Tackling Inter-trade barriers. A paper delivered by President Yoweri Museveni at the close of Africa Now Summit, Munyonyo. March 13th, 2019
The first barrier we need to tackle is the strategic conception. How are we going to solve the issue of prosperity? We shall solve the issue of prosperity through the production and sale of goods and services. The African leaders need to know that there are two key players in a modern economy: the producer of a good or a service on the one hand and a consumer of that good or service on the other hand. If nobody buys or consumes that good or service that business will collapse.
Of course there are factors that must link the producer and the buyer ─ infrastructure such as roads, railways, harbours and ships; trade access agreements, etc. It is through the criminal and unfair triangular trade that Africa liberated Europe from poverty. The Europeans would bring glass beads, mirrors, etc., to West Africa, exchange these low value products for slaves, transport the slaves across the Ocean to the Caribbean and the USA, make them produce cotton, which then, would be taken to Europe and sold at high prices. Hence, no value would be exchanged for value (slaves) and that value would be used to generate more value.
That unfair trade, helped Europe to enter the Industrial Revolution.
With the industrial revolution, production in Europe and the USA grew. However, by 1929, the disequilibrium between that increased production and demand could no longer be contained. It caused a big collapse in the form of the depression of 1929. That is how the economist Maynard Keynes proposed that it is better to dig a hole and fill it again so as to pay the diggers so that they could have money in their pockets that would help them to go to the shops and buy the merchandise ─ i.e. to stimulate more production by helping the poor to buy what is stuck in the shops.
All this time, Africa was both building the foundation of capitalism (through the free slave labour and, later on, the production of cheap raw-materials for colonial industries) but also lubricating the wheels of the very same capitalism by providing captive markets to colonial finished products. I never saw Mercedez Benz vehicles from Germany or Peugeot cars from France until about 1963, one year after Uganda’s independence.
Before that, the car market of Uganda was dominated by British cars: Humber, Morris Minor, Austins, Bedfords, Land-rovers, etc.
In spite of all those unfair advantages, not to mention the Americans who got massive freed lands that previously belonged to the Red-Indians, the capitalist system collapsed in 1929 precisely because they had little market. Recently, in 2007/2008, there was another crush. What is the reason? Inadequate demand for some of the goods and services that, eventually, affected the Banks, etc.
If that is not illustrative enough, look at India and China, Each one of them has got a population of 1.3 billion people. Therefore, their internal market is huge right from the beginning. Nevertheless, neither of them could undergo the social-economic transformation we were talking about yesterday until they opened up, started trading with the world but also started getting investments from the world. The GDP of China in 1978 was US$ 149.54 billion. It is now US$12.24trillion. That of India in 1991 when they opened up was US$278.4billion. It is now US$2,848 trillion. If China cannot prosper alone with a population of 1.3bn people, if India cannot prosper alone with, again, a population of 1.3bn people, how can Uganda prosper with a population of only 40 million people?
Yesterday, I told you of the different paths taken by the former British colonies of North America (the USA) compared to the Spanish colonies of Central and South America. If you start with the year 1776 when the British colonies expelled George the III authority from what is the USA today, by 1945 that country had emerged as the most powerful in the world. The former Spanish colonies up to today, many of them are mired in under-development, drug wars, etc., with caravans of people travelling on foot to try and access the prosperity of the USA.
Yesterday, I told you about the unification of the 39 Kingdoms of Germany in 1871 that propelled that country to the centre of the world stage as a very powerful country. Unfortunately, that country made the mistake of trying to compete for colonies with the older imperialist countries ─ Britain, France, Holland, Spain and Portugal. That is how, 14 years after the unification, Bismarck called the infamous Berlin Congress of 1884-5 where he demanded the “fair distribution” of colonial possessions ─ meaning us and the Asians. The older imperialist countries tried to pacify Germany by offering her Tanganyika, Rwanda, Burundi, Namibia, Cameroon and Togo. However, Kaiser Willheriem and Hitler, later could not be satisfied by this.
They wanted a “bigger share of us”. Hence, the 1st and 2nd World Wars, that, fortunately, helped us to, eventually, get our freedom. Those wars so much weakened the imperialists that they no longer re-assert themselves in the colonies ─ but not for lack of trying.
The big farmers in Prussia, known as the Junkers, could not accept the continued fragmentation of the Germanic peoples. They needed a unified market among the Germanic speaking peoples. By 1936, Hitler had gone further and incorporated Austria into the German Reich.
Henri Cavour of Piedmont worked for the unification of Italy for the first time since the collapse of the Roman Empire in 450AD. He achieved this in 1860, i.e. 1,410 years after the collapse of the Roman Empire.
I am quoting all this to make one point. Failure by some of the political and intellectual classes to know that, with modern economies, you cannot guarantee the prosperity of your people if you do not work for access to big markets, either through alliances like the Asian countries of South East Asia allying themselves to the USA or integration like the EU, is the first barrier to intra-African trade. There will be no prosperity without realizing this.
Once you realize this like I did in 1963 as a student leader, you cannot rest but work for this integration so as to avoid the continued marginalization of our people or even their future re-enslavement if not worse.
Once we know this, then we must accept the free movement of goods and services by removing taxes (tariffs) and non-tariff barriers (border restrictions, road-blocks on trade routes, complicated licensing procedures, etc). It is only when the goods produced by the factories access big markets that they can make profits. Again, it is basic economics. There are fixed costs ─ a building, machinery, etc. The investor has already spent money on those. If he uses them to produce a few items because the demand is small, he may make losses. Hence, the more items that are produced through fixed assets, the better for the business. Many factories are opening up in Uganda now. Why? It is because Uganda has got alot of raw-materials of all types (agricultural, minerals, forest products, etc.); it is peaceful; other than some parasite public officials that try to get bribes from investors, the business atmosphere is very friendly with a fully convertible currency; the work force can easily learn; we now have enough electricity and we are working on making it cheaper, we are working on the issue of the lowering the transport costs; etc., etc. Uganda can, therefore, take off quickly. Therefore, the issue of market access is now becoming critical. I told you about the motor-bike tyres and tubes factory that is producing 10,000 pieces per day but Uganda only consumes 3,000 of that. The shoe factory is producing 20,000 pieces and the local market consumes only 3,000 per day. The blanket factory produces 10,000 pieces per day, but, again, only sells 3,000 pieces in Uganda. The steel factory which capacity to produce 4,000 pieces of steel per day is now producing at half the capacity (i.e. 2,000 pieces per day) because of cheaper steel imported from outside the region. Even Uganda only consumes 20%.
East Africa needs to help us in this by imposing taxes on similar products coming from outside the EAC. Therefore, the free movement of goods and services is a matter of survival for Uganda, East Africa and Africa.
In 1986, Kenya was exporting to Uganda goods worth US$200million. Uganda was only exporting to Kenya goods worth US$12million. Some of the Ugandan leaders started talking of blocking Kenyan goods. I rejected that line because it is suicidal for Africa.
Supporting one another’s prosperity by buying one another’s goods and services is the correct way. With our united market, we can, then, approach third parties such as the USA, China, India, etc., for additional market access to their markets, just like they have been selling in our markets for centuries.
Once we deal with the concept, deal with freedom of movement of goods and services, remove the tariff and non-tariff barriers, we, then remain with two barriers to deal with. These are: the free movement of people and dealing with the transport bottlenecks – the roads, the railways, the water-ways, the airlines, the internet backbone, etc. On the issue of the free movement of people, our party, the National Resistance Movement (NRM), supports the total free movement of Africans in Africa. We only need to advise on two things in this respect. All Africans that are to enjoy that facility should be biometrically registered just for the sake of security. Secondly, all governments to undertake by treaty never to use that freedom of movement of people, never to ever operate behind the back of the host countries. The freedom of movement of people should only be for the transparent activities of trade and for nothing else.
The issue of infrastructure needs little elaboration. We need the railways linking the East with the West, the South with the North. The same for the roads, the waterways where applicable etc.
May be the last, there is the issue of the quality of safety products. Those standards must be harmonized, so that people’s lives are not at risk.
The future is bright, let us act right.