Why Ugandan pundits are mistaken in their understanding of why some foreign firms have quit our market THE LAST WORD | ANDREW M. MWENDA | A couple of multinational firms have pulled out of Uganda in the last one decade. Oil giant Shell sold itself to Vivo, Barclays Bank to Absa while Kenyan supermarket giants Uchumi and Namukatt went under. Recently, Africell followed by South African supermarket chains Game and Shoprite also decided to exit. Consequently, Ugandan pundits have been trying to explain this development.
Led by Timothy Kalyegira, a man of many doomsday projections for Uganda (and Africa), some people have been claiming that this is a sign that our economy is failing. Last week, newly appointed Permanent Secretary to the Ministry of Finance, also secretary to the Treasury, Ramathan Goobi, posted on Twitter that he had formed a committee to assess the cause of these developments.
It is intriguing how a section of the Ugandan punditry and journalism look at economic issues. Economics does not study the behavior of individual firms and individual entrepreneurs. It studies the aggregate economy, focusing largely, though not entirely, on the growth of GDP. It doesn’t matter – really – which individual firm closes and which opens or who buys and sells. That is a matter for business schools, who study the economy at the micro level of the individual entrepreneur and/or the firm.
The primary policy question for Uganda’s economy therefore is not, and cannot be, which company is exiting the banking, oil, supermarket and telecommunications sector. Rather it should be the performance of these sectors at their macro level. The critical questions for economists should be: how many bank accounts are being opened, what is the total value of bank assets, deposits and profits; how many mobile phone subscribers are we adding, how many people are getting online, how many phones are being sold etc. If consumption of these items is growing, it matters less at the macro level which individual firms are failing or succeeding.
The only policy issue at a micro level would be if many Ugandan-owned firms are failing and being taken over by multinational firms. This would mean our citizens are losing control of the economy, which is increasingly getting into the hands of foreign firms. The impact of this is that an increasing share of the surplus produced would constantly be externalised as dividends by foreign firms, or through […]