1.2.1 Overall GDP growth

Uganda’s real GDP grew by 6.3 per cent in 2001/02, a rate of growth that was below the 7 per cent annual growth target set out in the PEAP. However, this rate was higher than the rate of 5.6 per cent per annum registered in both 1999/00 and 2000/01, when failing world coffee prices and rising oil prices constrained the expansion of productive sectors of the economy. Growth in social services, wholesale and retail trade, manufacturing and food crops contributed strongly to overall GDP growth in both 2000/01 and 2003/02, but growth in 2001/02 was also boosted by higher output in the construction and cash, crops sub sectors.

GDP growth over, the medium term is projected to average 5.9% per annum, which is lower than the rate of 7% per annum considered necessary by the PEAP for Uganda to meet its poverty eradication goals by 2017. However, GDP growth could return to a growth path of 7% per annum in the longer term if Government successfully implements its current strategies to boost economic development, such as the Medium Term Competitive Strategy for the Private Sector (MTCS) and the Plan for the Modernisation of Agriculture (PMA). GDP growth would also be boosted by the implementation of the Bujagali Dam project and by a resolution of the conflict in Northern Uganda. Nonetheless, as part of the forthcoming PEAP revision, work is ongoing to identify a vision for structural transformation over the next two decades, and to assess the possible impact of a shortfall in GDP growth on poverty reduction in Uganda.

Uganda’s GDP growth Rate

Citation: IMF Staff Country Reports 2003, 301; 10.5089/9781451838732.002.A001

Source: USOS

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Uganda’s GDP growth Rate

Citation: IMF Staff Country Reports 2003, 301; 10.5089/9781451838732.002.A001

Source: USOS

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Uganda’s GDP growth Rate

Citation: IMF Staff Country Reports 2003, 301; 10.5089/9781451838732.002.A001

Source: USOS

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1.2.2 GDP per capita

Results from the 2002 Population and Housing Census indicate that Uganda’s population grew at an average rate of 3.4% per annum between 1991 and 2002. As a result of this high rate of population growth, annual real GDP per capita growth is below the 5% level set out in the Poverty Eradication. Action as desirable for achieving the poverty cradication objectives by 2017.

Uganda’s high rate of population growth is due to high fertility levels, with the average Ugandan woman giving birth to seven children in her lifetime. Such high fertility levels clearly have significant implications for female productivity. Time which women could otherwise spend in working, to raise their incomes is taken up with bearing and looking after large numbers of children and short birth intervals are associated with higher levels of infant mortality and poor maternal health.² Moreover, the cost of earing for large families, particularly when sick, directs scarce resources away from other productive investments, uses up savings and leads to the sale of assets³. Whilst these issues will be discussed in greater detail in other areas of the report, it is important to highlight their implications for Uganda’s overall rate of GDP growth, which can he adversely affected by reduced female productivity. Even if real GDP returns to a growth path of 7% per annum, Uganda’s population growth rate will need to slow to just under 2% per annum to enable a real GDP per capita growth rate of 5% per annum. Without such a slowdown, the poverty eradication targets could be jeopardised even if the economy grew at 7 percent, since it is the poor who have the largest families.

1.2.3. GDP growth by sector

The sectoral shares of GDP have remained relatively constant over the past four years, with services and agriculture accounting for just over 40% of GDP respectively, and industrial output accounting for just under 20%. There is clear evidence that structural transformation is not taking place as desired. Within the agricultural sector, the ratio of monetary to non-monetary output has remained constant, therefore, challenging the implementation of the PMA.

Sectoral; Contribution to GDP

Citation: IMF Staff Country Reports 2003, 301; 10.5089/9781451838732.002.A001

Source: UBOS

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Sectoral; Contribution to GDP

Citation: IMF Staff Country Reports 2003, 301; 10.5089/9781451838732.002.A001

Source: UBOS

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Sectoral; Contribution to GDP

Citation: IMF Staff Country Reports 2003, 301; 10.5089/9781451838732.002.A001

Source: UBOS

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• Services

  The service sector accounted for 40.6 per cent GDP in 2001/02. Within this sector, Government expenditures on social services provision were the biggest sub sector, accounting for half of total services output, whilst wholesale and retail trade accounts for a quarter. While increased public expenditures on social services is a good move for the poor, there are concerns over the value for money for these expenditures; which issues shall be reviewed in chapters 2 and 4.

• Industry

  Industrial production accounted for 18.9.% of GDP in 2001/02, with manufacturing and construction making the greatest contribution. Having performed relatively poorly in 1999/2000, in part as a result of high oil prices, industrial output improved in 2000/01.

• Agriculture

  The agriculture sector accounted for 40.5 per cent of Uganda’s GDP in 2001/02. Agricultural output has grown by less than the average GDP real growth rate over the past four years, which is a point of concern. It grew by 4.6% in 2000/01 and 5.1% in 2001/02. The slower rate of agricultural growth as compared to other sectors of production has significant implications for the livelihoods of the poor, the majority of whom are involved in agricultural production.⁴ If agricultural production continues to grow more slowly than other sectors of production, income inequality can be expected to increase, unless a significant number of workers are able to shift away from agriculture towards other forms of production. This highlights the need for rapid, broad-based implementation of the Plan for Modernisation of Agriculture, without which Uganda is unlikely to meet its poverty eradication goals.

  There was strong growth in food crop agriculture in 2001/2, but because demand is relatively price inelastic, food crop prices fell sharply. Hence incomes of food crop farmers are unlikely to have increased. The return to move normal weather conditions in 2002/3 led to a slow down in agricultural growth and a rebound in food crop prices – to the benefit of the rural poor.⁵

• Regional breakdown of GDP

  At present, no data is widely available on economic performance on a regional basis. Such information would greatly add to poverty analysis, since it would supplement the regional poverty data that is available through the household survey, and facilitate the development of Government policies to target poverty reduction in particular areas, such as Northern Uganda. As a starting point, Uganda Bureau of Statistics needs to collect and publish data on agricultural output by crop and region, with plans to expanding coverage to districts.

Table 1.1:

GDP growth by Sector

Source: UBOS

Table 1.1:

GDP growth by Sector

Sector			1998/99	1999/00	2000/01	2001/02
	Agriculture		5.8%	5.6%	4.6%	5.1%
		- monetary	6.6%	5.2%	4.3%	6.1%
		- non-monetary	4.9%	6.1%	5.0%	3.8%
	Industry		12.0%	5.3%	6.1%	7.0%
	Services		6.9%	6.3%	7.2%	6.8%
Total GDP - Factor Cost			7.4%	5.8%	5.9%	6.2%
	Indirect Taxes		11.9%	3.6%	3.1%	7.2%
Total GDP -Market Prices			7.8%	5.6%	5.6%	6.3%

Source: UBOS

View Table

Table 1.1:

GDP growth by Sector

Sector			1998/99	1999/00	2000/01	2001/02
	Agriculture		5.8%	5.6%	4.6%	5.1%
		- monetary	6.6%	5.2%	4.3%	6.1%
		- non-monetary	4.9%	6.1%	5.0%	3.8%
	Industry		12.0%	5.3%	6.1%	7.0%
	Services		6.9%	6.3%	7.2%	6.8%
Total GDP - Factor Cost			7.4%	5.8%	5.9%	6.2%
	Indirect Taxes		11.9%	3.6%	3.1%	7.2%
Total GDP -Market Prices			7.8%	5.6%	5.6%	6.3%

Source: UBOS

1.2.4 GDP Growth and Environmental Sustainability

It is widely recognized that sustained economic growth requires prudent use of natural resources. Prudent use of natural resources is especially vital for Uganda because its substantial endowment of high quality agricultural land means that agricultural production will continue to be a mainstay of the economy for the foreseeable future. Moreover, many of the rural population, and particularly the rural poor, are dependent on natural resources such as forests and natural water sources for their basic level of daily subsistence.

Although anecdotal evidence suggests that environmental degradation is currently occurring in Uganda, particularly deforestation, wetlands encroachment and land degradation, there is currently not enough data available to calculate accurately the poverty and growth impacts of this degradation. It is widely recognised that the real economic value of natural resources to Uganda are currently undervalued. There are also concerns that the pattern of the current economic growth is building up an environmental burden which will primarily be borne by the poor, who are the section of the population whose livelihoods are most dependent on natural resources⁵. Both these concerns mean that it is necessary to analyse existing data, and to collect new data⁶, to inform cross-cutting policy decisions which impact upon the quality of the environment in Uganda. The benefits of sustainable natural resource utilisation, and the very real dangers associated with over-use of natural resources, particularly for the poor, also need to be better reflected in the forthcoming PEAP revision.

1.2.5 GDP Growth and Employment

The 2002 Uganda National Household Survey mid-term report⁷ shows that 45% of Uganda’s population is economically active. Within this sub-set, 79.6% are either self-employed or un-paid family workers, and the figure is considerably higher for female workers, at 88.2%. Uganda Bureau of Statistics Report on the 2001/02 Business Register⁸ also reports that only 3.6% of the economically active population are employed by the private sector, where the private sector is defined as formal or informal businesses operating from fixed premises. Only 39% of these workers are female, and only 5.2% of them are employed in Northern Uganda, with the bulk of the employment, 63.4%, occurring in the Central Region.

Whilst it is taken as a given that strong GDP growth will result in job creation, these brief statistics demonstrate that there are significant gender and regional imbalances in current employment patterns in Uganda. Moreover, they do not make a distinction between employment and under-employment; many of the 79.6% of economically active workers who are categorized as either self-employed or un-paid family workers are probably better characterized as being under-employed or unemployed rather than employed. They also do not give an insight into the impact of employment patterns upon the poor. For the poor, who are frequently unskilled and lack access to productive resources such as land and credit, employment may be the only means of improving their social and economic welfare, and yet conversely, their lack of skills and assets may be the very factors that prevent them from accessing productive employment.⁹

Although robust, detailed labor force statistics are currently lacking in Uganda, the Uganda Bureau of Statistics is planning to undertake a Labor Force Survey in the near future, which will help inform policy decisions orientated towards improving the employment situation in Uganda. The Ministry of Gender, Labor and Social Development also has plans to develop a Labor Market Information System, and has already articulated a policy framework aimed at tackling issues relating to social exclusion and employment in the Draft Social Development Sector Strategic Investment Plan.

1.5.1 Constraints on Growth

Experience in the late 90s showed that a series of economic and financial reforms, geared towards macroeconomic stability and increasing private sector investment are necessary but not sufficient conditions for sustained growth. The Government, therefore, decided that further supply side reforms were necessary to maintain the pace of economic development and reduce the economy’s vulnerability to exogenous shocks.

In August 2000 the Government launched both the Medium Term Competitive Strategy for the Private Sector (MTCS) and the Plan for the Modernisation of Agriculture (PMA) as tools to address bottle-necks to private sector development and sustained economic growth. In May 2001, an economic Growth and Transformation Strategy paper was presented to the Donor Consultative Group meeting. The paper built on strategies set out in the MTCS and the PMA. Whilst its recommendations on barriers to investment were already broadly covered by ongoing work under the MTCS, the Government responded to the recommendations on strategic interventions by setting up the Strategic Exports Program (SEP) to work in tandem with the PMA.

The PMA, the MTCS and the SEP are jointly expected to tackle a number of supply-side constraints to economic growth, including:

• - limited access to markets on account of poor transport infrastructure

• - limited access to markets on account of lack of market information, farm-level processing and marketing skills

• - vulnerability to exogenous shocks

• - unreliable or non-existent utility services

• - limited access to affordable micro-finance and long-term financing

• - excessive regulatory burdens upon business

• - corruption in tax administration and

• - weak judicial processes.

Whilst these programs recognize the need for broad-based economic growth which increases the ability of the poor to raise their incomes, and outline strategies to achieve this goal, they need to be coordinated with other Government programs in areas such as health, education, water and sanitation, natural resources, gender and social empowerment. Enhanced human capacity, particularly amongst the poorest and most excluded members of society, and sustainable environmental management are key to pro-poor economic growth in Uganda. This, in turn, will to a large extent be based on enhanced agricultural productivity, especially in small holder food crop agriculture, and the generation of off-farm income earning opportunities in the rural areas. Government policies in these areas will be discussed in greater detail later in this document, as will Government’s efforts to tackle corruption, which has historically been seen as a significant barrier to doing business.

1.5.2 The Plan for the Modernisation of Agriculture (PMA)

The PMA was developed as a result of the realization that resources invested in the agricultural sector over many years were not yielding the desired results, and that the modernization of the sector required the participation and co-ordination of various ministries and institutions. It also arose from the recognition that paying greater attention to the agricultural sector was the fastest way of propelling the economy’s process of structural transformation, instead of giving priority to other areas, such as import substitution, which have a very poor record of promoting economic development, and make no contribution to poverty reduction.

Key principles in the implementation of the PMA are the empowerment of stakeholders so that they are able to demand and pay for services they need, deepening decentralisation to the lowest levels of the administrative structures, promoting stakeholder ownership through co-funding arrangements and ensuring that cross-cutting issues such as gender, natural resources management, HIV/AIDs and malaria control are addressed.

Most of the implementation frameworks for the PMA priority areas have now been designed. These include the National Agricultural Advisory Services (NAADS), the National Agricultural Research System (NARS), the Rural Micro-Finance Outreach Plan and the Marketing and Agro-processing Strategy (MAPS). However, of these programmes, only NAADS is currently operational. A key challenge to the ongoing implementation of the PMA is to ensure that strategies for the priority areas are completed and implementation starts immediately and efficiently. Failure to have the PMA implemented as a package will place pressure on programmes which are already running, such as NAADS, especially with respect to the demands for delivery of credit and market information services. The PMA also needs a robust monitoring and evaluation framework to monitor its implementation and to ensure the sustainability of key activities.

A second key challenge for the success of the PMA relates to the empowerment of women in agriculture. Two recent reports, the Uganda Participatory Poverty Assessment report¹⁰ and the Poverty and Social Impact Analysis of the Strategic Exports Programme¹¹, show that women face a number of micro-level constraints to increasing cash crop production which arise from unequal gender relations. They have little spare time to spend in additional agricultural activity, because of the burden of their household tasks, and they have little incentive to increase cash crop production, because frequently they do not control income from crop sales, which is appropriated by male members of the household. Moreover, they often face difficulties in terms of their access to, and control over agricultural land. The PMA should address such issues, particularly by targeting agricultural advice and extension to women farmers as well as poor households, and by raising awareness of the need for improved female literacy as a part of agricultural modernisation.

1.5.3 The Strategic Exports Program

As was noted earlier, the Government recognises that exports are the engine of growth because they provide both opportunities and incentives for exploiting comparative advantage, enhancing technological progress and reaping economies of scale, thereby generating rapid productivity growth. Export diversification also lessens the economy’s vulnerability to exogenous shocks in its export markets. Over the past five years, export diversification has significantly contributed to Uganda’s export performance, and non-traditional exports now earn more than cotton, tea, tobacco and coffee exports combined, accounting for 65% of all goods exports.

Whilst programs under the PMA are designed to develop the agricultural sector, further interventions are necessary to catalyse growth in certain strategic export areas. In September 2001, Government approved a programme for strategic intervention in the following sectors: Coffee, Cotton, Fish, Tea, Livestock, Horticulture, Irish potatoes and Information and Communications Technology (ICT). It also agreed to provide a conducive institutional arrangement for enhanced commodity trading and price risk management by investing in the establishment of a Warehouse Receipt System (WRS) and Agricultural Commodity Exchange (ACE).

Although the Strategic Exports Program has moved forward rapidly since 2001, its initial design lacked analytical rigor. In addition, the program’s incentive structure is not transparent enough. Government needs to ensure that all interventions under the Strategic Exports Program are poverty focused, and that they take place within a well-defined framework that promotes the principle of private sector competition. Moreover, interventions under the Strategic Exports program need to be explicitly complementary to the PMA and MTCS. Government also needs to ensure that the Strategic Exports Program is appropriately monitored.

The recent Poverty and Social Impact Analysis of the Strategic Export’s Program was a welcome step forward in terms of evaluating the potential poverty impacts of the programme. As outlined in the section above, the report indicated that greater priority needs to be given to targeting women farmers and poor households for the benefits of the Strategic Exports Program to be distributed equally. This work needs to be carried out in conjunction with work ongoing under the PMA.

1.5.4 The Medium Term Competitive Strategy for the Private Sector (MTCS)

The Medium Term Competitive Strategy for the Private Sector (MTCS) sets out a number of priority areas for private sector development, including reforms in infrastructure provision, financial strengthening, commercial justice reforms, institutional and regulatory reforms, removing current export-sector specific impediments, improving the business environment for small and medium enterprises, and trade issues. Financial sector and micro finance issues will be dealt with in following sections, whilst the rest of MTCS implementation is covered here.

Notable progress has been made in a number of areas falling under the remit of the MTCS:

• In the power sector, the reliability of mains supply electricity has improved considerably over the past two years, reducing the level of excess demand on the system, and the resulting load-shedding, which has historically been very disruptive to business¹². Reliability has improved for two reasons. Firstly, three additional generating units have come on stream at the Owen Falls extension which has increased the amount of electricity generated from 180MW to 300MW. Secondly, the amount of distribution losses in the electricity system have been reduced by 25% over the past year, from 37% of system output to 27%, as the Uganda Electricity Board (UEB) has upgraded parts of the transmission system and embarked on a targeted campaign to reduce power theft (Operation Sigma). Separately, the Government has awarded a twenty year generating concession for the Jinja generating stations to a private sector company. A distribution concession is expected to be awarded later this financial year. Private sector management of electricity transmission and distribution is expected to significantly improve the efficiency of the mains power system in Uganda.

• In the Roads sector, the Road Sector Development Programme (RSDP) was subject to a mid-term review during 2001 and early 2002, as a result of which it has been updated (RSDP2) to ensure that the road network is maintained at an acceptable level of service. The updated Programme has three components; the national road network, the local road network and institutional development and capacity building. A number of studies are underway to guide the future development of the programme, including most notably the Transport Master Plan Study and the Ten-Year District Roads Improvement Programme.

• The Telecommunications sector, which is now fully privatised and liberalised, has expanded significantly over the past two years, particularly with respect to mobile phone usage. The number of telephone subscribers in Uganda has risen by 200% over the past two years, from 230,000 in 2000 to just under 500,000 at the start of this financial year. The increase has been driven by mobile telephones, where increased competition has brought down prices and new connections can be made instantly. Mobile phone users now account for 90% of all telephone users in Uganda. Uganda’s teledensity, measured as the number of telephones per 1000 people, has more than doubled, from 1.07 telephones per 1000 people in 2000 to 2.25 telephones at the start of this financial year. The number of internet service providers in the country has also risen significantly, from 11 in 2000 to 17 at the start of the financial year.

  More than 50% the of sub-counties now have access to the telecommunications network. However, it is widely recognised that rolling out the network to a number of the remaining sub-counties is unlikely to be considered commercially viable by communications providers. Consequently, a Universal Service Levy (USL) has begun to be levied on the turnover of the telecommunications and postal sectors to finance the Rural Communications Development Fund. The proceeds of the USL will be used to finance investment subsidies to private operators willing to take on service obligations in commercially non-viable rural areas. The objectives of the Fund are a sub-component of the Government’s Rural Energy for Transformation scheme. Its main objectives are to provide at least one public telephone per 5,000 people at sub-county level, and to ensure internet access at every District headquarters.

• The Commercial Justice Reform Program has made significant progress in reforming Kampala’s commercial court, and is turning its attention to overhauling the business registry and providing alternative mechanisms to the commercial courts up-country.

• In the area of deregulation/better regulation, Government, is working to streamline the regulatory burden placed on business by existing laws. The current burden of regulation acts as a disincentive to investment and inhibits private sector growth¹³. The Government is also working on improving the efficiency of the existing regulatory processes for business. A pilot scheme to reform business licensing has been initiated and critical reforms to be implemented in the tax appeals process have been identified.

• A Commission of Enquiry was appointed to tackle corruption problems within the Uganda Revenue Authority and it has completed this work although a report and subsequent steps in terms of the way forward are still pending. In addition, reforms to modernize the operations of URA are on-going.

Despite the above satisfactory progress, it is notable that little or no progress has been made in the following key areas of the MTCS, such as rail transportation, which is key to reducing the cost of transportation to and from Mombasa Port, and the merger of Uganda Investment Authority, Uganda Export Promotion Board and Uganda Tourist Board, which is intended to streamline the services offered to investors and to sharpen Uganda’s focus on export promotion. Moreover, the process of developing the trade policy development is only just starting, and co-ordination of Medium and Small Enterprise Development, particularly in the area of capacity building, is greatly lacking.

In addition, it is notable that certain key sectors of development such as Tourism and Rural Electrification are not given sufficient attention by policies on economic growth and transformation, even though Tourism is currently Uganda’s single biggest export earner, accounting for 24% of total export earnings in 2001/2, and Rural Electrification is expected to raise the incomes of the poor, especially with respect to agro-processing. It is important that these programmes are focused on the joint MTCS/PMA/Strategic Exports framework so that they are implemented in a co-ordinated and consistent manner.

From the above discussion, it would appear that the implementation of the MTCS has somehow lacked a strong commitment and overall coordination of the various activities necessary for the full realisation of its objectives. The way forward is to avoid the piece-meal approach to its implementation which undermines coherence with other programmes such as the PMA and SEP.

At present, most available information on barriers to investment dates back to 2000. However, three separate investor surveys, including the Uganda Investment Authority’s Investment Survey, are currently ongoing, and their results are due out in the next few months. Their findings will make a critical input into the PEAP revision, since they will illustrate how far MTCS implementation to date has gone towards reducing perceived barriers to investment, and will flag up the areas where more work is required. They will also give an indication as to whether Government’s commitment to reducing corruption has translated into a better working environment for the private sector. Issues relating to the Government’s work on improving governance and reducing corruption are covered in the next chapter of this report.

1.5.5 Developments in the Financial Sector

There have been a number of significant developments in this area since 2000. Enhanced prudential supervision and the closure of insolvent financial banks has led to a significant improvement in the soundness of the banking sector over the past three years. The revised Financial Institutions Bill, which has been approved by Parliament, is expected to further enhance the regulation of the banking sector. It will bring Uganda’s financial legislation in line with international best practices. It seeks to maintain a regulatory and supervisory framework that encourages innovation and efficient competition in financial services based on prudent risk taking and the avoidance of reckless bank management.

The privatisation of Uganda Commercial Bank Limited (UCBL) in February 2002 was also an important milestone for the banking sector. The resolution of this failed bank involved the sale of 80 percent shares of UCBL to Stanbic (U) Ltd, with an agreement that on completion of the merger process of the two banks, 20 percent of shares in the new bank will be floated for public purchase on the Uganda Securities Exchange (USE). The privatization of UCBL is expected to strengthen the bank’s corporate governance, improve management and upgrade its technology. This will increase competition in the financial sector, which in turn is expected to lead to greater mobilisation of deposits and allocation of credit.

Several key indicators demonstrate the degree of improvement in the banking system since the banking crisis of 1999/00. The capital adequacy of the banking system, as measured by the proportion of total capital to risk-weighted assets, rose from 16% in June 2000 to 24% in 2002, whilst non-performing loans fell as a proportion of total private sector credit, from 12.4% in June 2000 to 3.6% in June 2002. However, private sector credit only grew by 14% over the two year period, as banks increased their investment in risk-free assets such as Treasury Bills and built up excess reserves instead of lending to the private sector.

Outstanding loans and advances to the private sector as categorized by economic sector show that the stock of credit grew by Shs 82bn from Shs 580bn billion in June 2000 to Shs 662 billion in June 2002.

Table 1.4:

Distribution of Loans and Advances to the Private Sector.

Source: Bank of Uganda

Table 1.4:

Distribution of Loans and Advances to the Private Sector.

SECTOR	June 2000	June 2002	Change
Agriculture	10.3%	10.2%	-0.1%
Manufacturing	31.2%	32.4%	+1.3%
Trade and other services	47.1%	46.5%	-0.6%
Transport, Electricity & Water	6.3%	6.2%	-0.1%
Building & Construction	4.8%	4.2%	-0.6%
Mining and Quarrying	0.4%	0.4%	0%
Total	100%	100%

Source: Bank of Uganda

View Table

Table 1.4:

Distribution of Loans and Advances to the Private Sector.

SECTOR	June 2000	June 2002	Change
Agriculture	10.3%	10.2%	-0.1%
Manufacturing	31.2%	32.4%	+1.3%
Trade and other services	47.1%	46.5%	-0.6%
Transport, Electricity & Water	6.3%	6.2%	-0.1%
Building & Construction	4.8%	4.2%	-0.6%
Mining and Quarrying	0.4%	0.4%	0%
Total	100%	100%

Source: Bank of Uganda

As at end June 2002, lending to the trade and services sector accounted for almost half of private sector credit. Within this sector, lending to importers was the single biggest item. The manufacturing sector accounted for a third of private sector credit, with lending to the foods, beverages and tobacco sector accounting for two thirds, while the size of agricultural lending was comparatively small, at 10%. This is partly because agricultural production in Uganda is mainly done by smallholder farmers who have difficulties in accessing formal credit, because they lack collateral. It is therefore, an area of concern that the agricultural sector, the backbone of the economy is starved of long-term financing. By contrast, agricultural lending is the single biggest recipient of micro finance lending.

Other forms of funding available to the private sector through the formal financial system are lease financing and credit from other non-bank financial institutions, both of which appear to have grown more rapidly than commercial bank lending over the past two years. The total volume of leasing activity in the banking system had reached Shs 15.8 billion as at end June 2002, while total private sector credit extended by non bank financial institutions was shs 64.7 bn, an increase of 29%.

In spite of these improvements, there are indications that the financial system is not meeting the needs of certain parts of the private sector. Anecdotal evidence suggests that the majority of the small and medium enterprises (SMEs) can’t access commercial credit, either because of lack of collateral or poor loan proposals. On the other hand, commercial banks’ short term lending arrangements can’t be used to finance long-term investment plans. As a first step, the Bank of Uganda needs to produce a more detailed breakdown of commercial banks’ private sector lending, by loan size, loan term and enterprise size, so that market gaps can be identified, and remedial action taken where appropriate. In addition, Government needs to expedite its plans for social security reform, in order to increase the mobilisation of long-term savings.

1.5.6 Micro Finance

The provision of financial services to the poor, for micro and small-scale income generating activities, offers a major opportunity for poverty reduction. For this to be successful, however, it is vital that micro finance services reach rural areas, and that appropriate financial products are developed to enable the economically-active poor to access them.

Over the past five years, the Micro Finance Industry in Uganda has grown fairly rapidly, although at present it is hard to measure its outreach and sustainability. In order to encourage and consolidate the growth of the industry, it is important that a comprehensive policy framework is developed for the Micro Finance Industry to address its legal and regulatory environment, and capacity building. As a first step towards this objective, The Micro Finance Bill, which will regulate deposit-taking Micro Finance Institutions (MFIs), was passed by Parliament in November 2002. However, the Act will only allow MFIs that meet prudential requirements to mobilise deposits for on-lending, and will therefore only apply to the very largest MFIs. Furthermore, Government has approved a plan for Expanded Outreach of Sustainable Micro finance Services. The plan, which will operate as a part of the PMA, will support the existing well-performing micro finance institutions to spread out their operations into presently under-serviced areas. The plan will also ensure that the capacities of the MFIs are developed in a manner that addresses the diverse needs of clients.

To develop a sound base for its work on developing a regulatory framework to cover the entire Micro Finance Industry, the Ministry of Finance conducted a survey of Micro Finance Institutions last financial year. A total of 1,340 institutions were visited. The results of the survey give an interesting insight into the form of the Micro Finance Industry in Uganda, and its outreach to marginalised and economically-disadvantaged members of society. The 1,340 institutions had just under 1 million members, of whom

55% were female. 85% of members were active savers, of whom 56% were female, whilst 35% per cent of members were active borrowers, of whom 69% were female. The total loan portfolio of the institutions amounted to Shs 86.5bn, and the average loan size was Shs 262,533. 40% of loans were for crop production, 29% were for services provision, and 24% were for animal husbandry. This data suggests that the Micro Finance Industry is currently playing a significant role in supporting small-scale agricultural development and enhancing the economic potential of women. However, more detail is required in certain areas, such as repayment rates by sex and loan size by sex. A more detailed analysis on micro-finance is in chapter 3.

1.5.7 Regional Integration

Uganda’s main focus over the past two years in terms of regional integration has been the revival of the East African Community (EAC), with Kenya and Tanzania. The Treaty for the establishment of the EAC was drawn up in 1999, and ratified in 2000. Since then, implementation of the diverse elements of the Treaty has progressed. The East African Customs Union (EACU) to be fully operational by November 2003, is central to the Community’s common trade regime, which is based on the principle of free internal trade and common external tariffs. The Agreement has been reached so far on almost all aspects of the EAC s internal trade regime, including a common EAC competition policy, on which Uganda’s draft competition law is based, anti-dumping provisions and a timetable for the elimination of internal tariffs. All internal tariffs are expected to be at 0% by 2008. Most aspects of the policy on common external tariffs have also been agreed upon, although the rate of the highest of the three agreed tariff bands and the treatment of certain sensitive products such as sugar and cigarettes is still under negotiation.

The institutional, legal and administrative structure for the EACU is expected to be developed in the course of the coming year. In addition to the EACU, the EAC also intends to build up its development strategy to boost the economic output of the Community through supply-side interventions, particularly in the areas of agriculture, energy and infrastructure.

The creation of a free-trade area within East Africa should be of significant benefit to Uganda with respect to its drive to increase exports, though the extent of its potential is yet to be known. Nonetheless, Uganda still needs to build its national capacity to be able to negotiate within bigger trade areas such as COMESA, and understand fully the cost and benefits of participation. This work should be undertaken in conjunction with efforts to develop a domestic trade policy strategy which places emphasis on allocating resources to enhance internal capacities to respond to market signals.

1.6.1. Overall Government Expenditure

Government expenditure has grown rapidly over the past four years, from 19.4% of GDP in 1998/99 to 24.9% of GDP in 2001/2. The rise in Government expenditure has not been as a result of budgetary indiscipline but as a result of planned increases in Government spending, particularly in the area of social services provision.

However, Government revenue collections have not kept pace with the increases in Government expenditure, as they grew by only 31% in nominal terms over the period. As a result, Government’s fiscal deficit excluding donor grants has increased substantially, from 7.8% of GDP in 1998/99 to 12.8% of GDP in 2001/02, and Government’s expenditure increases have been funded through increased donor aid. Donor aid increased from 9.1% of GDP in 1998/99 to 13% of GDP in 2001/02.

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Fiscal Trends

Citation: IMF Staff Country Reports 2003, 301; 10.5089/9781451838732.002.A001

Source: Ministry of Finance

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Fiscal Trends

Citation: IMF Staff Country Reports 2003, 301; 10.5089/9781451838732.002.A001

Source: Ministry of Finance

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Fiscal Trends

Citation: IMF Staff Country Reports 2003, 301; 10.5089/9781451838732.002.A001

Source: Ministry of Finance

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The rapid increase in Government’s donor-funded fiscal deficit, has raised concerns about Government’s absorptive capacity and the efficiency of further rapid increases in public expenditures, as well as Uganda’s current level of donor dependency. In spite of the increase in donor funding in absolute terms over the past four years, there have been persistent shortfalls in actual disbursements of budget support relative to donor commitments, illustrating the inherent unreliability of budgeting long-term expenditure increases on the basis of increased donor funding.

Government’s concerns over the size of the donor-funded fiscal deficit also link to its concerns about the sustainability of Uganda’s burden of external debt. Uganda was unable to service its extensive external debt obligations in the 1990s, in spite of its debt strategy of restricting new borrowings to highly concessional loans and its attempts to negotiate relief agreements with creditors. As a result of its macroeconomic track record, and its pro-poor policy framework, Uganda became the first country to qualify for the Highly Indebted Poor Countries (HIPC) debt relief initiative in 1998. The HIPC initiative has provided annual funding to the Poverty Action Fund (PAF) through savings on debt servicing since 1999, and the HIPC contribution to PAF currently averages $80m per annum. However, Uganda has not fully realized the savings expected from HIPC initiative in full, on account of the refusal of certain creditors to participate, and its debt has also risen to ‘unsustainable’ levels as measured by the HIPC criteria on account of slow export growth. Consequently, Government wishes to restrict its new borrowings from donors, however concessional, to a level that is compatible with a reduction of its debt burden back down to a sustainable level over the medium term. Failure to do so would have serious consequences for the Government budget and macroeconomic variables such as the exchange rate in the longer-term.

1.6.2 Domestic Revenue Collections

Domestic revenue collections have performed poorly over the past few years. Whilst they have increased in nominal terms, these increases have barely kept pace with the growth in nominal GDP, as collections have been adversely affected by weak tax administration. As a result, total domestic revenue collections amounted to 10.8% of GDP in 2000/01, as compared to 11.6% of GDP in 1997/98. Collection levels improved slightly in 2001/02, increasing to 12.1% of GDP, and they are projected to rise further to 12.8% of GDP in 2002/03. Nonetheless, the overall level of domestic revenue remains low, and as such, continues to be a significant constraint on Government’s overall expenditure levels. This is a big challenge because it is an indication that poverty reduction activities cannot be sustained.

Government in part expects to meet its commitment to increase revenue levels through ongoing reforms in tax administration, though it may also need to widen the tax base. The ongoing reforms in the Uganda Revenue Authority (URA), which include implementation of a new business plan, computerization and a crack-down on corruption, are expected to increase tax revenue collections. In terms of non-tax revenue, the responsibility of collecting certain non tax revenues is gradually being transferred to URA to improve efficiency, and all collections will be transferred to URA over the medium term. As a first step, collection of passport fees was transferred to URA last financial year, and was very successful; an outturn of 292% against the budget estimate was realized.

Concerns have also been raised about the low levels of local tax revenue collections, which grew by less than 5% per annum between 1998/99 and 2000/01, and on average funded less than 12% of District expenditures in 2000/01. At the same time, the most recent Uganda Participatory Poverty Assessment (UPPAP) report strongly suggests that the multiplicity of local taxes, levies, market dues and other charges levied by decentralized administrations are holding back the development of the non-farm rural economy, and that their collection methods are often harsh and inequitable. Government urgently needs to address this issue by reviewing local tax policies, ensuring that the burden of local government taxation on rural tax payers is appropriate, and that collection methods are both efficient and equitable. In addition, it also has to ensure that the measures in place have the potential to generate sufficient revenue to provide decentralized administrations with a degree of budgetary autonomy.

1.6.3 Budget Allocations

The Medium Term Expenditure Framework (MTEF) and the Poverty Action Fund (PAF) guided the strategic allocation of resources in the government’s budget over the period 2000/01 – 2002/03. PAF spending has risen substantially since 2001, and key sectors in the PEAP have received large increases in their budget allocations (see table 1.5 below). The fastest growing sectors in the MTEF over this period have been agriculture and health. Other sectors which have grown at a substantially higher rate than the average MTEF growth rate are Economic Functions & Social Services, which includes Lands & Environment and Social Development, Accountability, and Law & Order. The Roads & Work sector has grown at a relatively slow rate (10%) since 2000/01, following the end of some large investment projects. The education budget has also grown at less than the average rate in the MTEF, but it still remains the largest sector in the MTEF and receives sizeable increases in its budget year to year.

Table 1.5:

Sectoral Allocation of the Budget, FY 2000/01 – 2002/03

^* Economic Functions and Social Services

^** Includes unallocated

^*** Figures for PAF as % of total MTEF excludes interest payments

Table 1.5:

Sectoral Allocation of the Budget, FY 2000/01 – 2002/03

	FY 2000/01		FY 2001/02		FY 2002/03		Growth
SECTOR	Shs Bn	% of total	Shs Bn	% of total	Shs Bn	% of total	over period
Security	209.8	13.9%	229.2	12.0%	261.7	12.9%	24.7%
Roads and Works	138.0	9.2%	170.2	8.9%	150.5	7.4%	9.0%
Agriculture	24.1	1.6%	49.1	2.6%	46.8	2.3%	93.9%
Education	403.8	26.8%	458.3	24.1%	505.2	24.8%	25.1%
Health	114.2	7.6%	170.1	8.9%	196.0	9.6%	71.6%
Water	36.4	2.4%	54.0	2.8%	48.7	2.4%	34.0%
Law and Order	94.5	6.3%	128.5	6.8%	142.2	7.0%	50.5%
Accountability	17.1	1.1%	22.8	1.2%	26.6	1.3%	55.8%
EF & SS *	95.4	6.3%	139.9	7.4%	149.7	7.4%	56.9%
Public Administration	264.9	17.6%	325.3	17.1%	361.2	17.8%	36.4%
Interest Payments	107.1	7.1%	155.1	8.2%	144.6	7.1%	35.0%
Total MTEF **	1,517.8		1,918.7		2,037.6		34.2%
Total PAF***	491.0	34.8%	624.8	35.4%	683.1	36.1%	39.1%

^* Economic Functions and Social Services

^** Includes unallocated

^*** Figures for PAF as % of total MTEF excludes interest payments

View Table

Table 1.5:

Sectoral Allocation of the Budget, FY 2000/01 – 2002/03

	FY 2000/01		FY 2001/02		FY 2002/03		Growth
SECTOR	Shs Bn	% of total	Shs Bn	% of total	Shs Bn	% of total	over period
Security	209.8	13.9%	229.2	12.0%	261.7	12.9%	24.7%
Roads and Works	138.0	9.2%	170.2	8.9%	150.5	7.4%	9.0%
Agriculture	24.1	1.6%	49.1	2.6%	46.8	2.3%	93.9%
Education	403.8	26.8%	458.3	24.1%	505.2	24.8%	25.1%
Health	114.2	7.6%	170.1	8.9%	196.0	9.6%	71.6%
Water	36.4	2.4%	54.0	2.8%	48.7	2.4%	34.0%
Law and Order	94.5	6.3%	128.5	6.8%	142.2	7.0%	50.5%
Accountability	17.1	1.1%	22.8	1.2%	26.6	1.3%	55.8%
EF & SS *	95.4	6.3%	139.9	7.4%	149.7	7.4%	56.9%
Public Administration	264.9	17.6%	325.3	17.1%	361.2	17.8%	36.4%
Interest Payments	107.1	7.1%	155.1	8.2%	144.6	7.1%	35.0%
Total MTEF **	1,517.8		1,918.7		2,037.6		34.2%
Total PAF***	491.0	34.8%	624.8	35.4%	683.1	36.1%	39.1%

^* Economic Functions and Social Services

^** Includes unallocated

^*** Figures for PAF as % of total MTEF excludes interest payments

Budget allocations have also continued to direct an increasing amount of resources to poverty reducing expenditures in the Poverty Action Fund (PAF). The PAF has grown by almost 40% since FY 2000/01, rising from Shs 491bn in the 2000/01 budget to Shs 683bn in the 2002/03 budget.

Notwithstanding the positive aggregate trends in budget allocations, there are some areas of concern with respect to allocations of public expenditures towards PEAP priorities. Most notably, the public administration sector has grown by 36% over the past two years, due to a number of factors such as the costs of foreign missions, higher operational expenditures by key political institutions, and the increase in the budget of the Parliamentary Commission. It is however important to note that some of the growth in the Public Administration is due to a rising pensions bill and a higher allocation to Uganda Revenue Authority to enhance its ability to collect revenues.

Since Government’s expenditure is projected to grow at a slower rate than in the recent past over the medium term, it will become increasingly important for sectors to effectively prioritise their expenditures and enhance budget efficiency, in order to achieve the objectives of the PEAP.

1.6.4 Budget Execution

The execution of the budget has broadly preserved sectoral allocations over the past two years. However, the budget was not fully implemented as planned, due to a combination of revenue shortfalls and requests for supplementary expenditures, most notably in the Public Administration sector.

Aggregate budget performance in both FY 2000/01 and FY 2001/02 was relatively close to 100%. However individual sector performances varied significantly, with some sectors which consistently deviate from their budgets (see table 1.6 below). In particular, the public administration sector has been above its budget over the past two years, by about 12-14%, claiming the lion’s share of supplementary expenditures authorised by the Ministry of Finance. This confirms the trends of previous years, and shows that budget discipline is still lacking in this sector. The security sector has also been above its budget during FY 2001/02 and, especially, in the first half of FY 2002/03, due to higher than anticipated defence expenditures. These have been necessitated by the continued instability in the North, and have rendered budget execution particularly difficult to manage during FY 2002/03. As table 2 below shows, most sectors in the MTEF experienced large cuts in their non-PAF budgets in the first half of FY 2002/03, in order to release resources for higher defence expenditures.

Table 1.6:

Budget Performance by Sector, FY 2000/01-2002/03 (1^st Half).

^* Performance = Budget Releases/Approved Budget; FY 2002/03 performance is measured against 50% of the budget

^** Provisional figures

^*** Economic Functions and Social Services

Table 1.6:

Budget Performance by Sector, FY 2000/01-2002/03 (1^st Half).

	FY 2000/01		FY 2001/02		FY 2002/03 (1st Half)
SECTOR	Outturn	Performance*	Outturn	Performance*	Outturn**	Performance*
Security	208.4	99.4%	237.9	103.8%	154.7	118.2%
Roads and Works	127.8	92.6%	156.7	92.0%	61.2	81.4%
Agriculture	21.8	90.3%	42.4	86.4%	20.8	88.9%
Education	373.0	92.4%	455.8	99.5%	230.2	91.1%
Health	110.1	96.4%	162.9	95.8%	88.3	90.1%
Water	36.4	100.0%	49.0	90.8%	21.3	87.4%
Law and Order	97.7	103.4%	127.3	99.0%	61.8	86.9%
Accountability	16.3	95.4%	21.5	94.4%	11.8	88.9%
EF & SS ***	75.0	78.7%	122.4	87.5%	66.7	89.1%
Public Administration	301.6	113.9%	365.8	112.4%	185.3	102.6%
Interest Payments	127.6	119.1%	153.4	98.9%	78.1	108.0%
Total MTEF	1,495.7	98.5%	1,895.0	98.8%	980.2	96.2%
Total PAF	440.2	89.7%	603.5	96.6%	308.3	90.3%

^* Performance = Budget Releases/Approved Budget; FY 2002/03 performance is measured against 50% of the budget

^** Provisional figures

^*** Economic Functions and Social Services

View Table

Table 1.6:

Budget Performance by Sector, FY 2000/01-2002/03 (1^st Half).

	FY 2000/01		FY 2001/02		FY 2002/03 (1st Half)
SECTOR	Outturn	Performance*	Outturn	Performance*	Outturn**	Performance*
Security	208.4	99.4%	237.9	103.8%	154.7	118.2%
Roads and Works	127.8	92.6%	156.7	92.0%	61.2	81.4%
Agriculture	21.8	90.3%	42.4	86.4%	20.8	88.9%
Education	373.0	92.4%	455.8	99.5%	230.2	91.1%
Health	110.1	96.4%	162.9	95.8%	88.3	90.1%
Water	36.4	100.0%	49.0	90.8%	21.3	87.4%
Law and Order	97.7	103.4%	127.3	99.0%	61.8	86.9%
Accountability	16.3	95.4%	21.5	94.4%	11.8	88.9%
EF & SS ***	75.0	78.7%	122.4	87.5%	66.7	89.1%
Public Administration	301.6	113.9%	365.8	112.4%	185.3	102.6%
Interest Payments	127.6	119.1%	153.4	98.9%	78.1	108.0%
Total MTEF	1,495.7	98.5%	1,895.0	98.8%	980.2	96.2%
Total PAF	440.2	89.7%	603.5	96.6%	308.3	90.3%

^* Performance = Budget Releases/Approved Budget; FY 2002/03 performance is measured against 50% of the budget

^** Provisional figures

^*** Economic Functions and Social Services

The performance of PAF expenditures was relatively low in FY 2000/01, at 89.7% of the budget, mainly due to delays in the recruitment of primary teachers and health workers. However, the recruitment problems have now been resolved and the budget performance of PAF expenditures has improved, reaching 97% in FY 2001/02. Government continues to maintain its commitment to protect PAF expenditures from any budget cuts arising from unforeseen expenditure pressures and/or revenue shortfalls.

The main challenge for budget execution in the next few years will be to contain the demands for supplementary expenditures by some institutions in the budget, most notably in Public Administration. The Public Finance and Accountability Bill, which was passed by Parliament in April 2003, is intended to limit the incidence of supplementaries, by requiring Parliamentary approval prior to the release of any supplementary funds. This should help to contain the over-expenditures of some sectors in the MTEF, and lead to a more balanced execution of the budget in line with PEAP priorities.

1.6.5 Regional Aspects of Budget Allocation

A substantial and increasing share of government spending is taking place at the district level, in line with the government’s policy of decentralisation. In FY 2001/02, transfers to local governments represented 32% of all government’s budget expenditures. Over the past few years, transfers to local governments have also increased at a very high rate (45% during the period 2000-2002), largely reflecting the substantial increase in PAF spending over the period.

Table 1.7 shows budget releases by region during FY 2000/01 and 2001/02, and the per-capita release levels, using 2002 population figures. As the Table illustrates, the Northern and Eastern regions receive more resources per capita than the West and the Centre. This reflects the fact that several of the sectoral grants to the local governments are poverty-sensitive and allocate more resources to poorer districts, which are concentrated in the North and in the East. Most grants also have a geographical area weight, and a poverty index which favors the Northern region on account of its size and poverty situation. The share of resources going to the North will continue to increase so as to address problems of anti poverty.

Table 1.7.

Local Government Transfers by Region, FY 2000/01 and FY 2001/02

Table 1.7.

Local Government Transfers by Region, FY 2000/01 and FY 2001/02

	2002 Population Mn	FY 2000/01		FY 2001/02
		Budget Release Shs Bn	Per Capita Release Shs	Budget Release Shs Bn	Per Capita Release Shs
North	5.35	103.78	19,412	137.57	25,734
Centre	6.68	116.88	17,486	150.15	22,464
East	6.30	121.64	19,302	161.08	25,560
West	6.42	120.48	18,776	153.08	23,856
TOTAL	24.75	462.78	18,699	601.89	24,320

View Table

Table 1.7.

Local Government Transfers by Region, FY 2000/01 and FY 2001/02

	2002 Population Mn	FY 2000/01		FY 2001/02
		Budget Release Shs Bn	Per Capita Release Shs	Budget Release Shs Bn	Per Capita Release Shs
North	5.35	103.78	19,412	137.57	25,734
Centre	6.68	116.88	17,486	150.15	22,464
East	6.30	121.64	19,302	161.08	25,560
West	6.42	120.48	18,776	153.08	23,856
TOTAL	24.75	462.78	18,699	601.89	24,320

1.6.6 Budget Efficiency and Output-Orientation

The efficiency with which public resources are utilised is a key determinant of the extent to which government succeeds in achieving the targets of the PEAP. This will be particularly so over the medium term, given the lower rate of growth in public expenditure required to reduce the fiscal deficit. A major concern with the rapid growth in Government spending over the last few years is that this has driven up costs in key sectors, such as construction.

Several sectors are continuing in their efforts to monitor and improve their output-orientation and budget efficiency. The education and health sectors have taken the lead in making their activities output-oriented and commissioning expenditure tracking and benefit incidence studies.

The Education tracking studies of the capitation grant to primary schools (conducted in 1996, 1999, and 2001) have enabled the sector to identify and resolve bottlenecks in the flow of funds to the local governments. This has led to considerable improvement in recent years, and changes in the formula for the grants are also being implemented to improve allocative efficiency. Issues of value for money in the sector will be detailed out in chapter 2.

Similarly, the Health tracking study of 2001 identified several delays in financial disbursement to the districts, which are being addressed. The health sector also continues to monitor its key output indicators, and is channeling more resources to improve the performance of reproductive health, which has not been satisfactory over the past few years.

The water sector commissioned a value for money study in 2002, covering district water supply and sanitation programmes. This study raised a number of issues related to procurement, financial irregularities and quality control, which the sector is currently seeking to address. An analysis of unit costs in this sector over the period 1997-2001 has also been carried out, to assess budget efficiency. This revealed a significant increase in unit costs in the sector, due to the use of more expensive water sources (e.g. boreholes). This has raised concerns of value for money in the sector which are being addressed as a follow-up to the 2002 study.

Further budget efficiency and value for money studies are currently planned in other key sectors of the budget, such as agriculture, roads and justice. The results of these studies will allow government to have a more systematic picture of the efficiency with which public resources are utilized. This will enable it to allocate funding more efficiently across sectors and take remedial actions where necessary. Early indications from the roads sector, for example, already show that its maintenance programme is highly susceptible to budget cuts, and that the maintenance requirements of the current capital investment programme have not been fully accounted for. Over time it will be important to broaden the scope of budget efficiency studies, and ensure that they include an assessment of the impact of public expenditure on output and, indirectly, outcome indicators (e.g. impact on the poor; distribution of benefits of public expenditure; productivity-enhancing effects of spending).

1.6.7 Future Policy Direction

Economic performance has benefited from sound macroeconomic management over the past two years, but GDP growth remains below the PEAP target level of 7% per annum in real terms, and its impact upon the livelihoods of the poor and the quality of the environment is not well articulated. This means that various actions have to be taken to address this issue:

• Improve GDP performance by focusing attention on delivering coordinated and effective implementation of the ongoing programs to promote economic growth and transformation, namely the MTCS, the PMA and the Strategic Exports program. Where appropriate, the implementation of these programs should be based on a sound analysis of their likely poverty-reducing outcomes and their potential impact upon the environment.

• Ensure reduced pressure on the limited financial resources of the banking system and free up capital for private sector investment, which is essential for sustained GDP growth, by scaling back the fiscal deficit. This strategy will reduce appreciation pressures on the exchange rate and limit aid dependency.

• Continue to focus budgetary expenditures on complementary social services provision which will improve the capacity and opportunities of the poor to improve their productivity. In particular, greater efforts have to be made to keep budget expenditures in line with budget allocations, and to track the value for money efficiency of Government’s programs and their social outcomes.

2.2.1 The Security Situation

Insecurity emerged in three broad categories: cattle rustling, rebel activity, and urban crime and terrorism. In response to these threats, Government pursued a three-pronged approach involving dialogue, enforcement by security agencies and enforcing the rule of law. This was in recognition that the country’s security situation is influenced by a diverse range of factors and hence Government’s initiatives to ensuring security needed to be multifaceted.

a) Cattle Rustling

From 2000 todate, the areas of Karamoja, Lango, Acholi, Teso, Kapchorwa and Bugisu continued to suffer cattle rustling by cattle raiders from Karamoja and the Turkana from Kenya. The raids, in many instances, led to loss of lives, violation of rights, increased poverty and overall destruction of the social and economic life of the affected communities. People were displaced from their villages into camps. The Uganda Human Rights Commission (UHRC) cites Katakwi and Kapchrowa districts as having been most affected by the raids with Katakwi registering up to 88,000 people in the various camps in the district. The problem of cattle rustling was attributed to the presence of illegal guns in the hands of the Karamojong, to be 40,000.

In a bid to check the rustling and halt gun trafficking on the Sudan and Kenya borders, Government embarked on a disarmament scheme. The objectives of the scheme were:

• To stop wrong elements among the armed Karamojong warriors from terrorising their neighbours within Uganda, Kenya and Sudan

• To stop inter-clan wars within Karamoja and the infiltration of arms.

The disarmament process that started in December 2001 was undertaken in two phases. The first phase entailed pursuading the warriors to voluntarily surrender the weapons, while phase two was forced disarmament by the army. Phase one registered the highest level of compliance with over 6,500 guns being surrendered voluntarily by January 2002 following a UHRC-led sensitisation campaign which helped to alley some of the warriors’ fears about the intentions of the exercise.

By mid September 2002, the exercise had yielded 9763 guns. Table 2.1 below shows the weapons collected between 2 December 2001 and 17 January 2002.

Table 2.1:

Weapons collected between 2 December 2001 and 17 January 2002

Source: UHRC (2003) Annual Report 2001-2002

Table 2.1:

Weapons collected between 2 December 2001 and 17 January 2002

District	County	As at 2 December 2001	As at 12 December 2001	As at 14 January 2002	As at 17 January 2002
Moroto	Bokora Matheniko	1059 500	1163 554	1536 669	1560 671
Nakapipirit	Chekwi	270	336	509	509
	Pian	0	409	575	582
	Pokot	101	106	348	352
Kotido	Dodoth	438	513	1252	1293
	Jie	360	623	1198	1240
	Labowor	100	319	358	386
Sub-Totals		2828	4023	6445	6593

Source: UHRC (2003) Annual Report 2001-2002

View Table

Table 2.1:

Weapons collected between 2 December 2001 and 17 January 2002

District	County	As at 2 December 2001	As at 12 December 2001	As at 14 January 2002	As at 17 January 2002
Moroto	Bokora Matheniko	1059 500	1163 554	1536 669	1560 671
Nakapipirit	Chekwi	270	336	509	509
	Pian	0	409	575	582
	Pokot	101	106	348	352
Kotido	Dodoth	438	513	1252	1293
	Jie	360	623	1198	1240
	Labowor	100	319	358	386
Sub-Totals		2828	4023	6445	6593

Source: UHRC (2003) Annual Report 2001-2002

In view of the fact that close to 70 percent of the 9763 guns that had been collected by 20^th September 2002 were received using the voluntary surrender approach, it would imply that the use of force has this far been comparatively less effective in ridding the area of illegal guns. Greater effort therefore should be focused on helping those in possession of guns to appreciate the need to surrender their guns. Government extended the disarmament exercise in Karamoja to include neighbouring areas of Kapchorwa district. A total of 763 guns had been collected from people in Kapchorwa as of 20^th September 2002.

Another development arising from the disarmament exercise was the establishment of support offices in the districts of Kotido, Moroto and Nakapiripit by the UHRC, which later became Civil Military Operation Centres (CMOCs). CMOCs serve to provide accountability for guns collected from sub-counties. Their staff include officials from the UPDF, human rights desk, public relations office and those assigned by political commissars. The main function of the centres is to:

• Coordinate with the district teams of civil society, local government and traditional leaders

• Act as harmonious points for civilians and UPDF forces

• Receive complaints against the military and take remedial actions

• Assist in any displacement due to the disarmament

Although a lot of efforts have gone into the disarmament exercise, it has been influenced by different interpretations of its objectives especially by the communities. In some communities the exercise is perceived as one that created conditions of vulnerability especially for those who had to surrender their guns before the neighbouring communities surrendered theirs. It is therefore necessary that these fears are allayed if the process is going to be effective. The Karamojong bitterly complained about the indiscriminate impounding of their animals, to which the President issued a directive in April 2002, for it to be stopped. Other studies have called for the establishment of a long-term disarmament exercise with the active control of local leaders in the process.¹⁵

Other additional factors hampering the disarmament exercise and efforts to stop cattle raiding include:

• a) The continued cross-boarder raids against the Karamojong by warriors from bordering areas of Kenya.

• b) The inability to enforce law and order in Karamoja makes it difficult to ensure the timely arrest and prosecution of criminal offenders.

• c) The local’s interpretation of the temporal ban of wearing a suka not to conceal a gun as a ban on traditional dressing.

b) Insurgency

Government has approached the problem of rebel activities in the country using a combination of peace talks, military confrontation and legal provisions. On the peace talks front, Government initiated dialogue to establish good relations with neighbouring countries of Sudan and the Democratic Republic of Congo (DRC), from which rebels are suspected to have launched attacks. It reopened its diplomatic missions in the two countries and has continued to participate in the Lusaka Peace Accord initiative under the auspices of the UN.

The Peace Pact signed between the Government and the Uganda National Redemption Front (UNRF) II rebel group of West Nile resulted in the surrender of 2000 rebels in April 2000. In addition, another 5000 rebels had surrendered by July 2002 in response to an Amnesty Law provided by Government in January 2000 to end hostilities by forgiving and reconciling with the different rebel groups. According to the UHRC annual report (2001-2002) 3,641 of the 5000 ex-rebels had received their papers processed as of September 2002.

Peace negotiations with the Lord’s Resistance Army Rebels, which commenced in July 2002, spearheaded by religious and political leaders. Government agreed to a cease-fire on condition that rebels cease kidnapping and attacking civilians and damaging of property. Patience was however being over-stretched on the part of Government by October 2002 given that rebels were not responding to the conditions of the ceasefire. These developments demonstrate a positive trend in Government’s efforts to quell the rebellion in the North.

In addition to diplomatic means, Government has had to use its military arm, the Uganda Peoples Defence Forces (UPDF), to deter and subdue agents of insecurity. Over the review period, the army registered relative progress in the following key areas. It has been instrumental in the restoration of relative peace in the West and sustained efforts to attain peace in the North. Its operations in the North have yielded enormous pressure on rebel groups of the Lord’s Resistance Army (LRA). This was largely as a result of the protocol signed between the governments of Uganda and Sudan on 10^th March 2002, allowing UPDF to mount limited operations into Sudan to comb out LRA bases in southern Sudan. The operation code named “Operation Iron Fist” has mostly involved counter insurgency operations that have made it possible for the army to clean up civilian areas of rebel infestations. As a result of the operation 6,000 people who were reportedly being held in LRA camps¹⁶, were rescured.

According to the UHRC, while the operation has succeeded in dislodging LRA from Southern Sudan and led to the capture of many guns and ammunition, it has left a toll in communities. The large number of rebels that crossed back into Uganda have increased the suffering of the ordinary people. UHRC estimates the terror and loss suffered by the people of Kigtum over the period June to September 2002 to be more than that suffered over the entire 2001, with close to 1000 people loosing their lives, including rebels, UPDF soldiers and civilians. Table 2.2 below presents a summary of the total causalities and losses arising from the Northern Insurgence for the years 2001 and 2002.

Table 2.2:

Summary of rebel activities and their impact on the population in 2001 and 2002

Source: UHRC (2002:58-63) 2001-2002 Annual Report

Table 2.2:

Summary of rebel activities and their impact on the population in 2001 and 2002

	UPDF Dead	Rebels dead	Civilians Killed	Civilians rescued/released	Civilians injured	Civilians abducted
2001	40	60	98	264	125	52
2002	171	436	670	737	172	1775
% increase	327.5	626.67	583.67	197.17	37.6	3313.46

Source: UHRC (2002:58-63) 2001-2002 Annual Report

View Table

Table 2.2:

Summary of rebel activities and their impact on the population in 2001 and 2002

	UPDF Dead	Rebels dead	Civilians Killed	Civilians rescued/released	Civilians injured	Civilians abducted
2001	40	60	98	264	125	52
2002	171	436	670	737	172	1775
% increase	327.5	626.67	583.67	197.17	37.6	3313.46

Source: UHRC (2002:58-63) 2001-2002 Annual Report

The above figures show a marked rise in the number of victims over a one-year period and pose a great concern over the likely socio-economic implications of continued rebel activity in the North. In recognition of this, Government is rallying all resources at its disposal to see to it that the rebellion in North is speedily brought to an end. The President has also been very instrumental in this area by camping in Gulu and staying and assuring the population that this war will end soon.

In the Rwenzori region, at the height of insurgency in 2000/01, a total of between 150,000 and 180,000 people had been displaced into 84 camps in the three Districts of Bundibugyo, Kabarole and Kasese. Security has, however, since improved in all three districts of the Rwenzori region, with several people in Kasese and Kabarole being able to return home.

As of 2002, Katakwi was the most affected district with a total IDP population estimate of 88,000¹⁷. Kapchorwa district on the other hand has about 5,000 IDPs and displacement has lately also occurred within Karamoja region.

A Recent study¹⁸ involving a sample of 15 of the 84 camps then in the Rwenzori region, showed that the majority (43%) of IDPs perceived poor access to land as the main problem they face during displacement. On the other hand, (26%) regarded food as the leading problem, access to income and health ranked priority problems by 12% and 10% of the respondents respectively. The study notes that while these problems existed before, living in camps aggravated them. The study identified security (52%), lack of shelter, (25%) and reluctance to take a lead in returning home from camps (6%) as the major constraints to the IDPs desire to return to their homes.

Furthermore, in addition to the above threats, Government recognises that the country could face many other threats in the foreseeable feature, some external in nature primarily resulting from instability along its borders, others from internal problems such as banditry. In view of this, Government is preparing a Defence Policy aimed at providing policy guidance in determining military capability as well as to plan its implementation. The policy spells out what the UPDF should seek to achieve in form of five defence missions, how they should achieve it through nine clear modernisation themes, and the respective responsibilities of the different arms of the UPDF.

In line with the above objective, UPDF has, in its pursuit to professionalise the army, continued with training, promotions and purchase of modern equipment. The airforce was able to put back some aircraft into operation. These measures are important to make the army more combat effective. Development partners have also provided resources for technical assistance in the furtherance of a comprehensive defence review.

Furthermore, the army has implemented the Commitment Control System (CCS) in line with government’s efforts to make public expenditure more efficient. External Security Organisation has also computerised up to 95% of its records and payment system and the Military Tender Board has been given the necessary training.

2.2.2 The Refugee Problem in Uganda

Uganda has hosted refugees since the 1950s. In 1995 the numbers of registered refugees reached a peak of over 400,000 with a majority from Southern Sudan. At present figures reach some 190,000 most of them are refugees from Sudan, but there are other substantial groups coming from DR Congo, Rwanda and a number of other neighbouring countries. The most affected region is the North, hosting over 2/3 of the refugee population. The rest of the refugees are hosted in the West and South Western parts of the country. Most refugees flee their countries due to armed conflicts and abuse of human rights in their respective countries. Due to the prevailing volatile situation in the neighbouring countries, the country is likely to receive higher numbers of refugees. There is therefore a need to prepare for such influxes and to undertake efforts to support regional efforts to strengthen good governance.

It is important to note that the vast majority of refugees are of rural origin, in most cases coming from very poor and marginalized war-affected areas. But even the little they may have possessed usually is lost during the flight. Refugee population statistics show that a majority of refugees are women, children and the elderly, a substantial number are physically and mentally handicapped due to the effects and traumas of war which indicates the vulnerability of these groups. Consequently the majority of refugees belong to the poorest of the poor who have settled in the rural areas that are poverty-stricken as well.

The refugee situation is a key concern in poverty eradication due to the high numbers and the impact they may have on the host populations in terms of economic and social development.

The presence of such large numbers of people in a given region can cause serious ecological consequences, if sustainable settlement strategies are not implemented early enough to reduce environmental damage. In some settlements there is a problem of deforestation, and fuel wood has become a problem to the community. Depletion or degradation of the natural resources has also become common, for example water has become scarce, in some settlements with the reduced water table. There is strain on social amenities in the districts hosting refugees. Health services, education, land, roads, and all other services may be over stretched in refugee-inhabited areas unless necessary complementary investments are made. Shortage of local food supplies is also likely to occur as a result of refugee influx, and there may be an increased competition for scarce employment opportunities

There are, however, also positive impacts of the presence of refugees in a host region provided a conducive policy is in place, which assures that the local population can share the benefits, which refugee assistance may bring along such as, the building of schools, health units, roads and other infrastructure. If such investments are properly planned they may considerably contribute to the development of the host region. Furthermore the presence of refugees may spark the economic development in the region by providing additional market outlets and economic opportunities for both refugees and local population, and refugees may also bring helpful innovative skills or practices to the region.

2.3.1 Suspects

Uganda Police is noted as being one of the main respondents in the complaints lodged in UHRC. A total of 69 complaints against the police were handled by UHRC over the period January 2001 and June 2002. From its visits to police stations and posts, UHRC noted violations of human rights including long detentions exceeding 48-hour rule with the majority occurring in central region police stations such as Central and Kiira Police Stations.

Conditions in police cells also remain unfavourable for detained persons. According to UHRC, while police officers are increasingly aware of the rules and regulations protecting rights of detained persons, their ability to correctly discharge their duties remains constrained by factors such as interference by some politicians and members of other security organs, irregular court sessions and inadequate transport.

2.3.2 Prisoners

The conditions of prisoners in central government prisons and respect for their human rights also registered improvement over the review period. The situation has however worsened in most local administration prisons with officials having limited awareness of prisoners’ rights, some prisons accommodating double their capacity, water and sanitation infrastructure in a dilapidated or non existent state, prisoners lacking medical care, adequate meals and clothing, and torture still standing as a big problem. The contrast in the situation between central government and local governments’ prisons is attributed to the continued lack of clarity on whether the management of local administration prisons is a local government or central government responsibility.

According to UHRC, prisoners are also subjected to walking long distances to and from their work on private firms or shambas where they are hired out for labour to wealthy organisations in return for food and money. UHRC agues that while in theory the proceeds from such work are expected to benefit prison inmates, in practice they do not because the proceeds are taken by prison authorities, who do not use it to improve prisoner welfare. In some prisons, UHRC found out that inmates work seven days a week with no day of rest.

2.3.3 Detainees by the Military

Suspects held on treason and armed robbery are detained by the military. According to UHRC, their arrest was unconstitutional and voilated human rights. Because of the uncoordinated nature of activities of the paramilitary agency, UHRC argues that many suspects arrested were brought before a Court Martial that was not yet constituted and were, as a result, subjected to detention for over 48 hours within which a suspect should have been brought before a competent court of law and charged according to the law. It also cited the risk of collateral injury, death, and mistaken identity in shooting incidences as an issue of real concern in the operations of the agency.

According to UHRC, while the operation was by and large successful in reducing organised crime commonly characterised by armed robberies and murders as explained by its popularity amongst the public, its modus operandi contravened the Constitution and therefore a threat to Uganda’s process of building constitutionalism.

Inspections of army detention centres, though starting to register success, have also by far not been possible because of an army requirement that it should be notified in advance of any such inspection, a condition which defeats the essence of surprise inspection visits.

2.3.4 Workers’ Rights

Uganda is a signatory to the International Covenant on Economic, Social and Cultural Rights which stipulates rights at work and requires all countries to recognise the right of every one to the enjoyment of a just and favourable conditions of work. Favourable conditions of work include fair wages and equal wages for work of equal value without distinction of any kind, and safe and healthy working conditions. Uganda’s compliance with these requirements continues, however, to be unsatisfactory.

According to the UHRC 2000-2001 annual report, safety and welfare of workers against occupational calamities and diseases is rarely respected. Some employers are noted to deny their workers gloves, headgear and facemasks and as a result, some workers have developed diseases related to cancer and HIV/AIDS. As a means of curbing the abuse of rights at work, UHRC calls upon government to repeal all labour laws that do not conform with the Constitution and ratify those ILO Conventions that enhance the rights of workers.²⁰

2.3.5 Challenges

• Reducing the emerging and worrying pattern in which some Government officials act with impunity knowing that they will not be held personally liable for their acts or omissions that violate rights.

• Maintaining a balance between reducing organised armed robbery while adopting a modus operandi, which does not pose a threat to Uganda’s efforts of building a culture of constitutionalism.

• Ensuring that investors provide favourable conditions of work to their employees which reflect investors compliance to the provisions of the Constitution of Uganda and Uganda’s compliance with International Covenant on Economic, Social and Cultural Rights.

• Expansion of the civic education activities to ensure the people have knowledge of their rights and freedoms.

• Repealing all laws that are inconsistent with Uganda’s Constitution or do not comply with international obligations

2.4.1 Criminal Justice Reform

Empirical evidence from the Criminal Justice Baseline Survey (JLOS, April 2003) indicates that physical access, as well as access through legal literacy, is hindered, especially for the poor. The JLOS “Voices of the Poor” Participatory Poverty Assessment (JLOS, November 2001) also indicates that access is hampered by the inequitable distribution of service delivery agencies across the country, high costs of services and antiquated laws.

Access to Justice

Improved Operations and Infrastructure

In terms of operations and infrastructure, while the Judiciary has good coverage of the country, other institutions such as the Directorate of Public Prosecutions have much more limited coverage. In nine (9) districts, the Uganda Police Force (UPF) lacks adequate communication equipment while only 29 of 46 prisons have transport. Prisoners walk distances of up to 15 kms to attend court, and often do not arrive at all. The inequity in service levels limits the successful completion of court cases, and the proliferation of new districts, in the absence of JLOS institutions has also exacerbated the problem. (See Figure 2.1 below)

Percentage of Household Informents Perceiving Distance to Be Less Than 5 km to Institution

Citation: IMF Staff Country Reports 2003, 301; 10.5089/9781451838732.002.A001

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Percentage of Household Informents Perceiving Distance to Be Less Than 5 km to Institution

Citation: IMF Staff Country Reports 2003, 301; 10.5089/9781451838732.002.A001

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Percentage of Household Informents Perceiving Distance to Be Less Than 5 km to Institution

Citation: IMF Staff Country Reports 2003, 301; 10.5089/9781451838732.002.A001

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De-concentration of Justice Services

The Sector has embarked on a “de-concentration of services” programme with emphasis on rationalizing the establishment of sector institutions to ensure that the process of administration of justice increases efficiency from “entry to exit”.

Particular regard has been given to the Northern region, which given a lengthy period of civil strife experiences the lowest distribution of service providers, particularly for the Uganda Police Force (See Figure 2.2 below). Focus has also been, directed to the Karamoja region to address the culturally specific nature of the region, with more flexible court sessions in terms of frequency and location to enable quicker resolution of cases.

Police Staff per 1 Million Inhabitants

Citation: IMF Staff Country Reports 2003, 301; 10.5089/9781451838732.002.A001

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Police Staff per 1 Million Inhabitants

Citation: IMF Staff Country Reports 2003, 301; 10.5089/9781451838732.002.A001

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Police Staff per 1 Million Inhabitants

Citation: IMF Staff Country Reports 2003, 301; 10.5089/9781451838732.002.A001

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Rationalized Human Resource Recruitment and Distribution

De-concentration of services, also requires a distribution of human resources informed by the trends in crime, as well as population ratios. In terms of the Police Force the ratio is 1 police officer per 1,899 persons against the ideal of one (1) officer per eight hundred (800) persons. For the Prison Service, international standards set an ideal ratio of one (1) warder per three (3) prisoners with the current standing at one (1) warder for nine (9) prisoners.

The Sector has prioritized the phased recruitment of staff to achieve the ideal ratios in the long term and to increase access through faster case investigation prosecution and adjudication; and to achieve increased national geographical coverage in the medium-term. Process to date includes recruitment of 500 Prison Warders/Wardresses and 500 Police officers per annum. In addition, the Judiciary is to recruit 26 Grade 1 magistrates per annum, with the Directorate of Public Prosecution recruiting 60 State Attorneys per annum.

Efficiency and Effectiveness

Efficiency and effectiveness are to be achieved by lowering the costs of the “administration of justice”, and decreasing the inflow of cases into the justice system through crime prevention strategies. The Criminal Justice Baseline Survey established that the poor, women in particular, face a financial barrier to accessing justice services. The Sector notes that a financial barrier to accessing justice cannot be completely removed for “the poorest of the poor” but has developed a number of initiatives to decrease the cost of administration of justice.

Lowering the Cost of the Administration of Justice

While the lower courts receive a significantly lower budgetary allocation than the higher courts, the case throughput for Judges at the High Court and higher levels is much lower than that of the lower courts such as Magistrates Courts and Local Council Courts (See Figure 2.3 below). While the complexity of cases at higher court levels contributes to delays, increased pecuniary and criminal jurisdiction to the courts with higher case throughput shall limit growth of the case backlog, and allow for quicker disposal of cases; thereby reducing the cost of administering justice.

Caseload, Throughput and Backlog 1999

Citation: IMF Staff Country Reports 2003, 301; 10.5089/9781451838732.002.A001

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Caseload, Throughput and Backlog 1999

Citation: IMF Staff Country Reports 2003, 301; 10.5089/9781451838732.002.A001

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Caseload, Throughput and Backlog 1999

Citation: IMF Staff Country Reports 2003, 301; 10.5089/9781451838732.002.A001

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Another initiative to reduce time spent on remand 60% of the 17,500 prisoners in Uganda are on remand (Uganda Prison Service, December 2002). The cost of feeding one prisoner for a year amounts to approximately UG. Shs. 750,000. Time spent on remand also constitutes time spent away from income generating activities which has negative impact particularly for the poor. Thus reducing the overall number of remand prisoners, in addition to the time spent on remand is a critical issue.

With defined and monitored case completion targets the remand period has been reduced from an average of five (5) years for capital cases to two (2) years. The overall number of prisoners on remand, however, remains constant, due to the increased crime rate, and increased efficiency in investigation of criminal activities.

The Chain Linked Initiative first piloted in Masaka District, and Case Backlog Project, have now been “rolled-out” to six high court stations and to 29 magisterial areas. “Best practice” guidelines have been issued, which include a limitation on the number of adjournments, set targets for case completion, hearing of matters on a day to day basis and cross-institutional consultation in the scheduling of cases. Evidence suggests that the coordination of case scheduling has beneficial effects with regard to efficiency with witnesses assured of cases being heard upon first appearance and accused persons receiving “speedy trials”.

Lowering the Crime Rate

With regard to effectiveness, the baseline survey has shown that crime in Uganda is on the increase. The prisoner to population ratio has increased from 30 people per 100,000 in the 1920’s to 101 per 100,000 as per year 2000. This fact emphasizes the need for increased investment in crime prevention strategies and strengthened civic and legal education. Community policing and partnership with Civil Society Legal Aid and Education service providers are amongst the on-going interventions aimed at limiting growth in the crime rate.

2.4.2 Commercial Justice Reform

As was noted in chapter 1, the Commercial Justice Reform Programme is a key component of Uganda’s Medium-term Competitiveness Strategy with a focus on improving the regulatory and service delivery framework for businesses in Uganda. The Commercial Justice Baseline Survey²² illustrated key constraints and highlighted the negative impact of poor services on private sector development.

The survey also established that the vast majority of enterprises in Uganda are micro-level with an estimated 800,000 enterprises employing approximately 90% of the total non-farm economy. With regard to the informal sector, only 10% had a commercial dispute in the past three years, of which 71% of those sought resolution in a court or official forum.

Of businesses surveyed 70% perceived the commercial justice system to be expensive, slow and corrupt, with 60% adding that their businesses would prove more profitable, by at least 5%, if the system was improved. The need for efficient and effective commercial dispute resolution mechanisms was also demonstrated with approximately 50% of businesses interviewed having had a serious commercial dispute in the past three years, and nearly 90% having sought resolution in a court or other official forum.

The vast majority of enterprises in Uganda are micro-level employing approximately 90% of the total non-farm economy. Women are important participants in these micro enterprises with an estimated 45% of such businesses headed or owned by them. Given the prevalence of micro businesses in Uganda, it is clear that the malfunctioning of the commercial justice system has a more severe impact on them than on large firms. Large firms have a comparative advantage given their monopoly position as suppliers or purchasers, better absorption of bad debts, better placement to use harassment to enforce contracts and a tendency to be more aware of legal rights.

The key areas for reform in the commercial justice programme include Courts and promotion of Alternative Dispute Resolution mechanisms, Commercial Registries law reform and strengthening the Legal Profession.

Access to Justice

Commercial Customer Service Strategy

The Commercial Court, established as a separate division of the High Court in 1996, has developed a customer service strategy to address constraints substantiated by the Commercial Justice Baseline Survey. The mission of the strategy is to provide a court “accessible to all businesses, and which processes commercial cases expeditiously and justly”.

The Court now engages in constructive dialogue with users, and has established a Commercial Court Users Committee to provide a forum for information exchange and learning. Private Sector representatives have benefited from a demystification of the court process, and opportunity to pursue complaints and concerns.

Thus, there has been increased usage of the commercial court with a 35% increase in the number of new cases registered between June and October 2002 alone. The Uganda Bankers Association noted that, “it is gratifying that the registration of fresh cases is increasing. It may be a sign of confidence in the functioning of the court.²³”

Promoting Alternative Dispute Resolution

The Sector seeks to promote alternative dispute resolution mechanisms to ease access for those enterprises that face barriers due to financial and other constraints. A key initiative has been the establishment of a Centre for Arbitration and Dispute Resolution (CADER) with enabling legislation – The Arbitration and Conciliation Act - to allow disputants to seek arbitration, mediation or negotiation as an alternative to adjudication in the commercial court.

Litigation lawyers demonstrated some awareness of ADR mechanisms (See Table 2.4 below) with 61% of them saying they were likely to use” ADR. ADR is perceived as being faster cheaper and free from procedural entanglements, which bodes well for increased usage by poorer clients.

TABLE 2.4

Litigation lawyers aware of Alternative Dispute Resolution Mechanisms

TABLE 2.4

Litigation lawyers aware of Alternative Dispute Resolution Mechanisms

Methodology	% of Lawyers aware
Arbitration Mediation	80% 43%
Negotiation	26%

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TABLE 2.4

Litigation lawyers aware of Alternative Dispute Resolution Mechanisms

Methodology	% of Lawyers aware
Arbitration Mediation	80% 43%
Negotiation	26%

Quality of Justice

Reform of Commercial Laws

According to the Commercial Justice Baseline Survey, 50% of managers of businesses in formal sector believe that Uganda’s commercial laws have a negative impact on their operations. For the informal sector, 32% believed that the Income Tax Act places undue burden on smaller enterprises thereby making them less competitive. In the Legal Profession 71% identified commercial laws, particularly the Companies Act, as having a negative effect on commercial practice.

The Uganda Law Reform Commission has begun the process of identifying and drafting new or amendment laws in response to the survey findings. The Commission has now dispatched proposed bills to the following respective ministries for action:

• Ministry of Trade, Tourism and Industry: Consumer Protection (new legislation), Sale of Goods and Services (re-enactment), Competition (new legislation), Co-operatives (amendment), Anti-dumping (new legislation), Hire Purchase (new legislation)

• The Uganda Investment Authority/MFPED: Special Economic Zone (new legislation)

• Ministry of Justice and Constitutional Affairs: Company Bill (re-enactment), Insolvency (re-enactment and consolidation), Partnership Bill (amendment)

• Ministry of Lands, Water and Natural Resources: Mortgage Decree (consensus concluded with committee on land laws), Personal Properties Security (new legislation)

Strengthening the Legal Profession

The Baseline Survey for Commercial Justice indicates that 75% of the formal sector and 11% of the informal sector use services of lawyers. While 64% of formal businesses are satisfied with the quality of lawyer’s service they receive, nearly 100% of the informal sector judged their services to be too expensive, compared with 50% in the formal sector. Ugandan lawyers are also perceived to be corrupt with nearly 40% of businesses rating them as “corrupt”. Businesses do, however, have confidence in the lawyer’s disciplinary procedures with nearly 50% reporting satisfaction. Table 2.5 below provides a comparison of ratings between the formal and informal sectors, reflecting deep dissatisfaction in the informal sector due to lack of access and unaffordable services.

TABLE 2.5

Comparison of Formal and Informal Sector Satisfaction with Lawyers

TABLE 2.5

Comparison of Formal and Informal Sector Satisfaction with Lawyers

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TABLE 2.5

Comparison of Formal and Informal Sector Satisfaction with Lawyers

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The Commercial Justice Reform programme has facilitated the amendment of the Advocates Act, which provides more stringent disciplinary measures and improved oversight by the disciplinary body, the Law Council. In addition the Uganda Law Society has taken the policy decision to require lawyers to handle a minimum number of pro bono matters or provide payment in lieu, as a means developing a “legal aid” culture amongst lawyers. Lawyers are also receiving specialized training in the form of study tours and short courses to improve their capacity to handle commercial matters.

Monitoring Indicators

JLOS has developed sector-wide outcome indicators for the medium-term, and institutional output indicators for each component programme. The Sector has also Strengthened the current Good Governance indicators in the Poverty Monitoring and Evaluation Strategy, June 2002. The rationale behind this is that the current indicators are too narrowly focused, lack attribution to JLOS specific institutions, and in some instance may provide perverse incentives for JLOS institutions. The Sector outcome indicators thus focus on the more qualitative, aspect of administration of justice, white recognising the importance of quantitative data.

A key indicator for efficiency and effectiveness of a justice system is bow many cases result in successful convictions/resolution on merit in a reasoned judgment. A better understanding is derived about cases dismissed for reasons indicating inefficiency such as exceeding time limitations, or incomplete investigations.

All indicators have, as far as possible, been designed to encourage good SWAp practice, enable cost-effective data collection, to demonstrate the impact on poverty reduction, use of varied data sources and to maintain a manageable number of indicators.

2.4.3 Challenges and Constraints

2.5.1 Elections

Electoral democracy is one of the key elements of good governance that have been pursued in Uganda. After the promulgation of the 1995 Uganda Constitution, Government embarked on promoting the use of electoral democracy as a key component of good governance. Leaders are elected at various levels within a decentralised system of governance. The conducting of elections has increased the participation of citizens in the decision making within their localities. The people perceive elections as a tool for getting rid of corrupt leaders,²⁴ but also decry the buying of votes and other malpractices that has marred the electoral process at all levels. This issue is also a concern raised by the UHRC, when it notes that during the 2001 Presidential and Parliamentary elections, money played a central role in the electoral system. The UHRC 2000/1 report also notes that the violation of election laws such as bribery and the abuse of office was common in the elections.²⁵ Similar concerns have also been raised by the civil society electoral monitoring body - NEMGROUP-U, which noted a range of malpractices in the election systems, which were largely related to the poor enforcement of electoral laws and undue influence by some key institutions of government.²⁶ Related concerns have been raised by another study which notes that the degree of trust in the National Electoral Commission was at 76% in 2000 and dropped alarmingly in two years with nearly the same number of persons 74% not trusting the electoral system in 2002.²⁷ In response to the loss of confidence in the Commission, in 2002, changes were made in its leadership. There have also been various court cases on the election malpractice, which still point to the weakness in the conduct of the election. But the fact that most of those aggrieved sought legal redress rather than extra judicial means to voice their concerns points to the confidence in the courts as mediating institutions of the state.

The regularity of elections, the participation of people in electing their leaders and attempts to create an impartial electoral system are all efforts in the right direction that need to be consolidated as critical to the democratic functioning of the state.

The UHRC has also made recommendations to Parliament that need to be taken forward. These include;

• a) Legally empowering the Electoral Commission to enforce laws and rules including prosecution of those who violate the election laws and regulations,

• b) Introducing massive civic education and

• c) Devising a system to monitor expenditures of candidates during the electoral process.

In the PPA2, people made recommendations on how to improve the governance system. The recommendations centred around the need to provide forums for interaction between elected leaders and their communities and providing information that can be used to hold leaders accountable to their constituencies.

2.5.2 Parliamentary Strategic Investment and Development Plan

In a new development, the Parliament has developed a Parliamentary Strategic Investment and Development Plan (PSIDP) that aims at providing the policy and development framework to enhance its capacity to exercise its Constitutional mandate and increase its contributions to national development. The PSIDP stipulates the vision of Parliament to be “an effective and independent Parliament that protects and promotes democratic governance, accountability and sustainable development.”

The plan identifies democracy, development, accountability and institutional relations as the four strategic objectives to guide its role in national development. Parliament’s broad objectives under each of the above four strategic objectives include:

• i) Democracy: Achievement of national unity through peace-building; sustenance of inclusive representation; and respect, protection and promotion of human rights.

• ii) Development: Facilitation of citizens’ ownership of national strategies

• iii) Accountability: Promotion of transparent allocation and utilisation of public resources

• iv) Institutional Relations: Strengthening Parliament as an institution as well as stakeholder partnerships

2.5.3 Constitutional Review Commission

As part of the process of deepening the democratisation process, a Constitutional Review Commission (CRC) was set up in 2001. The CRC was put in place following indications for the desire to review parts of the 1995 Constitution, to bring it in line with the changing social and political aspirations of the people.

The CRC, Terms of Reference stipulate 20 different elements that it is supposed to fulfil. These fall under the themes; civil and political rights, socio-economic rights, relationships between different arms of government, democracy and good governance and enforcement and/or implementation of the Constitution. The CRC has proceeded to fulfil its task by adopting a methodology that ensures; popular participation of all people of Uganda, listening to all people’s views, careful and accurate analysis of their views, an analysis of society to discover people’s perceptions of the Constitution, making a comparative study of other Constitutional Reviews in both developing and developed countries, claming fears and concerns of Ugandans on the genuineness of launching the CRC, building the confidence of Ugandans in the exercise and drawing lessons from the methodology used in the constitutional making process in 1995.

By February 2003 the CRC had held public hearings in 44 districts of Uganda and had planned to cover the rest by the end of March 2003. The CRC had also held several plenary sessions in Kampala where views of various stakeholders were received.

2.5.4 Partnership with CSOs

2.7.1 Strengthening institutional frameworks that support public expenditure management.

2.7.2 Management Reform

As part of the Public Service Reform Programme, a new Performance Appraisal Scheme that is based on the assessment of well defined and resource specific targets and outputs, has been introduced in the Public Service. The scheme is intended to bring about a substantial change in the culture and practice of the previous scheme which was characterised by inability to measure individual performance objectively and limited input from the appraise.

In line with this development, MoPS has produced guidelines for managers and staff in the public service as well as a manual on time management for better service delivery. A number of civil servants have already been sensitised on the new staff appraisal system.

2.7.3 Pay Reform

Following Cabinet’s approval of the pay reform policy in April 2002, Government has carried forward the implementation of its pay increase strategy within a hard budget constraint. The strategy aims at improving pay levels for middle to senior level professionals in the traditional public sector as well as preserving the purchasing of lower cadre staff salaries. To this end, a total of Sh. 17 and 15 billion was allocated for pay increase for middle to senior level professionals during the FY 2001/02 and 2002/03 respectively and Sh.10 billion for lower level staff in FY 2002/03. Under the budget estimates proposed to Parliament for the FY 2003/04, a total of Sh. 15 billion was earmarked for the pay increases in the middle to senior level staff.

2.7.4 Efficient Delivery of Public Services:

Ensuring efficiency in the delivery of Public services is pivotal in enhancing the realisation of Government’s objective of improving the quality of life of the population. It is in this vein that Government is keen to ensure that there is optimal resources use by Government Programmes.

Community services (education, health and water and sanitation) account for the highest proportion of public resources devoted to the provision of public services as was demonstrated by table 1.5 of the first chapter. A number of recent findings have however raised concern over the value for money being realised from increased allocation of resources to the social service sectors. These concerns culminated in the commissioning of a number of tracking studies in the water and sanitation and health sectors as well as continuation of others in the education sector. Supplementary surveys have also been independently undertaken by some keen Civil Society Organisations, in particular Uganda Debt Network.

A 2002 joint GoU/Donor review report of the water and sanitation sector notes that the projectorised funding and implementation approach practised by the sector has led to inefficient use of resources and does not provide integrated and holistic support to the districts and communities. In addition, there is inadequate co-ordination among all actors in the sector, including NGOs, which also limits efficient utilisation of resources through adoption of inconsistent implementation approaches. Operation and maintenance is noted for being the weakest in the provision of sustainable water and sanitation facilities with the crux of the problem stemming from the fact that there is currently no integral operation and maintenance plan for ensuring sustainability of completed facilities. To address this problem, a community based operations and maintenance plan has been set up, which will hold communities responsible for the operations and maintenance costs of installed facilities and where the community cannot cover fully the anticipated costs, there must be identification of who will. While this approach may be a solution to the longevity question of water and sanitation facilities, it raises afresh the question of whether the approach will not disproportionately burden the poor in communities concerned.

In the education sector, there is recognition that the sustained substantial budgetary allocations to the sector are being accompanied by progress in expenditure management in support of the UPE programme. This progress is reflected in form of the major reduction in the price of basic learning materials; completion of outstanding Government accounts; continuation of the drive to audit them and continued teacher recruitment³⁸. Concern has however been expressed with respect to the proper use of SFG funds. A report by UDN indicates that the amount of money lost under the SFG grant is frustrating the very objectives Government had in setting up the grant. Shoddy construction of classrooms has particularly been cited as an area where a lot of money has been lost. The survey found out that in some cases, shoddy work was carried out with the collusion of some high-ranking district officials³⁹. The public’s perception on the quality of school building and other related facilities as captured by the 2002 National Integrity Survey appears to concur with above findings as shown in table 2.6 below. By and large however, there is great appreciation by the general public of the improvements in the sector as a whole over the last four years as depicted by the same table.

Table 2.6

Assessment of Quality of Education

Source: Second National Integrity Survey (March 2002)

Table 2.6

Assessment of Quality of Education

Attribute	Satisfied with Present Quality (%)	Satisfied Improvement in Past years (%)
School Buildings	57	80
School Facilities	47	74
Teaching	44	69

Source: Second National Integrity Survey (March 2002)

View Table

Table 2.6

Assessment of Quality of Education

Attribute	Satisfied with Present Quality (%)	Satisfied Improvement in Past years (%)
School Buildings	57	80
School Facilities	47	74
Teaching	44	69

Source: Second National Integrity Survey (March 2002)

In the health sector, study findings conclude that PHC conditional grants have already impacted positively on Government efforts to ensure a Minimum Quality of Health Care for all Ugandans through facilitation of nationwide health infrastructure development and service delivery especially in rural areas with nearly, 100% of the PHC funds that reach the district level being utilised for the purpose intended⁴⁰. This was attributed to the clear guidelines provided by MFPED, MoH, and the Local Government regulations as well as the team efforts of the various players involved in the PHC funds process. This performance is clearly reflected by the public’s perception of the progress in the health sector as shown in the table 2.7. The PHC study, however, also revealed long delays in fund requisition and accountability submission due to a number of factors namely; the learning curve associated with a new and complex process, inadequate technical and administrative capacity at requesting level, poor coordination at approval level and ‘knock-on’ effects of late submission of previous accountability reports by lower level entities in the PHC funds flow cycle. The effects of the above shortcomings are noted to manifest in form of stock outs of key health care inputs an issue that is discussed in chapter 4.

Table 2.7

Household Perceptions of Improvements in Health Service Delivery

(Pecentage)

Source: Second National Integrity Survey (March 2002)

Table 2.7

Household Perceptions of Improvements in Health Service Delivery

(Pecentage)

Improved a Lot	Improved a Bit	Not Improved	Cost Expensive	Cost Reasonable	Cost Cheap
11.5	51.2	37.3	36.6	37.1	26.6

Source: Second National Integrity Survey (March 2002)

View Table

Table 2.7

Household Perceptions of Improvements in Health Service Delivery

(Pecentage)

Improved a Lot	Improved a Bit	Not Improved	Cost Expensive	Cost Reasonable	Cost Cheap
11.5	51.2	37.3	36.6	37.1	26.6

Source: Second National Integrity Survey (March 2002)

Together, poor fund flows and drug management are reported to have led to deaths, especially where the poor cannot afford them on the market.

It is clear that Government efforts to ensure efficiency in delivery of services to the population are registering encouraging progress despite some pockets of malpractice. This points to the need for Government to maintain and further strengthen monitoring, accountability and transparency mechanism currently in place. In strengthening accountability, particular attention must be paid to ensuring accountability at the grassroots and strengthening existing partnerships with other stakeholders especially civil society.

2.7.5 Anti Corruption

Corruption negatively impacts on Government’s performance and effectiveness, and is thus a key hindrance to poverty eradication. Uganda has been ranked near the bottom among countries surveyed by Transparency International: as the 11^th most corrupt country in 1999 and 3^rd most corrupt country in 2001. Although generally corruption is said to be increasing, ratings for corruption in different institutions show that there is a decrease. According to the second Afro-barometer survey report⁴¹, police gets the worst ratings with 67% of the survey sample indicating a prevalence of corruption. Next are Government officials (47%), border officials (46%), Judges and magistrates (38%), teachers and school administrators (13%), NGO and community leaders (13%) and Religious leaders (5%). However, Afro-barometer Round 2 surveys have consistently found that actual experiences with corruption appear to be considerably less frequent than commonly assumed.

The National Service Delivery Survey (NSDS) 2000 indicated a decrease in corruption in the provision of services as indicated in table 2.8 below:

Table 2.8:

Trends in corruption in service delivery

Table 2.8:

Trends in corruption in service delivery

Service	% of Respondents
Local Council work	39.5
Local Council courts	39.3
Magistrates courts	27.1 (however 14.2% said there is an increase here.)
Health inspector	24.1
Midwife/nurse	30.5
Vaccination/immunisation	30.2
Pre-natal/post natal	25.6
Agricultural extension services	15.9
Livestock extension services	14.6
Public transport	23.9
Police work	26.8 (although a higher proportion of 32.2 felt there was an increase of corruption here)

View Table

Table 2.8:

Trends in corruption in service delivery

Service	% of Respondents
Local Council work	39.5
Local Council courts	39.3
Magistrates courts	27.1 (however 14.2% said there is an increase here.)
Health inspector	24.1
Midwife/nurse	30.5
Vaccination/immunisation	30.2
Pre-natal/post natal	25.6
Agricultural extension services	15.9
Livestock extension services	14.6
Public transport	23.9
Police work	26.8 (although a higher proportion of 32.2 felt there was an increase of corruption here)

The government has successfully undertaken efforts to address the problem of corruption for example by publishing, broadcasting and posting information in news papers on transfers of public funds to local governments and schools. Commissions of inquiry like the Ssebutinde commission on corruption in army procurement, revenue collection and the electoral process have also been instituted as explicit efforts to end corruption in Government institutions.

Government has gone ahead to strengthen the legal framework on anti-corruption. The leadership code was passed by Parliament in April 2002 and this calls for mandatory public declarations of the personal assets and liabilities for leaders and their close family members. 1,769 out of the 5,761 leaders who were served with declaration forms in October had declared their wealth by June 2002.

The IGG Bill was passed by parliament in December 2000 and it is now law after being assented by H.E the President in March 2002. The Directorate of Ethics is also spearheading a force to review the Prevention of Corruption Act (1970) and the focus is on harmonizing legislation related to anti-corruption and to strengthen the definition of corruption.

2.8.1. Medium Term Communication Strategy

A Comprehensive Medium Term Communication Strategy designed by the MFPED is in its second year of implementation. The key aim of this plan is to increase communication and empower the public to demand accountability. As a result of the strategic plan, a series of publications have been produced and disseminated and these include among others, the Citizens’ Guide to the budget process, The Budget at a Glance, and the Summary and Popular and vernacular versions of the PEAP.

The Citizens’ Guide to the Budget describes the planning process by Central Government and local governments in the preparation of the National Budget. The Budget at a Glance on the other hand provides decision makers, analysts, and other interested stakeholders with an overview of national revenue sources, transfers, and utilisation by institution. This is in addition to the existing system of having mandatory notices of monthly releases to the various sectors displayed in public places such as schools, office notice-boards and health facilities as a measure of increasing transparency and accountability. The system works well particularly in the education sector but less in other sectors.

The Summary version of the PEAP is designed to communicate more concisely the key points of the PEAP as well as the institutional and individual roles to make it work and is primarily targeted at Parliamentarians/politicians, policymakers, implementers in

Government and related institutions, district officials, NGOs and development partners. The Popular version of the PEAP on the other hand is a simplified visual-aided version of the PEAP published, so far, in English and five major local languages namely; Luganda, Ateso, Luo, Runyoro-Rutoro, Runyankole-Rukiga and Lugbara. A summary and popular version of the PMA have likewise been published.

2.8.2 Media

The media is an integral part of Government’s ICT strategy and has continued to play a growingly significant role as a dissemination channel for Government policies and programmes. This commonly takes the form of newspaper adverts and radio and television talk-show programmes as well as radio-spots on FM radio stations.

Financial information relating to disbursements is disseminated through the mass media, particularly the local newspapers with countrywide circulation. Sector ministries such as MoH continue to educate and inform the public on key issues such as HIV/AIDS, malaria prevention and family planning using the mass media.

Although little is known about the effectiveness of radio communication because no systematic audience research focusing on this has been carried out, the new wave of radio stations using local languages in the districts and the increased coverage of mobile networks has increased and improved the availability of public information. Top government officials and the President himself have frequently appeared on live talk-shows to explain government policies and programmes and to receive views and answer questions from citizens.

2.8.3 Information Technology

Government has also continued to strengthen its capacity to disseminate electronic information. A number of government institutions including MFPED, MoH, MoWLE, MoW, MoES and institutions like NARO, NAADS, PMA, Uganda AIDS Commission, have established websites providing relevant information on Government policies, programmes, activities, and reports.

2.8.4 Challenges

• Despite the existence of these initiatives, findings from PPA 2 still revealed complaints people about lack of information on GoU policies and programmes, with even less access to women. Poor women especially noted their difficulty in accessing information by radio because of over control of radios by men and the heavy workload. A number of recommendations were made like use of information boards, community involvement in implementation and monitoring of programmes and many others. However, the problem of illiterancy hampers information flow.

• Although a number of key government policies as in the PEAP and the Budget framework are understood outside government, a number of challenges still remain. The lack of assessments as to whether the information disseminated is assimilated and makes a difference in the lives of an average Ugandan and the limited flow of information to the lowest levels are major challenges.

• The Ministry of Finance commissioned a study towards the end of 2002, to assess progress made in communication efforts to improve stakeholder involvement. The findings of the study will inform the revision of the Ministry’s Medium-Term Communication Strategy to address identified concerns and consolidate the gains made.

2.9.1 The Community Mobilization Strategy

In light of the above, Government has developed a Community Mobilisation Strategy with the objective of:

• a) Enabling communities to understand government development programmes and policies;

• b) Preparing communities to embrace and implement such programmes;

• c) Empowering communities to manage and sustain these programmes.

In setting out key areas of action, government intends to create an enabling environment through Community Mobilisation and Empowerment for communities to participate in their own development. Households and communities will be facilitated to attain the right attitudes, values and aspirations, enabled to participate in the planning and budgeting processes and provided with skills to use available opportunities and resources to get themselves out of poverty.

A number of programmes including the LGDP, PMA, Non-Sectoral Conditional Grant, and Farmer Empowerment Grants through National Agricultural Advisory Services are already providing discretionary resources to communities to facilitate their effort in fighting poverty. However, the successful use of these resources demands that communities are effectively mobilised to participate in community planning and budgeting processes, provided with skills to help improve productivity and helped to access resources and provide accountabilities.

Various ministries, sectors including the office of the Resident District Commissioner at the district and sub county levels have gone a long way to recruit mobilisers with the mandate of sensitising the population for socio-economic and political development. The activities of these mobilisers have hitherto remained ineffective due to lack of _ coordination. Community Mobilization and Empowerment function will ensure that an institutional framework is in place to enhance the cohesion of various efforts. A key step in ensuring that this happens is the ongoing development of a community mobilization strategy [which is currently in draft form].

2.9.2 Status of Community Mobilisation and Empowerment

The most recent socio-economic indicators show that the development gains made in the 90s have not been sustained in all sectors and at all levels. There is therefore an urgent need to transform development efforts into social and economic achievements at the community and household levels. This is in recognition of the fact that socio-economic transformation hinges on community participation and sustainability of gains achieved. Communities need to be mobilized to supplement government efforts in eradicating poverty.

Local governments have already recognized the importance of community participation in the planning and budgeting processes at all levels. Community development workers have been identified as core mobilisers and facilitators for information flow, civic education, local revenue mobilisation and gender and rights fulfilment.

To this effect, a Community Mobilization and Empowerment function has been revitalised and the position of a Community Development Worker (CDW) has been set up in the local government structure context. A Community Mobilisation Strategy has been developed to support the revitalization of the Community Development function, mainstream and integrate this function in all government programmes and to provide a policy and regulatory framework.

2.9.3 Challenges

A number of key challenges must however be overcome for the strategy to roll out and become fully institutionalised. These include the need to:

• a) Ensure that at least two trained and facilitated community development workers are recruited per Sub County;

• b) Provide coherent financing mechanisms for Community Mobilization and Empowerment activities at all levels of government;

• c) Promote multi-sectoral linkages through local government planning and ensure that Community Development Workers assume their coordination role;

• d) Ensure that communities participate in identifying their own priorities, planning and monitoring effective use of resources available at their level.

3.2.1 Poverty trends and inequality

The proportion of the population living below the poverty line declined from 56 percent in 1992 to 44 percent in 1997 and further, to 35 percent in 2000. A small component of this reduction was due to redistribution hence the observed widening inequalities between rural and urban areas and inter-regionally, with the North lagging behind the rest of the country, followed by the Eastern region. Using data on households interviewed both in 1992 and 1999. Lawson et al (2003)⁴³ find that there are a core number of households which remain in poverty (chronic poverty) and substantial number that moved back into poverty after being non-poor in 1992 (Figure 3.1).

Poverty Dynamics in Uganda 1992-1999

Citation: IMF Staff Country Reports 2003, 301; 10.5089/9781451838732.002.A001

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Poverty Dynamics in Uganda 1992-1999

Citation: IMF Staff Country Reports 2003, 301; 10.5089/9781451838732.002.A001

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Poverty Dynamics in Uganda 1992-1999

Citation: IMF Staff Country Reports 2003, 301; 10.5089/9781451838732.002.A001

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Findings also show that one third of the chronically poor (30.1 percent) and a disproportionate number of households moving into poverty are from Northern Uganda. More than 91 percent of the households that are chronically poor and those moving into poverty live in rural areas.

For the three household surveys conducted since 1999, children and young adults constitute a large share of the population (76 percent in 2002 based on preliminary results of the 2002/03 UNHS). This creates a high dependency ratio given that not all employable adults are gainfully employed. Obviously, by virtual of their number, children are heavily represented amongst the poor.

There is further evidence of the economic inequalities between the Northern and Eastern regions and the rest of the country. Levels of asset holdings, a key determinant of poverty, are much lower in the North and East than elsewhere in the country. In addition, 31 percent of the households in the East as compared to 59 percent nation-wide own a bicycle and only 16 percent of the households in the North as compared to 35 percent overall live in a permanent house. Also, land rental activity, which is a factor indicative of economic growth, is significantly higher in the Central, East and West than in the North of the country.

During the 2001/2002 PPA, poverty trends were explored in 12 districts⁴⁴ of Uganda for the period from 1990. Indications are that access to social services particularly education, water and health has dramatically improved for the majority of the communities, especially since the implementation of the PEAP in 1997. However, the quality of services was noted to have deteriorated at the same time (see Chapter 4).

The productive sectors including crop, livestock, agro-forestry and fish farming, from which the majority of rural households derive the bulk of their income, were reported by poor people to be performing poorly thus leading to low household incomes. Poor performance was attributed to low production and yields, poor prices, inadequate incentives to expand production, lack of markets, environmental degradation and insecurity and human displacement in Northern Uganda. The lack of markets is further discussed in section 3.3.2 while the key message from the Environment and Nature Resource, (ENR) sector is that the quality of environment is declining (see 3.3.1).

The key factors identified in PPA2 as leading people into and out of poverty are shown in Table 3.1. Alcoholism stands out as the number one cause of movement into poverty as well as polygamy and insecurity. On the other hand, working hard in all types of jobs explains movement out of poverty.

Table 3.1:

Priority factors responsible for moving people into and out of poverty

Source: MFPED, 2003.

Table 3.1:

Priority factors responsible for moving people into and out of poverty

Moving into poverty		Moving out of poverty
Priority factors responsible	% of communities reporting of total45	Priority factors responsible	% of communities reporting of total
Alcoholism	42%	Working hard/gainful employment	53%
Polygamy	42%	Multiple income sources	47%
Insecurity & displacement	42%	Access to land, property	47%
Large families	37%	Education/literacy	37%
Illness	37%	Startup capital	21%
Theft	32%	Petty trade (women)	21%
Landlessness	26%	Surplus production and good prices	21%
High/unfair taxes	21%

Source: MFPED, 2003.

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Table 3.1:

Priority factors responsible for moving people into and out of poverty

Moving into poverty		Moving out of poverty
Priority factors responsible	% of communities reporting of total45	Priority factors responsible	% of communities reporting of total
Alcoholism	42%	Working hard/gainful employment	53%
Polygamy	42%	Multiple income sources	47%
Insecurity & displacement	42%	Access to land, property	47%
Large families	37%	Education/literacy	37%
Illness	37%	Startup capital	21%
Theft	32%	Petty trade (women)	21%
Landlessness	26%	Surplus production and good prices	21%
High/unfair taxes	21%

Source: MFPED, 2003.

3.2.2 Determinants of Poverty Trends

Using the UNHS 1992 and 2000 panel data, four key determinants of household consumption growth were identified namely: asset ownership, electricity, health and civil strife (PSR, 2001). By increasing asset ownership, improving access to public services such as health care and infrastructure as well as avoiding civil strife, households can increase their ability to raise their incomes and reduce the risk of falling into poverty. A review of the performance of these and other indicators during 2000-2002 may provide an indication about the poverty trends since the 2001, Poverty Status Report (PSR).

3.2.3 Employment

The most sure way to ensure increase of incomes, is through productive employment. Most Ugandans are self-employed in agriculture and other non-farm sector activities. As incomes rise and investment occurs, there will be more opportunities for people to enter formal employment.

3.2.4 Food Security and Nutrition

Uganda is generally rated as a having surplus food but there are signs of malnutrition especially among children in some parts of the country. Some key nutritional indicators are summarized in Table 3.2. suggest that acute malnutrition (wasting) rates in Uganda have declined since 1995, while chronic malnutrition (stunting) rates have increased. Causes of this include inadequate food intake, ignorance, poverty, taboos and the high prevalence of HIV/AIDS. In the last few years, Uganda has witnessed an increase in the incidence of diet-related, chronic, non-communicable diseases such as hypertension, obesity, diabetes and heart problems.

Table 3.2:

Key nutrition-related indicators for Uganda

Source: Report of the Nutrition Core Group 1999/2000; National Food and Nutrition Policy 2000-2003 Final Draft; UDHS 1995 and 2001.

Table 3.2:

Key nutrition-related indicators for Uganda

Indicator	Percentage affected
	1995	2001
Wasting among children under 548	6%	4.0%
Stunting among children under 5	36%	39.0%
Underweight children under 5	27%	23.0%
Vitamin A deficiency among children	-	28.0%
Anaemia in children under 5	-	64.0%
Anemia in pregnant women	-	41.2%
Anemia in non-pregnant women	-	26.2%

Source: Report of the Nutrition Core Group 1999/2000; National Food and Nutrition Policy 2000-2003 Final Draft; UDHS 1995 and 2001.

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Table 3.2:

Key nutrition-related indicators for Uganda

Indicator	Percentage affected
	1995	2001
Wasting among children under 548	6%	4.0%
Stunting among children under 5	36%	39.0%
Underweight children under 5	27%	23.0%
Vitamin A deficiency among children	-	28.0%
Anaemia in children under 5	-	64.0%
Anemia in pregnant women	-	41.2%
Anemia in non-pregnant women	-	26.2%

Source: Report of the Nutrition Core Group 1999/2000; National Food and Nutrition Policy 2000-2003 Final Draft; UDHS 1995 and 2001.