etc. I was appalled at the degree of dilapidation of these secondary schools.

Back in the good old days, poor children all over our great country would compete to enter these premier secondary schools regardless of which tribal groups they belonged. A child from Lira would go to study from Jinja College and those in Jinja would come to Comboni College. Ugandan children were trekking every corner of the country and mingling with others who didn’t speak their native language or looked like them. To me, that was pride and a sense of nationalism. We have lost that.

What we have done as a society is to encourage more private schools and sabotaged public education. While some private schools have been very successful in providing quality education, ignoring public schools is a roadmap to a complete failure of our education system. Physical rehabilitation of these traditional premier secondary schools alongside changing the educational curricula will not only bring our pride back, but also encourage more competition in the failing Universal Primary Education (UPE) system.

SOURCE: Daily Monitor

AUTHOR: Prof Andrew Ojede is a professor of economics at Texas State University.

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