Is rationalization a double-edged sword? Weighing up economic wisdom and bureaucratic reform

By Sebaggala Richard

 

My reflections on the possible rationalization of the Uganda Coffee Development Authority (UCDA) were prompted by two compelling but opposing views I recently heard from respected voices in Uganda’s policy sphere. The first speaker, a respected political commentor argued that the Ugandan government is both capable and conscientious, carefully assessing the impact of any reform to ensure that it aligns with the best interests of the country. By this logic, the rationalization agenda aimed at streamlining the public sector and reducing redundancies is a necessary step in Uganda’s development that we should support with confidence including the UCDA. I wondered why those who oppose the government do not give it the benefit of the doubt?

But just a few hours later, a second voice challenged this view and appealed to my understanding as an applied economics scholar. This speaker presented a cost-benefit analysis comparing the economic potential of coffee with that of Uganda’s oil sector. He explained that coffee could bring in 75 billion dollars over the next 25 years — even taking into account market uncertainties — compared to the 44 billion dollars the oil sector is expected to bring in over the same period if oil prices per barrel remains at 100 dollars. Considering the huge infrastructure investments and public spending already devoted to the oil agencies, his argument was simple but convincing: if coffee holds such promise, disbanding the UCDA under the pretext of reducing public spending could be counterproductive. He warned that moving UCDA’s functions to a larger ministry could suffocate the sector in a more cumbersome bureaucracy, which could jeopardize Uganda’s competitive advantage in the coffee sector.

These conflicting viewpoints made me wonder: is our government really conducting the thorough assessments of economic policies and reforms that it claims? And if so, how could it overlook the compelling economic argument for preserving UCDA’s independence?

It is important to recognize that the UCDA is not the only agency being reformed. The government’s proposal to merge UCDA’s functions into the Ministry of Agriculture, Animal Industry and Fisheries (MAAIF) is part of a larger rationalization agenda aimed at streamlining public agencies to reduce costs and increase efficiency. Parliament has passed laws to merge other agricultural institutions such as the Cotton Development Organization (CDO), the Dairy Development Authority (DDA) and the National Agricultural Advisory Services (NAADS) into MAAIF. Other institutions such as the Uganda Trypanosomiasis Control Council (UTCC) and the Agricultural Chemicals Board (ACB) have also been absorbed into their parent ministries.

This rationalization is widespread. By September 2024, almost 20 agencies have been rationalized. In the Ministry of Gender, Labour, and Social Development (MGLSD), for example, the National Youth Council, National Women’s Council and National Children’s Authority will be merged. Other authorities such as the Uganda Warehouse Receipts System Authority, the Uganda Free Zones Authority and the National Physical Planning Board have been merged into the Ministry of Trade and the National Planning Authority (NPA). This trend extends to various sectors, from meteorology to higher education, and shows a strategic shift towards a leaner government structure.

The UCDA's dilemma now is to find a balance between the economic impact of coffee and the cost-saving objectives of rationalization. Cost-benefit analysis, a basic requirement for economic decision-making, offers a pragmatic view here. Reducing bloated public spending is essential, but abolishing the UCDA risks diluting specialized oversight, as coffee would then fall under broader bureaucratic control within a ministry. This could stifle growth, as ministries often lack the sector-specific focus and agility of specialized agencies. Moreover, history has shown that the consolidation of specialized agencies into broader ministries often leads to bureaucratic inertia. Agencies with targeted goals, such as the UCDA, are structured to maximize sector-specific knowledge, market adaptability, and international trade engagement. Government departments, on the other hand, may not have the same level of agility and depth of focus.

One of the key questions this debate raises is whether the government’s assessments truly take into account the nuanced economic impact of the UCDA’s dissolution. Public confidence rests on the certainty that any reform will be supported by data-driven analysis, but doubts arise when economic projections, such as those for the future of coffee, are overlooked. Transparency could strengthen the government's position here. Disclosing the methodology and results of its assessments would not only clarify the rationale, but also show that Uganda’s policies take into account both immediate fiscal constraints and long-term economic benefits.

 

While rationalization can streamline governance, but a one-size-fits-all approach could miss opportunities where specialized agencies which make unique contributions to the economy are merged. If the UCDA is self-sustaining and capable of generating significant economic returns, its abolition could be counterproductive. The experience of other countries argues for a selective approach where the agencies that have proven their worth are retained and strengthened with additional resources rather than abolished.

Victor Ayeni’s Public Sector Reform in Developing Countries offers valuable insights into rationalization and highlights that while efficiency gains are possible, there are also significant risks. Success stories such as the selective reform of underperforming public enterprises in Malaysia show that targeting inefficiencies can improve governance without undermining functioning institutions. Conversely, Ayeni’s examples from Zimbabwe and Kenya illustrate the unintended consequences of losing specialized expertise and institutional knowledge, leading to impaired service delivery and economic setbacks.

For me as an applied economics scholar, I find the debates and counterarguments surrounding the UCDA’s rationalization both enriching and insightful. The UCDA has received substantial attention from politicians, academics, and the general public—a level of scrutiny that other merged institutions have not. This suggests that Ugandans are thoughtful, rational, and deeply concerned about issues that directly impact their lives and the country’s economic future. I hope that the government listens carefully to the arguments raised against dissolving UCDA, perhaps taking them into account to avoid the policy failures that have marred similar decisions in the past.

In line with Ayeni’s findings, the government’s decision to adopt a three-year transition period for the rationalization of UCDA is a wise move. Agriculture Minister Rwamirama explained, "Given the tensions surrounding UCDA's rationalization, the government has granted a three-year transition period. This will provide time for stakeholders to understand that the same government that supported UCDA aims to empower farmers to earn more." This period offers a window of certainty and flexibility for stakeholders concerned about the reform’s impact on the coffee sector. It allows time to evaluate whether the transition truly supports farmers, preserves the UCDA’s crucial functions, and provides room for adjustment or reconsideration if the intended outcomes are not met.

This phased approach, consistent with Ayeni’s principles of strategic preservation, proposes a rationalization model that focuses on efficiency without compromising specific roles that are important to Uganda’s economy.  As Uganda moves forward with rationalization, prudence and selectivity are key to striking a balance between efficiency and economic resilience. By maintaining a flexible approach that allows for adjustments based on sector-specific impact assessments, Uganda can avoid the risks of blanket rationalization. Ultimately, reforms should strengthen rather than diminish Uganda’s competitive advantages in sectors such as coffee so that they are consistent with both immediate fiscal goals and long-term economic priorities.

Pockets of Effectiveness: Why the Rationalization of Uganda's Coffee Authority Should Be Reconsidered

By Sebaggala Richard

 

As part of Uganda's ongoing efforts to streamline public institutions, the National Coffee Amendment Bill 2024 has sparked a fierce debate, particularly over the proposed dissolution of the Uganda Coffee Development Authority (UCDA). This proposed legislation raises critical questions about the timing and rationale for rationalizing institutions, especially in sectors that are central to Uganda’s economic performance. The case of UCDA provides a unique opportunity to examine the "pockets of effectiveness" within Uganda's broader quest for institutional reforms. These are public organizations that are performing exceptionally well despite the prevailing inefficiencies in the broader institutional landscape. Given UCDA’s success in supporting Uganda’s coffee industry — a sector that is critical to both the economy and the livelihoods of millionsof people — its possible dissolution deserves close scrutiny.

The concept of "pockets of effectiveness" refers to public organizations that function exceptionally well even in an environment where inefficiency is a norm. These institutions are successful because they have a clear mandate, strong leadership and operational autonomy that enable them to deliver important public goods and services, often exceeding expectations in key areas. UCDA is widely recognized as one of these rare pockets of efficiency and plays a critical role in Uganda’s coffee sector, the country’s most important export commodity. UCDA’s successes in promoting quality control, supporting farmers and expanding market access have contributed to significant growth in coffee production and export earnings, making UCDA an invaluable asset not only to the coffee industry, but also to the overall economic health of Uganda.

To understand the potential impact of disbanding the UCDA, it is important to look at its historical role in shaping the coffee industry. The roots of Ugandan coffee cultivation date back to the 19th century when coffee was introduced as a cash crop. Since then, coffee has developed into an important economic cash crop, contributing significantly to the country’s gross domestic product and providing a livelihood for millions of people. The establishment of the UCDA in 1991 was a pivotal moment for the industry to overcome challenges such as price volatility, quality control issues and inadequate support for farmers. The UCDA was tasked with overseeing production, processing and marketing, ensuring quality standards and driving research and innovation. Its establishment was not only institutional but also transformative, laying the foundation for Uganda’s growth as a competitive coffee exporter.

Over the years, UCDA’s leadership has focused on transparency, accountability and stakeholder engagement. By fostering collaboration between farmers, exporters and researchers, it has created a strong, innovation-oriented environment within the Ugandan coffee value chain. Its quality assurance programs and promotion of specialty coffee have not only improved the quality of coffee, but also increased Uganda’s competitiveness in global markets. As a result, the country's coffee production and export earnings have steadily increased, making Uganda one of Africa’s leading coffee producers.  However, the proposed dissolution of the UCDA raises critical questions about the future of the coffee sector and the potential loss of an institution that has underpinned its success. The National Coffee Amendment Bill 2024 appears to be driven by a broader agenda of institutional rationalization aimed at reducing bureaucracy and increasing efficiency. While these objectives are laudable, the risks associated with breaking up effective institutions should be carefully weighed against the potential benefits. The UCDA case illustrates the unintended consequences that can result from such restructuring, especially in sectors that are critical to national economic stability.

Rationalization, i.e. the merging and dissolving of public agencies, can actually improve the efficiency of the public sector. From an economic perspective, rationalization is often justified if it leads to cost savings, reduces redundancies or eliminates underperforming agencies. For agencies that are duplicating services or not meeting their goals, rationalization can free up resources and improve service delivery. But if an agency is high-performing and contributes significantly to economic growth, the logic of dissolving it is questionable.

At this point, the insights of Yuen Yuen Ang from her book ; How China Escaped the Poverty Trap offer important lessons. Ang (2018) argues that development is not a linear process of first fixing institutions and then growing the economy, as traditional economic thinking suggests. Instead, development is a co-evolutionary process in which local entrepreneurial activity and institutional growth occur simultaneously. Effective institutions do not have to fully emerge before economic progress occurs. Rather, local actors often use existing resources to spur growth so that economic and institutional development can unfold together.

Applying Ang’s framework to Uganda’s coffee sector, we can see that UCDA has driven both institutional and economic progress simultaneously. Rather than waiting for "perfect" institutions, Uganda has relied on UCDA to drive the coffee sector forward. This co-evolutionary approach suggests that dismantling the UCDA could disrupt the balance between institutional growth and economic expansion in this sub-sector. Ugandan policy makers should be aware that dismantling a well-functioning authority in the name of rationalization could undo the gains made in the coffee industry. Instead of dissolving UCDA, Uganda could consider nurturing such pockets of effectiveness to further strengthen the coffee sector.

Against this backdrop, Ang’s perspective challenges the notion that all institutions need to be perfected or made more efficient before they can contribute to economic progress. The UCDA is an example of an imperfect but effective institution that has adapted to local realities and played an important role in Uganda’s economic development. Its dissolution could do more harm than good and destabilize a system that has proven successful in a critical sector.

The debate over UCDA illustrates a broader lesson about rationalization. While rationalization efforts can be beneficial in certain areas, UCDA is an example of a high impact institution that has earned trust and expertise in the Ugandan coffee industry. Dismantling such an agency risks destabilizing an important economic pillar. UCDA’s specialized knowledge in managing the Ugandan coffee value chain cannot easily be replicated in a larger, more general ministry.  Moreover, UCDA’s autonomy has enabled it to avoid political interference, which has been key to its success. Incorporating UCDA into a larger bureaucracy could introduce political pressures that would compromise UCDA's effectiveness and jeopardize the future growth of the sector.

There are also significant concerns about the impact on public confidence. Farmers and industry stakeholders rely on the UCDA for technical support, advocacy and market facilitation. The dissolution of the UCDA could send a troubling signal and undermine confidence in the government’s commitment to supporting the coffee sector. Diminishing confidence could ultimately slow down productivity and investment, which would have negative consequences for Uganda’s development.

When thinking about rationalization, it is important to ask whether an organization like UCDA provides unique value that others cannot replicate. If an organization is demonstrably very effective, dissolving it would be counterproductive and could harm the people and sectors that depend on its services. UCDA’s contributions to coffee production, quality assurance and export growth make it an indispensable asset in Uganda’s agricultural landscape. While rationalization may be necessary to eliminate inefficiencies in some areas of government, it should not come at the expense of effective institutions that drive economic growth.

In conclusion, the National Coffee Amendment Bill 2024 provides an opportunity to reflect on the role of pockets of effectiveness in Uganda’s institutional landscape. Rationalization is a valuable tool for improving government performance, but it must be applied selectively and thoughtfully. In the case of UCDA, the benefits of maintaining an effective institution far outweigh the benefits of dissolving it. Uganda’s rationalization efforts should focus on underperforming agencies and not on dismantling institutions that promote growth and deliver tangible results.

Uganda’s policy makers must also consider the isomorphic constraints that influence their decisions. Pressure to adopt “best practices” in rationalization, often driven by notions of economic rationalism, can crowd out judgment and promote reforms that may not serve local priorities. Resisting these pressures would show that true progress lies in strengthening what works well in the local context, not in conforming to external neoliberal capitalistic ideals. By preserving some pockets of effectiveness, Uganda can ensure that its key economic sectors continue to thrive and contribute to the country’s prosperity.

 The deadly dance with danger: Lessons from the Fuel Tank Tragedies in Uganda

By Sebaggala Richard

Within the space of a week, two catastrophic tanker accidents occurred in Uganda and Nigeria, in which numerous people lost their lives. These events, characterized by overturned tankers being ignited while onlookers gather to siphon fuel, are indicative of a broader pattern rather than isolated incidents. This incident is reminiscent of previous tragedies in Uganda. In 2013, a similar accident in Kampala killed 31 people, and in 2001, 90 people died in eastern Uganda in almost identical circumstances. Despite the well-documented dangers associated with such actions, people continue to engage in this dangerous behavior, which raises an important question: What motivates people to engage in such life-threatening activities even though they are aware of the risks involved?

While poverty is often cited as a major factor in these decisions, it is not a sufficient explanation on its own. A critical understanding of these recurring tragedies requires research into the psychological underpinnings of risk-taking behavior, particularly the cognitive biases that drive people to make dangerous decisions.

The immediate reason for these actions often has to do with economic desperation. Many people see these accidents as an opportunity to obtain a valuable resource — fuel — that they can use or sell for their financial gain. From a rational economic standpoint, such decisions can be interpreted as an expression of desperation, as individuals are willing to jeopardize their safety for short-term monetary gain in a context characterized by great scarcity. However, eyewitness accounts reveal a more complex scenario. One witness reported that the truck driver fled the scene while cautioning people to keep a safe distance. Footage from another observer shows an urgent request for others to leave the area, indicating that people were aware of the impending danger. Despite these warnings, many people continued to siphon fuel, indicating that they were aware of the potential consequences and were not deterred. This behavior indicates that the motives for such risky behavior go beyond mere economic need. Insights from behavioral economics that explore irrational behavior and cognitive biases — mental shortcuts that can distort decision-making in high-risk contexts — provide valuable clues as to why people engage in such dangerous practices.

The Limits of Rational Perspectives

The immediate reaction to fuel siphoning incidents often focuses on the obvious: poverty creates desperation, and desperation leads people to take risks. While poverty can indeed drive desperate acts like fuel siphoning, this rational economic explanation has limitations. Banerjee (2000) study, The Two Poverties, distinguishes between "poverty as desperation" and "poverty as vulnerability," which provides deeper insights into why people engage in risky behavior even when the dangers are clear.

Poverty as desperation suggests that individuals make high-risk decisions because their economic situation leaves them with little choice. In this view, people are driven to siphon fuel because the immediate need for survival outweighs long-term safety considerations. This framework aligns with the idea of rational decision-making, where the need to secure valuable resources, such as fuel, justifies taking extreme risks. However, poverty as vulnerability focuses on the precariousness of people's lives and the constant exposure to risks that make them more likely to engage in dangerous behaviors. Vulnerability is not just about immediate desperation but also about the chronic uncertainty and lack of safety nets that prevent individuals from making safer choices. In this context, even when people are aware of the risks or receive warnings, they may still engage in risky behavior because they have become conditioned to taking chances due to the absence of viable alternatives.

 

This distinction highlights that desperation alone does not explain why people knowingly place themselves in danger. Vulnerability compounds this issue by revealing how the structural conditions of poverty limit people's capacity to make safer, long-term decisions. Therefore, while the rational perspective explains part of the behavior, it overlooks the cognitive biases and psychological factors that interact with the chronic vulnerability experienced by many, leading to repeated engagement in high-risk activities.

 

Let us now examine how cognitive biases come into play, offering a broader framework for understanding these tragedies. Cognitive biases are psychological tendencies that influence decision-making, often leading to flawed judgments, particularly in complex or stressful situations. Several key biases help explain why people continue to ignore the clear dangers of siphoning fuel:

 

Optimism Bias: This bias leads individuals to believe that they are less likely to experience negative outcomes than others. In the case of fuel siphoning, people may acknowledge the risk of fire but assume that it will not happen to them. They believe they can extract the fuel quickly enough or that previous experiences of taking risks without harm mean that they will be safe this time.

Normalcy Bias: Many people involved in these incidents have likely encountered hazardous situations before, whether through handling fuel or being exposed to other dangerous materials, without serious consequences. This experience reinforces the belief that things will continue as usual, leading them to underestimate the risk of a catastrophic explosion.

Herd Behavior: The sight of others siphoning fuel creates a powerful social dynamic. When a few individuals begin to engage in the activity, others quickly follow suit, assuming that the collective action somehow reduces individual risk. This herd mentality overrides personal caution, as people rely on the behavior of the group rather than independent risk assessment.

Temporal Discounting: This bias causes individuals to prioritize immediate rewards over future risks. In the context of poverty, where survival often depends on day-to-day gains, the short-term benefit of obtaining free fuel can eclipse the long-term danger of a fire or explosion. The immediate need for fuel or the potential to sell it for cash can blind individuals to the potential for fatal consequences.

These cognitive biases don’t only explain behavior in fuel siphoning incidents; they extend to many aspects of life in African countries, shaping decisions related to health, education, and economic opportunities. These biases, combined with economic challenges, perpetuate cycles of poverty and suffering.

 

Broader Implications

The effects of cognitive biases are not limited to fuel siphoning. These psychological tendencies influence decision-making in various areas, lead to risky behavior and contribute to major social and economic challenges. A recent example is the COVID-19 pandemic, where governments around the world, including Uganda,  struggled to convince people to take preventive measures. Despite the obvious dangers posed by the virus, many people were reluctant to take health precautions such as wearing masks and social distancing.

The difficulty in enforcing these safety measures across the board can be attributed to cognitive biases such as the optimism bias (the belief that “I won’t get sick”) and the normalcy bias (the expectation that life will go on as usual despite the warnings). This bias made it difficult for public health campaigns to convince people to change their behavior in the face of an invisible but deadly threat.

A similar pattern is evident in the context of the upcoming general elections in Uganda. In previous elections, reckless behavior has claimed many lives, especially among boda-boda riders who ride dangerously on their motorcycles during campaign rallies. This behavior, often driven by the excitement of the campaign season, reflects both herd mentality and temporal discounting. Riders are influenced by the actions of like-minded individuals and focus on the immediate thrill or potential rewards without considering the long-term risks to their safety.

Delays in emergency response to accidents, such as tanker truck explosions, exacerbate the dangers posed by risky behavior. If emergency services take too long to arrive and secure the area, people are more likely to congregate to siphon fuel, which can have deadly consequences. Quick intervention could stop this behavior and prevent loss of life. However, Uganda’s emergency response capacity remains limited, especially in densely populated areas with many fuel stations, which are effectively “time bombs” if not properly managed.

As the country continues to urbanize, the growing number of petrol stations in close proximity to residential areas and businesses increases the risk of future fire disasters. Countries such as Brazil and India, which also face similar risks, have invested heavily in faster emergency response systems, including firefighting hubs near high-risk areas and advanced training for emergency personnel. These countries also enforce strict regulations on the placement of fuel stations and ensure that emergency response teams are equipped to deal with fuel-related accidents quickly. Uganda can look to these examples to strengthen its own fire prevention and emergency response systems.

Lessons for Uganda

To prevent future fuel tanker tragedies in Uganda, a multifaceted approach is needed—one that addresses both the root causes of poverty and the cognitive biases that contribute to risky behavior. While tackling poverty requires long-term solutions, raising awareness of cognitive biases and implementing targeted interventions can more swiftly mitigate their impact.

For example, public safety campaigns must do more than just inform people about the dangers of fuel siphoning. They should also address the cognitive biases that lead to risky behavior, such as optimism bias and normalcy bias. Campaigns could employ powerful stories of past tragedies to make the risks more tangible and immediate to the public. Community-led initiatives that engage people at the local level can further enhance the effectiveness of these campaigns by building trust and making the messages more relatable.

In addition, the government must strengthen its ability to quickly secure accident sites and prevent people from accessing hazardous areas. Institutional vigilance—through faster emergency responses and the enforcement of public safety regulations—will act as a necessary deterrent to dangerous behavior. Moreover, ensuring that disaster response teams are well-trained to manage crowds and protect public safety is essential for preventing future incidents.

Conclusion

The tragic fuel tanker fires in Uganda are not merely the result of poverty; they are part of a deeper issue rooted in cognitive biases—psychological tendencies that drive people to make risky decisions in high-stakes situations. These incidents illustrate a deadly dance with danger, where individuals, despite knowing the risks, are drawn to perilous behavior due to desperation and mental shortcuts. While poverty remains a significant factor, understanding and addressing these cognitive biases is key to preventing future tragedies and improving decision-making across various aspects of life in Africa.

To move forward, Uganda must adopt a multifaceted approach that tackles both cognitive biases and poverty, strengthens public safety governance, and creates economic opportunities. By raising awareness and providing safer alternatives to risky behavior, the country can begin to break free from this dangerous cycle of poverty and tragedy. These lessons extend beyond Uganda, offering valuable insights for all African nations striving to create safer and more prosperous futures for their people.

 The Quest for Institutional Reforms in Uganda: Navigating the Quagmire of Neoliberal Capitalism

 

By Sebaggala  Richard

 

The need for institutional reform in developing countries, especially those that have long been victims of colonialism and the neoliberal economic policies imposed by former colonial rulers, has become even more urgent in light of recent research by Nobel laureates in economics. Their groundbreaking work underscores a fundamental truth: institutions matter. Sustainable development depends on well-functioning political and economic institutions to ensure long-term prosperity. In countries like Uganda, however, this path is complicated by a double legacy: the lingering effects of colonialism and decades of neoliberal reforms promoted by the International Financial Institutions (IFIs).

Neoliberalism, an economic and political ideology, emphasizes free markets, minimal government intervention, and individual economic freedom. The policies of neoliberalism promote privatization, deregulation, and reduced public spending. It is based on the belief that if markets can operate freely, they will allocate resources efficiently and promote growth. In developing countries, this ideology has been enforced through Structural Adjustment Programs (SAPs) led by the International Monetary Fund (IMF) and the World Bank, which made financial support conditional on adopting these market-based reforms.

For Uganda, this has led to a —difficult and inescapable situation—resulting from the entanglement of neoliberal capitalism and its impact on governance and economic structures. On the one hand, neoliberal policies rely on the freedom of the market and less government intervention. On the other hand, Uganda is confronted with the consequences of these reforms: weakened public institutions, increasing inequality and limited social safety nets. Instead of promoting growth, these policies have often exacerbated socio-economic problems and made it more difficult for Uganda to implement meaningful institutional reforms.

The contrast becomes even clearer when comparing the neoliberal model that has been imposed on developing countries with practices in developed countries. While pushing neoliberal reforms abroad, many developed countries maintain significant public sector involvement. Kamala Harris’ proposal to provide $25,000 for first-time homeownership in the US highlights the critical role that the public sector continues to play in addressing social needs. This raises a crucial question for Uganda and other developing countries: should they continue to follow the prescribed path of limiting public sector involvement or is it time to rethink their approach and pursue more balanced, inclusive institutional reforms that reflect the socio-economic realities they face?

The neoliberal reform package and its consequences

Uganda has often been hailed as a "star performer" of neoliberal reforms in Africa. In the late 1980s and 1990s, the Ugandan government implemented far-reaching changes that transformed the economy from a state-led to a market-oriented model. In fact, Uganda adopted one of the most comprehensive neoliberal reform packages on the continent (Harrison 2006). These reforms included the privatization of state-owned enterprises, deregulation of key sectors, liberalization of trade, and a significant reduction in the role of the public sector in the economy — all to promote what some scholars refer to as a "market society"

Neoliberalism is based on the assumption that free markets lead to efficient outcomes and that the benefits will eventually be passed on to all. In Uganda, this ideology has led to widespread privatization, the dismantling of public services, and the deregulation of many sectors, particularly agriculture. The dissolution of state marketing boards, the weakening of cooperatives, and the reduction of the government's role in the provision of important public goods such as health and education were the main features of this change.

However, the neoliberal reforms in Uganda were not limited to economic transformation; they also changed the social fabric and moral norms of the country. The neoliberal model emphasizes individualism, self-interest and the pursuit of personal gain, often at the expense of community values such as reciprocity, solidarity and mutual aid. This shift towards a market-oriented moral code that devalues traditional social norms has had a profound impact on Ugandan society.

While these reforms helped Uganda achieve a degree of macroeconomic stability in the 1990s, they also brought with them significant challenges. Critics argue that Uganda's market-based policies have contributed to new forms of inequality, entrenched corruption and weakened the ability of the public sector to deliver basic services. For example, the dissolution of cooperatives has left smallholder farmers exposed to market forces, often leading to exploitative trade practices. In addition, the erosion of state institutions has exacerbated inequality and increased the vulnerability of the poor. In the absence of robust regulatory oversight, corruption flourished, leading to a "moral restructuring" of the Ugandan economy, where individualism, profit maximization and opportunism took precedence over community welfare and ethical corporate governance.

The limits of neoliberalism and the need for institutional reform

While neoliberalism has brought Uganda some economic successes, it has also presented the country with significant social and economic challenges. Relying too much on the market’s ability to regulate itself, Uganda's reforms overlooked the crucial role of strong public institutions in addressing market failures and ensuring inclusive growth. The diminished role of the state in regulating industries, enforcing contracts and providing social safety nets has resulted in an economy that disproportionately benefits a small elite while the majority is left behind.

To move forward, Uganda’s institutional reform agenda must transcend the limitations of neoliberalism. Instead of further diminishing the role of the state, the country should prioritize strengthening public institutions to effectively regulate markets and provide essential services. As has been seen in many industrialized countries, a well-functioning state is essential for long-term development. Public investment in infrastructure, education, healthcare, and social protection programs is critical to reducing inequality and ensuring that economic growth benefits all sections of society — not just the wealthy few.

Uganda should rethink its reform strategy and draw lessons from successful economies that balance state involvement with market-led growth. A more integrated approach, where public investment complements private sector activities, could fill the gaps left by the neoliberal model. By investing in infrastructure, education, healthcare and social services, Uganda can build the human and physical capital needed for sustainable development.

In addition, strengthening the regulatory framework and revitalizing community economic structures such as cooperatives could help restore some of the moral norms and social practices that were weakened under neoliberalism. A reform agenda that recognizes the importance of both state and market-based institutions for equitable and inclusive development is essential for Uganda's future prosperity.

Conclusion: Revitalizing Uganda through balanced institutional reforms

Uganda's experience with neoliberal reforms provides crucial lessons for future institutional change. While the country has achieved some macroeconomic stability through market-led growth, it is clear that reliance on neoliberal prescriptions has left significant gaps in terms of equity, social welfare, and sustainable development. As Lodhi (2017) argued, neoliberalism has redistributed rather than generated wealth, eroded social welfare, and created conditions for political instability. To build a more resilient and inclusive economy, Uganda needs to move beyond strict neoliberalism and adopt a more balanced approach that includes both public and private sector collaboration.

 

1. Rebuilding government capacity for public services: Uganda's future depends on reinvesting in key public services such as education, health, and infrastructure. Neoliberal reforms have weakened the role of the state in these areas, particularly in education and health, leaving the most vulnerable populations without access to critical resources. Strengthening the state's capacity to deliver these services is crucial to reducing inequality and improving human capital, which are key factors for long-term development.

2. Strengthening the regulatory framework: Effective market regulation is necessary to prevent exploitation and ensure fairness. Uganda’s reforms should focus on rebuilding a regulatory framework that monitors labor rights, environmental protection, and corporate accountability. This will create a more equitable business environment where both small and large companies are held to standards that support sustainable and inclusive growth.

3. Revitalize cooperativism: The dismantling of cooperatives in the wake of neoliberalism has exposed smallholder farmers and local communities to volatile market forces. Restoring cooperative models, especially in agriculture, will create collective economic power and secure livelihoods. Cooperatives also promote social cohesion and mutual aid, which are crucial to building stronger, more resilient communities.

4. Inclusive economic planning and industrial policy: Uganda needs a strategic industrial policy that promotes sustainable growth and protects its economy from the vagaries of global markets. Rather than relying on unregulated foreign investment, the state should strategically direct its resources to sectors that can generate high levels of employment and innovation. This approach requires coordinated planning in which the state plays a central role in managing economic growth while ensuring that it is inclusive and benefits all citizens, not just a few.

5. Progressive taxation and social welfare programs: To address the growing inequality exacerbated by neoliberalism, Uganda should introduce a progressive taxation system that distributes wealth more equitably. This revenue can be used to fund robust social programs that provide a safety net for the poor, such as universal health care, unemployment benefits, and pensions. These programs are important to reduce dependence on market forces and improve the overall prosperity of the Ugandan people.

By addressing these five critical areas, Uganda can develop a reform agenda that moves away from the constraints of neoliberalism and builds a more equitable, sustainable, and resilient economy. A balanced approach — where the state plays an active role in public investment and regulation — will not only ensure that growth is inclusive but also secure a prosperous future for all Ugandans, not just the privileged few.

 

 

 Institutional Reforms Matter Now or Never for Uganda: Lessons from the Nobel Prize in Economic Sciences 

By Sebaggala Richard

The recent Nobel Prize in Economic Sciences (2024), awarded to Daron Acemoglu, Simon Johnson, and James Robinson, has brought to light a crucial truth: Institutions are why some nations prosper while others stagnate. Nobel Prizes are not awarded lightly — they reflect seminal contributions to understanding complex issues, and this particular award speaks volumes about Africa’s long-standing problem of institutional dysfunction. The laureates highlighted an important explanation for the world's wealth disparities: the political and economic systems introduced or retained by colonizers from the sixteenth century onwards. Their research has shown that these systems have led to a "reversal of fortune" in which regions that were relatively prosperous at the time of colonization are now among the poorest.

This realization is directly linked to a recent speech by President Museveni at the African Heads of State Summit. In it, he affirmed that Africa’s development problems are due to philosophical, ideological, and strategic economic mistakes made by colonial rulers in the past. According to Museveni, these mistakes, rooted in exploitative systems, continue to undermine the continent's growth.

The laureates’ research on how inclusive institutions promote economic growth while extractive institutions hinder it relates directly to the Ugandan context. Their findings underscore the urgent need for Uganda to focus on institutional reform as a foundation for long-term development. However, despite numerous attempts at reform across Africa, progress has been slow and uneven. This raises a crucial question: Why have institutional reforms in Uganda and other African countries failed to produce the desired results?

To answer this question, we need to look deeper into the historical context, particularly the lingering effects of colonialism and the narratives that continue to shape our understanding of institutions. Here, Edward Said’s Orientalism is a useful lens through which we can examine how external narratives and colonial legacies still influence our perceptions of governance and reform. Drawing on Said’s critique, it becomes clear that the lessons from this Nobel Prize breakthrough become relevant for Uganda as we rethink our approach to institutional reform, leaving behind the vestiges of colonial models and considering African-centered, context-specific solutions.

Colonial Legacy and the Limits of Past Reforms
Said's Orientalism offers valuable insights into how Africa’s institutional problems have been viewed through a distorted lens that often portrays African governance structures as inherently weak and dependent on Western models. This legacy of colonialism has resulted in Africa operating within an institutional framework designed not for inclusive governance but for the benefit of colonial powers and elites. After independence, many African states inherited these extractive institutions, and efforts to reform them were often superficial and missed the root causes of dysfunction.

This failure of reform is further complicated by what Peter P. Ekeh describes in his seminal work "Colonialism and the Two Publics in Africa" Ekeh argues that colonialism created two distinct publics in African societies: the "civic public", which is linked to the state and colonial institutions, and the "primordial public", which is rooted in traditional kinship, family and ethnic networks. The civic public sphere, inherited from the colonial administration, is often seen as a space for personal enrichment without the moral and ethical obligations that apply to the primordial public sphere. This duality has perpetuated the gap between formal government structures and the social norms that continue to shape political and economic behavior in Uganda.

Ekeh’s theory is critical to understanding why many institutional reforms in Uganda fail: they often focus only on the civil public and ignore the deep-rooted influence of the primordial public. The result is systems of government that are technically sound but lack the moral legitimacy needed to gain the trust and support of the population.

Beyond external narratives

To chart a new course, we must reject the Orientalist narrative that Africa is forever bound to its colonial past or destined to follow Western models to succeed. As the work of Acemoglu, Johnson, and Robinson shows, the success of institutional reform depends on the nature of the institutions themselves — whether they are extractive or inclusive. However, inclusivity cannot be achieved through imported solutions alone. Uganda must look to its own context, culture, and historical circumstances to reshape its institutions to be relevant and responsive to the needs of its people.

Ekeh’s idea of two publics can help us to ensure that institutional reforms reflect both the formal civic public and the informal primordial public. Reforms must bridge the gap between the state and the social fabric of Ugandan society by integrating local customs, values, and governance structures into modern institutions.

Contextualizing Institutional Reforms for Uganda
An important lesson from Why Nations Fail is that reforms must be context-specific. In Uganda, this means recognizing the diversity of governance systems in different regions, the importance of traditional leadership structures, and the influence of social norms on political and economic behavior. Rather than imposing top-down and externally-driven models, Uganda should favor reforms that are rooted in local governance practices and informed by the lived experiences of its citizens. By way of illustration, let us examine two policy reforms that need to be rethought: Decentralization and the sidelining of traditional leadership.

Uganda's 1997 decentralization policy was meant to improve service delivery and local participation, but it has often failed. Local governments have struggled with underfunding, political interference and corruption. While decentralization aimed to strengthen local governments, top-down control and resource constraints limited its effectiveness.

Traditional leadership structures, such as those in Buganda and Toro, play a crucial role in governance and social cohesion. Previous attempts to sideline these structures, such as their abolition under Milton Obote, led to instability. Even though they were reintroduced under President Museveni, their role remains largely symbolic. Recognizing the importance of traditional leadership and integrating it meaningfully into modern governance could strengthen Uganda's institutions. This approach is in line with Ekeh’s argument that reforms can only be successful if they involve the primordial public and not just the civilian public.

Breaking the Cycle of Extractive Institutions
Uganda’s extractive institutions continue to benefit a small elite at the expense of the wider population, a problem that is echoed in many post-colonial African states. The Nobel Prize in Economics awarded to Acemoglu and his colleagues underscores the urgent need to replace extractive institutions with inclusive institutions. Their research emphasizes that inclusive institutions — those that distribute power and resources equitably — are essential for promoting sustainable economic growth. Breaking the cycle of extractive institutions in Uganda requires not only formal legal changes but also tackling entrenched power dynamics. Political will and the active participation of marginalized groups in governance processes are needed.

Corruption and capture by the elite, two characteristic features of Uganda's extractive institutions, persist despite several anti-corruption reforms. The implementation of these reforms has been weak due to the concentration of power among the political and economic elites. For example, although Uganda has a legal framework, reports repeatedly show that corruption especially among high-ranking officials often goes unpunished. This points to a larger problem: The failure of anti-corruption measures is not just a matter of enforcement but is deeply rooted in social norms and cultural ties that influence behavior. In Uganda, as in many other parts of Africa, social and familial networks — rooted in ethnicity, tribe, and kinship — are embedded in governance structures, making it difficult to hold individuals accountable when they are part of one’s close social circle.

Ekeh's theory offers a valuable lens for understanding the pervasive influence of elite capture and corruption in Uganda. The dual public spheres—the civic public, tied to formal state institutions, and the primordial public, rooted in kinship, ethnicity, and community—create a complex dynamic. While the civic public is often seen as a domain for personal gain, loyalty to the primordial public can shield individuals from accountability for their actions in the civic sphere. This duality undermines efforts to promote transparency and accountability within Ugandan institutions.

To break this cycle, Uganda needs to reform its institutions in a way that aligns the moral imperatives of the primordial public with the expectations of the civic public. Structural reforms must aim to weaken the influence of "identity politics and economics" that permeate Ugandan institutions. One approach is to adopt policies that prevent nepotism and conflicts of interest. This can reduce the power of the primordial public in state affairs and ensure that civil institutions serve all citizens and not just the elites.

Conclusion
The awarding of the Nobel Prize to Acemoglu, Johnson, and Robinson underscores the crucial role of institutions in Uganda's development. Their research underscores the need for inclusive institutions that distribute power and resources equitably to promote sustainable economic growth. However, reforming these institutions presents Uganda with unique challenges that are deeply rooted in its historical, social, and cultural context.

Edward Said's Orientalism is an important warning against adopting Western models of governance without taking into account local realities. Uganda must resist the temptation to adopt one-size-fits-all reforms. Instead, a contextualized approach rooted in local governance practices, social norms, and the aspirations of the people is essential.

Ekeh's concept of "Two Publics" provides a valuable framework for understanding the complexities of institutional reform in Uganda. The persistence of corruption and capture by the elites is due to the tension between the civic and the primordial public. To break out of this cycle, Uganda needs to integrate the moral obligations of the primordial public into the civic public and foster a sense of collective responsibility that transcends personal networks and power dynamics.

In summary, the lessons from the Nobel Prize-winning research, combined with Said's critique of external narratives and Ekeh's insights into dual public systems, point to a clear path for institutional reform in Uganda. With a contextually grounded, culturally sensitive, and locally focused approach, Uganda can build the inclusive institutions necessary to realize its full potential and promote long-term, equitable growth.

 The Economic Reality of Uganda's Housing Market: Unpacking the Truth Behind Rising House Prices

By Sebaggala Richard

Uganda’s housing market is under immense strain, reflecting a broader economic crisis. A recent Daily Monitor story revealed that only three in ten Ugandans can afford to buy land, and construction materials, and pay for labor to build a house. This stark headline captures the growing reality for many Ugandans—the dream of owning a home is becoming increasingly unattainable. Rising construction costs, stagnant incomes, and high unemployment have created a difficult environment for homeownership. As housing prices continue to soar, examining the underlying factors driving this trend, its implications, and what can be done from an economic perspective and using examples from countries that have successfully navigated similar challenges is crucial.

The Ugandan government has made efforts to address this housing crisis. The 1995 Constitution guarantees the right to decent housing as part of broader social and economic objectives. The National Housing Policy of 2016 sets ambitious goals to increase housing production, improve housing quality, and promote affordability. This policy emphasizes partnerships between the government, private sector, financial institutions, cooperatives, and individuals, focusing on serviced land, infrastructure, and affordable financing.

However, despite these aspirations, the reality on the ground remains stark. The Africa Housing Finance Report 2023 estimates Uganda’s housing deficit at 2.4 million units, with 900,000 existing homes classified as substandard. The government’s target to build 200,000 units annually by 2022 was not achieved, as the private sector continues to focus on high-end projects for wealthier buyers. This disconnect between policy goals and actual implementation highlights deeper structural issues in Uganda’s housing market. Uganda’s challenges mirror those across sub-Saharan Africa, where countries like Zimbabwe, Tanzania, Kenya, and Nigeria face similar backlogs. The focus has often been on higher-income urban households, while the majority—those most in need of affordable housing—are left out.

A Critical Look at Supply vs. Demand

There is a widespread belief that the Ugandan housing crisis is due to a mismatch between supply and demand. However, this view only scratches the surface. An important factor is the segmentation of the housing market, where different groups view housing as either a commodity or an asset. Put simply, commodities are things we buy primarily to use or consume. Their value depreciates over time due to factors such as wear and tear or obsolescence. Examples of consumer durables are cars, food, and clothing. On the other hand, assets are things you buy to keep with the expectation that their value will increase over time. This happens due to factors such as market demand or scarcity. Examples of assets are real estate, stocks, and precious metals. The main difference between a commodity and an asset is the intention of the buyer: we use commodities for personal or everyday purposes, but we invest in assets in the hope that they will increase in value over time.

In Uganda, wealthier people treat housing as an asset, i.e. they built or buy houses in the expectation that their value will increase, which drives speculation and pushes up prices. In contrast, most Ugandans view home ownership as a necessity, as something that provides security and stability— much like we do with commodities. This difference in the perception and use of home ownership plays a big role in driving up prices and increasing inequality.

The housing problem in Uganda, as in many developing countries, is not just a matter of supply. Despite the government's efforts to reduce the housing deficit by building 200,000 units per year, the deficit has increased from 1.6 million to 2.4 million homes by 2023. The core problem lies in demand — people cannot afford housing, regardless of how many are built. The circular logic of addressing the housing shortage by increasing supply without considering affordability highlights a deeper truth: housing is expensive, not necessarily scarce. Building more homes will not solve the crisis if income levels stagnate.

A Skewed Housing Market

A persistent challenge in Uganda’s housing policy is the failure to segment housing demand by socio-economic groups. Like many sub-Saharan countries, policy often prioritizes the middle and upper classes, leaving out the poorest households. This mismatch contributes to widespread exclusion from the housing market. In sub-Saharan Africa, the housing affordability pyramid is skewed, with the wealthy and upper-middle class at the top and the vast majority, who are poor, left without options. Income inequality drives this phenomenon, and it is an issue Uganda must address if it hopes to make meaningful progress.

The growing gap between Uganda’s wealthy elite and the rest of the population is clearly reflected in the housing market. While a few wealthy individuals can afford to build houses at an accelerated pace, the majority remain priced out.  As resources are funneled into high-end projects, little attention is paid to affordable housing, leaving millions stuck in a cycle of renting or living in substandard conditions.

The Productivity Dilemma

The high cost of housing in Uganda poses a double challenge: rising overall costs and the need to make construction more affordable. In economics, there are two ways to reduce the price of a commodity—reduce demand by lowering wages or increase productivity. In the case of Uganda, where wages are already low, the focus should be on improving productivity. Reducing wages further would only hurt workers. Therefore, increasing efficiency in the construction sector is the best way to reduce costs and make housing more affordable.

To illustrate the importance of productivity, consider the difference between a locomotive driver hauling tons of material and someone using a handcart. Automation and machines dramatically increase efficiency. Similarly, Uganda’s construction sector, which relies on traditional, labor-intensive methods, keeps housing prices high. To reduce costs, the sector needs to adopt modern technologies and automate more processes.

To illustrate this, I observed the construction of a student center near our business school in Kristiansand, Norway, which is about the size of Cham Towers in Uganda. Despite the scale of the project, I noticed that there were less than five workers on site, and yet everything was running efficiently. I joked with my African friends that if this building was being built in Uganda, hundreds of workers would be on-site and food and tea kiosks all around. While it may seem positive that so many people are employed on a single construction site, the reality is that the low wages these workers are paid and a reliance on manual labor do not result in significant productivity gains. If Uganda’s construction sector is to become more efficient, embracing automation and reducing reliance on manual labor is essential.

Building houses is not just about putting materials together, it’s about efficiently assembling thousands of industrially-made components, like lumber, pipes, concrete, windows, and more. To make housing more affordable, the construction industry needs to become more productive in assembling these components, and the entire supply chain must become more efficient at producing and delivering the necessary materials. Simply put, there are no shortcuts when it comes to improving productivity. Cheaper prices come from increased efficiency, and in the housing sector, this means automation, energy use, and streamlining the entire supply chain.

Lessons from Other Countries

Rwanda’s public-private partnerships (PPPs) offer a useful model for Uganda. While Uganda’s PPPs have mostly focused on higher-income earners, Rwanda’s approach is more inclusive, targeting lower-income citizens and aligning housing development with their needs. By working with private developers and incentivizing affordable housing projects, Rwanda has managed to prevent runaway inflation while promoting economic development.

Costa Rica provides another valuable lesson. The country has prioritized sustainability in its housing policy, integrating green building practices and offering direct subsidies and market-rate credit. The National Housing Finance System, established in 1986, has been instrumental in improving access to housing through direct subsidies and market-rate credit, which have helped increase housing supply and access for low-income families.Despite challenges related to poverty and inequality, Costa Rica’s focus on sustainable, affordable housing has generated employment and growth opportunities. Uganda, with its plans to transition to a green economy, could adopt similar strategies to lower costs and create new economic opportunities.

Colombia has also taken measures aimed at expanding home ownership while ensuring broader economic growth. The country has introduced a demand-side housing program based on the ABC (savings, subsidy and credit) model, providing targeted subsidies to help low- and middle-income families afford a home (Gilbert, 2014). The country’s ABC model has helped expand homeownership for low- and middle-income families. More recently, Colombia has engaged its diaspora, linking remittances to housing projects. Given Uganda's large diaspora community in the US, Europe and Arab countries, Uganda could explore a similar strategy, incentivizing its large diaspora to invest in affordable housing. By linking remittances to housing projects, Uganda could create a win-win situation: Diaspora members would have a tangible way to invest in their home country, while the country would benefit from increased housing supply and economic growth. This strategy could help Uganda expand its housing market without jeopardizing investment in other important sectors and promote a more balanced and sustainable development path.

Conclusion

Uganda’s housing crisis is not just a result of rising construction costs—it reflects deeper economic issues, including income inequality, speculative investment, and cultural pressures surrounding homeownership. Housing policies across sub-Saharan Africa have often focused on the wrong targets, prioritizing the middle and upper classes while leaving the poor behind. Uganda’s current housing market risks excluding many people, leaving them “born to rent.”

To resolve this crisis, Uganda must rethink its housing strategy. Instead of focusing on high-end construction and speculative investment, the country should expand access to affordable housing while promoting productivity-driven economic growth. As the Housing Finance Yearbook 2022: Uganda Profiles outlines, there are no simple solutions. Uganda must tackle the issue from both the supply and demand sides, taking inspiration from countries like Rwanda, Costa Rica, and Colombia. Without these changes, Uganda’s housing crisis will only deepen, and more citizens will struggle to secure one of the most basic human needs: a roof over their heads.