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.