H.E. the Vice President;

Rt. Hon. Speaker;

His Lordship the Chief Justice;

Rt. Hon. Deputy Speaker;

Her Ladyship Deputy Chief Justice

Rt. Hon. Prime Minister;

Rt. Hon. Leader of the Opposition;

Hon. Ministers;

Hon. Members of Parliament;

Members of the Diplomatic Corp

Distinguished Guests;

Ladies and Gentlemen.

Yesterday, I made a very long statement prepared by the Government Departments (Permanent Secretaries) as my State of the Nation Address, dealing with many aspects of the country.  Unfortunately, Rt. Hon. Nandala Mafabi and his group could not cope with my stamina.  At exactly page 52, they ran away from this honourable house to which voters sent them.  Our brothers and sisters, the Banyarwanda, however, say: “ntacyobitwaaye” – which translates as “it makes no difference.” Any of you that made it to this honourable Parliament should use that chance to contribute ideas in a civil, non-confrontational way.  Your ideas may help.  Do not forfeit your chance with ‘walk-outs’ because we shall continue without you.

On this occasion, I want to thank the Honourable Minister of Finance for presenting the budget.  I want also to use this time to explain in my own words the socio-economic challenges Uganda has been facing as well as the journey we have made.

In 1986, there were two sets of problems: the short-term and the strategic long-term ones.  The short-term ones were: magendo and kusamula (smuggling and commodity speculation) which caused very low tax collections this represented the informalization of the economy; inflation; shortage of goods; etc.  How did we cure these?  We cured them by applying realistic stimuli to them.  One such stimulus was to liberalize the foreign currency market.  We stopped the practice of allocating dollars cheaply from the Central Bank to people who would, then, sell the same dollars to kibanda (the black market) at their real market price.  By this policy instrument we destroyed kibanda for good.

Another distortion we resolved was the shortage of houses.  In one of the early Cabinet meetings, some of the Ministers argued for rent control because house rents were very high and extortionate.  We, however, pointed out the mistake involved with that.  You control rent, people will not rush to invest in housing.  We would, therefore, remain with a permanent shortage of houses.  The explosion you see in housing around Kampala, Entebbe, Wakiso, Mukono and even the up-country towns was due to that correct policy decision.  The same was true of transport costs.  There were very few Lorries available that time to transport food and merchandise.  Prices for transport were very high.  Some, again, were arguing for price control – a physical impossibility.  We pointed out their mistake and allowed prices to be handled by the law of supply and demand.  What was the consequence?  People invested in buying commercial vehicles such as Lorries, buses, mini-buses, taxis of other type, bodabodas, etc.  That is how we handled the transport problem.  These were some of the short-term problems we dealt with in 1986/87.  The method we used was called market-led strategy.  Market-led strategy, however, works well with efficient regulation.  If there are monopolistic tendencies, the State must come in and regulate.  That is why in some countries, they introduce some anti-monopoly laws.

Alongside the short-term problems, however, there were the strategic ones – long-term and with global impact on the whole economy.  I call these foundation problems or core physical problems.  These are the hardware of the economy.  The policy instruments, I have been talking about, are the software part of the economy.  The strategic bottlenecks are the following: infrastructure – roads, the railways, electricity, airports, telephones, ICT, piped water, schools and hospitals.  Without these, an economy cannot grow and a society cannot undergo socio-economic transformation.  Why? This is because the costs of doing business in an economy will remain high because these elements are not adequate.  In some cases, these elements of the infrastructure are totally absent.  If electricity is inadequate or absent, you cannot attract factories or hotels.  If you do not have factories, hotels, etc., you cannot achieve the following: create jobs; expand the tax-base; process your raw-materials; export value-added products; earn enough foreign exchange; accommodate tourists; etc.  These days, I like to use one measurement of kilowatt hour (kWh) per capita of electricity to show the correlation between infrastructure development and socio-economic transformation. Here-below is a sample of the countries of the world and their kWh per capita:

Table showing kWh per capita of selected countries:

Source: Internet CIA database

The full list showing kWh per capita of all countries of the world is appended hereto.

No wonder many of the African countries are still Third World Countries.

Right from the bush days, NRM believed in the industrialization of Uganda.  We said so in our Point No.5 of the NRM Ten-Point Programme.  We intended to build ‘an independent, integrated and self-sustaining economy’.  We have moved some distance on this goal.  Witness the steel mills that produce mitayimbwa (steel rods) for housing, cement, sugar, witness the production and processing of milk, production and processing of tea, etc.  We would have moved much faster had we solved, in a comprehensive manner, the problem of strategic bottlenecks enumerated above.  We could not comprehensively and sustainably solve the problem of these bottlenecks on account of depending on external funding.  However, there was also the problem of clarity of vision on the part of the civil service in Uganda as well as most of the other African countries – on this issue.  We had assumed that we would set the targets and the civil servants would work out the details, only to find that that was not the case.   Fortunately, after sometime, we discovered this gap and moved in.   Also, fortunately, Uganda is beginning to have our own financial resources even before you include the money that will come from oil.   Ever since 2006, for instance, I directed the creation of the Energy Fund.   By 2010, we had US $ 200 million in that fund.   I directed that part of that fund be lent to the developers of the Bujagali project so that it could start on time.   We lent them US$ 75 million.  They started on time and when they got their funding, they paid back our money.  We used part of that fund to connect Mpanga   mini-hydro station to the main grid at Kahuunde and also to build there a sub-station.  We used the same money to do rural electrification schemes in several districts connecting electricity to district Headquarters, productive centres like factories and trading centres as well as social services such as health centers, educational institutions and water supply points.

Over the last few years, the following district Headquarters have been electrified: Arua, Nebbi, Apac, Kiryandongo, Sembabule, Kibaale, Kanungu, Oyam, Kaberamaido, Bundibugyo, Kyenjojo, Pader, Agago, Abim, Rakai and Isingiro.  New diesel generators were installed in Moyo, Adjumani, Moroto and Kalangala to provide more reliable power, although we are on the way to connect those Districts to the main grid soon.

In addition, we have connected Tea Factories at Muzizi, Kayonza, Rugyeyo and Buhweju on top of several fish processing factories along Lake Victoria.  Using some funds from the Energy Fund, we are now implementing a large rural electrification programme which is nearing completion and the following district Headquarters are getting connected: Moroto, Napak, Lamwo, Nakapiripirit, Amudat, Dokolo, Amolatar and Alebtong.  These district Headquarters will be connected with grid electricity by the end of this year.

Within the coming financial year, projects to connect the following district headquarters to grid electricity will be started: Buliisa, Kotido, Moyo, Adjumani, Kalangala, Amuru, Bukwo, Zombo, Koboko, Nyadri, Katakwi, Amuria, Ntoroko, Kaberamaido, Kyegegwa and Kiruhura.

Once this comprehensive rural electrification programme has been implemented, there will be adequate infrastructure to form the basis for transformation in areas of production and social services.  One of the major constraints to accessing electricity which we have noted is the inability, mainly, of the rural and peri-urban dwellers, to afford connection costs.  Therefore, Government has decided to start a subsidy scheme to ease the burden of the high upfront connection costs, which will start in the coming Financial Year.

As I told you yesterday, we spent 500 billion Uganda shillings on the elections and the identity card project.  We built a new State House, completed Matugga-Semuto road, started working on Kampala-Masaka road, Busega-Mityana road, etc.   All this, we were using our own money – not grants or loans from outside.   This is very pleasing.  This means that with thorough, scientific, non-populist planning, we can start planning for the base of our economy – dealing with the foundation of the economy that we could not deal with comprehensively before on account of depending on external funding, mainly.   However, this money is not enough to deal with all the foundation issues of the economy.  We continue to appreciate the contribution of our partners from outside.  I salute the European Union (EU), for instance, for working on Mbarara-Masaka road, the World Bank for working on Gulu-Atiak and Arua-Koboko-Oraba and Japan International Cooperation Agency (JICA) for working on Atiak-Nimule road, just to mention but a few of our Development Partners.

With that realization, that you cannot build an airborne-house without a foundation, you cannot, similarly, build a modern economy without modern infrastructure (roads, electricity, railways, ICT, telephones, etc).   Let us, therefore, unemotionally, in a cool-headed manner, use the money we are beginning to generate to build this foundation – step by step.   I would like to discourage the stampede of:  ‘I want in my area, I want in my area’ because we do not have enough resources to deal with all the areas at the same time.  There are, however, investments that have got pan-Ugandan impact wherever they are executed.   If we build Karuma, 700 mega watts, that electricity will benefit Kisoro as well.  If we tarmac the road from Gulu to Nimule, the cattle-keepers in Isingiro, near the Tanzanian border, will access the Southern Sudanese market as much as the people of Gulu.   With Bujagali, Karuma, Ayago, Isimba, etc., factories can be built in Moroto, Kasese, Kabaale, etc., that will use this cheap electricity.  Those factories will provide jobs for our children, generate more taxes, produce more goods for exports that will stop the Uganda shilling depreciating and, therefore, creating problems (inflation) for the importers.

It is that disciplined, NRM ‘bushist’ thinking, that is behind this budget and the subsequent budgets.  It is bad planning to be every where and nowhere.  As I told you, sometime ago, Mao Tse Tung once said:  “It is better to cut off one finger of the enemy completely than to simply injure all his ten fingers”.  Let us concentrate our resources in those areas that will create a higher threshold for the whole economy, step by step and in their descending order.

In that spirit, the Minister provided 800 billion Uganda shillings for Karuma hydro-power project for this Financial Year.   I want you to support this.  700 mega watts at Karuma means cheap electricity for factories anywhere else in Uganda as long as the electricity wires have reached there.  On the other ‘manifesto projects’, we shall be handling them in batches step by step.

On the roads, for this Financial Year, we shall handle Moroto-Nakapiripirit; Mukono-Kyetume-Katosi-Nyenga; Mbarara-Kikaagati; Ntungamo-Kakitumba; and Hoima-Kaiso Tonya; using our own money.  Next Financial Year we shall add another batch of the ‘manifesto roads’ and so on.

On the side of Education, this Financial Year we are going to implement free education for A-level and start preparing for university student loans.  We are also going to start planning for the restocking of the areas of Acholi, Lango, Teso, etc.   In order to supplement our resources, we shall continue talking with the World Bank, ADB, EU, USA, etc., in case they are able to pick up some of our priority projects.   In that way, we may fast-track many of our projects.  If we do not get external funding, those projects will await our batch-by-batch approach, each subsequent Financial Year, already talked about above.   I am saying all this without putting into consideration our oil money.  With our oil money, the tempo will be faster.

Since 1986, although we had erratic funding, we have been able to address some of the foundation elements of the infrastructure, especially the following:

(i)                  Some tarmacking of some of the roads;

(ii)                Telephones jumped from 28,000 lines to about 13 million telephone lines;

(iii)              ICT backbone fibre-optic cable linking to the Sea-cable at Mombasa, using a Chinese Government loan;

(iv)               Piped water for most of the major towns assisted by the Development Partners;

(v)                 Extensive network of educational infrastructure for Primary, Secondary, University and some Vocational Institutions;

(vi)               A vast network of health units – up to almost all the sub-counties, constituencies, district hospitals, referral hospitals and the refurbishment of Mulago national referral hospital; and

(vii)             The Private sector has invested heavily in radio stations and TV stations.

Some work has been done on electricity but not enough.   Little work has been done on the railway.   Hence, the NRM is going to put great emphasis on electricity, roads, the railway and education in this budget.   The expenditure for the other sectors will remain at the previous years’ level.

Another strategic bottleneck that we dealt with was the issue of market access.   When you produce, somebody must buy what you produce.  The internal market of Uganda is good but we also need the regional, continental and the international markets.   The NRM has, over the last 25 years, concluded agreements that have resulted in market access for the East African market, the COMESA market, AGOA, access to the Chinese market, access to the European market, access to the Japanese market and access to the Indian market.

Regarding the short-term challenges of high food costs and high fuel costs, the Minister has announced some relief measures.  On the side of food, the harvest is about to come in and, therefore, the prices will come down.  The Minister talked about storage facilities so that all the food does not have to be sold in omweeru (kyengera) – the time of plenty.

On fuel, we are going to develop the route of Dar-es-Salaam as well as engaging the Government of Southern Sudan.  In both the long and medium term, irrigation is the answer for food and agricultural raw-materials.  We are going to use both mega and micro-irrigation schemes to immunize ourselves against drought.

On the issue of corruption, it is only the NRM that handles corruption.  In the same way we handled extra-judicial killings, by executing the soldiers that killed people, we shall handle and we have been handling corruption.   Indisciplined people, those in the habit of telling lies cannot handle corruption and should not even talk about it.

I salute all of you and thank you.