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Why middle-income status doesn’t mean wealth for you

Ugandans are yearning for a better life, but the government's much-touted middle-income status won't  automatically hand down wealth to everyone, writes ALON MWESIGWA.

At a political rally in Katwe near Kampala, Mable Mugisha looks on thoughtfully as a local minister makes a case for the removal of age limits for presidential candidates from the Constitution.

“Uganda will be middle-income soon,” the politician declared amid cheers from the crowd. “It means every Ugandan will earn more money every year than now,” she added without further explanation.

In the run-up to the 2016 elections, middle-income status became a key highlight of the ruling party’s election manifesto.

“If that thing called middle income comes, we’ll have survived poverty,” said Mugisha, who runs a restaurant in a makeshift structure in Katwe, off Entebbe highway.

But what does it mean? And is it true that everyone will be better off? What has been the experience of other African countries that have achieved this status?

A roadside food market in Busega

A country reaches the middle-income status when each of its citizens is assumed to earn at least $1006 (Shs 3.7m) per year.

This is called Gross National Income per capita – calculated by getting the total value of the country’s wealth divided by the population. Uganda’s total wealth (GDP) was $25.5bn in 2016, according to the World Bank, with every Ugandan assumed to earn $615.31 (Shs 2m) per year.

This means if the country is to achieve the much-revered status, it must double its current earnings by 2020 to about $50bn.

According to the National Development Plan II 2015/16 – 2019/20, to achieve middle-income status, Uganda is expected to grow by at least 6.3 per cent annually from 2015-2020. In the last four years, the country has grown at an annual average of 4.5 per cent.

Keith Muhakanizi, the secretary to the Treasury, has openly said Uganda would not achieve this status and has blamed population explosion.

“I’ve told Ugandans to produce fewer children and they don’t listen,” Muhakanizi recently told reporters.

MORE WEALTH?

Yet even if Uganda were to climb into middle-income status, it would not guarantee wealth for everyone, although, according to Dr Paul Lakuma, a senior research fellow at Economic Policy Research Centre (EPRC), it may mean the country has more resources to deal with its needs.

“Uganda should not chase headlines of middle-income status. It should work to see many people are lifted out of poverty,” he said.

As a country grows, inequality tends to increase, with the rich becoming richer. Most African countries that have achieved middle-income status are stuck at this level, with the huge part of their populations remaining poor while a few enjoy the benefits of growth.

Kenya, with the per capita income of $1,400, has 42 per cent of its population living below the poverty line.

Traffic on a road in Kenya. The country achieved middle income status but still has 42% of its population below the poverty line

Gabon, the fifth largest oil producer on the continent, with per capita income of $7,000, has a third of its 1.9 million population living below the poverty line and with some of the worst human development indicators. Gabon gets its wealth from oil, timber, gold, and manganese.

The same story can be told of Equatorial Guinea, whose per capita income is at $8,333 but with about 60 per cent of the people below the UN poverty line.

Equatorial Guinea and Gabon’s wealth reduced with the drop in oil prices. Nobel Prize winner Joseph Stiglitz has explained why for instance countries in East Asia have tended to have growth that has lifted millions out of poverty while that of Africa has failed.

He said these countries re-invested initial benefits of growth into land reform to increase rural productivity, income, and savings; universal education to provide greater equality; and industrial policies that distributed income more equally through high and increasing wages and limited the price increases of commodities.

Dr Enock Twinoburyo, an economist, said even if Uganda were to reach that threshold by 2020, where it would be classified as a lower middle-income country, nothing would have changed fundamentally.  

“The structure of Uganda’s economy is not that of a proper middle-income country, such as Brazil, Argentina, China and Turkey. In these countries the economy is dominated by modern firms, employing lots of people and using modern equipment, not by household enterprises of subsistence farmers and petty traders as in Uganda,” Twinoburyo said.

“It will take decades to transform Uganda’s economy into one like that of China or Brazil.”

Bank of Uganda deputy governor Dr Louis Kasekende echoes similar views.

“One of the weaknesses of the Ugandan economy is that the modern business sector still comprises a relatively small share of it – just five per cent of GDP,” Kasekende told a bankers’ dinner recently. “If we are to transform our economy into middle-income, we must expand the size of the modern business sector many times [where people can earn decent wages].”

Twinoburyo said: “Whereas countries such as Nigeria, Ghana, Angola and Zambia have attained middle-income status, their poverty levels are still alarming.”  “Middle income based on per capita income alone should not be an end in itself.”

For people like Mugisha, Uganda must invest in land reforms, quality education, health services, and manufacturing sector to create well-paying jobs, otherwise, middle-income status will remain another empty rhyme.

Table showing country wealth and poverty levels

Country

GDP ($), 2016

GDP per capita

Level of poverty as % of population

Kenya

70.3bn

$1,455

42%

Equatorial Guinea

10.18bn

$8,333 (dropped from $38,000 after oil price drop).

60%

Gabon

$14.21bn

$7,179

30%

Nigeria

$405.1bn

$ 2,177

46%

Angola

$86.3bn

$ 3,110

68%

Swaziland

$3.7bn

$ 2,775.15

63%

Zambia

$19.55bn

$1,178

40%

Botswana

$15.2bn

$6,788.04

20%

South Africa

$294.8bn

$5,273.59

55%

Ghana

$42.69bn

$1,513.46

24.2%


amwesigwa@observer.ug

Comments   

0 #1 WADADA rogers 2017-12-06 11:31
Middle income status means promoting the interests of others at the expense of the populace
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+1 #2 SSebunnya Fredrick 2017-12-06 12:05
Its an educative and informative article please thank you
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0 #3 kelem 2017-12-06 14:25
ohhhh gullibility of Ugandans never ends as many are easily deceived by cheap talk of 2020 as a promised land.

IT WONT HAPPEN!!!
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0 #4 Akot 2017-12-06 19:52
Without National Education, there is no way Africa will reduce poverty & population will continue to rise!

Africa has - 5% of educated mothers with - 4 kids, & + 90% uneducated but have + 5 kids they can't afford to feed!

Many European women have + 3 kids because it brings social money/help, while women with 1 or 2 kids get almost no help: but education is given to ALL children!

So parents from developing countries with + 3 kids do everything to get to Europe!

Africa must make Education main goal & give every so that poverty is tackled through jobs, innovation!

The key to development is Education & this must be National matter payed with tax money; free or loans!

The rich will always go for private education that must work hand in hand with government with National school programmes!
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0 #5 Akot 2017-12-06 19:59
Yet, for Uganda, without change of governance, there will never be talk of National Education nor subsidized agriculture!

So, with ever increasing population, how will Ugandans reduce pverty in a non existant economy where even universities are closing due to debts?

But of course museveni has money to bribe any one to get his age bill through & will continue destroying Uganda for ever!

How can Ugandans allow a man they gave shelter to destroy their country like this?
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0 #6 rubangakene 2017-12-06 21:13
This haji- baji about middle income status is a very difficult phenomena to implement in certain societies all over the world.

It requires a great effort both on the government side and equally the populace.

Some people do not want to embrace change even if it is the only thing separates them from death. For example, in Tanzania, Nyerere used to say, "Kuula na Usiibe"/ Eat and fill your stomach.

He didn't care about the quality of the food these people filled their groaning bellies with.

Look at the state of sanitation in Uganda towns and villages and then you know that we are regressing rather than moving forward!
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+2 #7 Lysol 2017-12-06 21:43
Middle income status various from country to country.

Uganda middle income would not be the same thing as that of the USA or Britain for example.

There is also what is known as the lower middle income status, which most of African countries above belong to.

As for Uganda, it's more of a political gimmick than the reality on the ground. We hear this almost in every campaign season from Museveni to keep himself in power. Uganda will not belong there anytime soon.
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