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The East African : Oct 13th 2014
2 Special advertising section The EastAfrican UGANDA@52 OCTOBER 11-17, 2014 A signpost shows an artistic impression of the 600MW Karuma Hydro project in Uganda. It was among priority projects that received funding. Picture: File Mega projects to shape budget spending While funding to the works, transport and energy sectors has risen, the gains may be small R ising inf≥ast≥uctu≥e spending meant to stimulate economic g≥owth amid high ≥isks of misuse of funds, poo≥ implementation of key policy initiatives such as the national identification ca≥d p≥oject and notable gains made f≥om changes in the p≥ocu≥ement p≥ocess in the ≥oad secto≥ could shape Uganda’s budget p≥ocess. The cu≥≥ent financial yea≥ was ma≥ked by a sha≥p ≥ise in funding to the wo≥ks, t≥anspo≥t and ene≥gy secto≥s, but acco≥ding to local economists, while this may have unde≥sco≥ed gove≥nment’s desi≥es to plug the count≥y’s inf≥ast≥uctu≥e deficit and ≥evive st≥ong economic g≥owth ac≥oss majo≥ secto≥s including manufactu≥ing and t≥ade, it could yield little benefit. They say that so fa≥, the ≥e- sponse f≥om local businesses has been slow and pe≥sistent supplementa≥y budgets keep a≥ising du≥ing the implementation phase. Expenditu≥e in the wo≥ks, t≥anspo≥t and ene≥gy secto≥s is expected to spu≥ inc≥eased economic activity th≥ough HURDLES CRITICS SAY SLOW RESPONSE CYCLES AMONG LOCAL BUSINESSES TOWARDS NEW INFRASTRUCTURE FACILITIES AND THEIR BENEFITS REMAIN A HURDLE IN ACHIEVING STRONGER GROWTH MOMENTUM AFTER THE COUNTRY’S 52ND BIRTHDAY. the awa≥ding of va≥ious supply cont≥acts, bulk pu≥chases of const≥uction mate≥ials and p≥ovision of nume≥ous jobs to casual wo≥ke≥s assigned to these p≥ojects. Uganda’s economic g≥owth ≥ate fell to 4.7 pe≥ cent in the 2013/14 financial yea≥ f≥om 5.1 pe≥ cent in 2012/13, att≥ibuted to p≥essu≥e f≥om diminished expo≥ts to South Sudan and suspension of aid by seve≥al weste≥n dono≥s. P≥ivate secto≥ playe≥s a≥e optimistic about g≥owth in inf≥ast≥uctu≥e spending but ≥emain doubtful about t≥anspa≥ency in the budgeting p≥ocess. “If you a≥e doing the ≥ight thing, why avoid pa≥liamenta≥y app≥oval fo≥ supplementa≥y budgets? Looking at the ≥oads secto≥, inc≥eased competition f≥om Chinese cont≥acto≥s and g≥owing volumes of wo≥k cont≥acts have helped cut ave≥age ≥oad const≥uction costs and ≥enewed inte≥est among fo≥eign cont≥acto≥s that had p≥eviously quit Uganda. But othe≥ secto≥s a≥e still lagging behind on delive≥y indicato≥s,” said Justin Osillo, the managing pa≥tne≥ at Osillo Ce≥tified Public Accountants. Howeve≥, c≥itics say slow ≥esponse cycles among local businesses towa≥ds new inf≥ast≥uctu≥e facilities and thei≥ benefits ≥emain a hu≥dle in achieving st≥onge≥ g≥owth momentum afte≥ the count≥y’s 52nd bi≥thday. Faced with ≥elatively low ac- cess to c≥edit, high ope≥ating costs incu≥≥ed on elect≥icity and fuel plus poo≥ investment st≥ategies based on “t≥y and e≥≥o≥” thinking, established ente≥p≥ises tend to ≥eact slowly to new oppo≥tunities in the absence of gove≥nment incen- tives, expe≥ts say. As a ≥esult, seve≥al ent≥ep≥eneu≥s p≥efe≥ positioning themselves fo≥ new oppo≥tunities in the long te≥m as opposed to the sho≥t ≥un, expe≥ts say. That f≥equent tactics by Minist≥y of Finance technoc≥ats to set aside funds fo≥ supplementa≥y budgets — which has been a ≥egula≥ sou≥ce of cont≥ove≥sy between legislato≥s and the Executive — and dive≥ting some of these funds to non p≥io≥ity secto≥s late≥ could also unde≥mine benefits f≥om huge inf≥ast≥uctu≥e spending, c≥itics claim. Common items financed by supplementa≥y budgets include wages and allowances plus eme≥gency milita≥y needs. Huge expenditu≥es incu≥≥ed on the national identification ca≥d p≥oject that was cha≥acte≥ised by sho≥tage of equipment, non-payment of some sta≠ assigned to the p≥oject and long queues at ≥egist≥ation cent≥es have also ≥aised questions about gove≥nment capacity to execute c≥itical planning activities. While Ush147 billion ($54.9 million) was allocated fo≥ this p≥oject, doubts about the design of identification ca≥ds to be issued to citizens, data quality and uptake of ta≥geted pe≥sons above 16 yea≥s of age ≥eflect se≥ious weaknesses in its outcomes, pa≥ticula≥ly fo≥ law enfo≥cement agencies and financial institutions. Lack of e∞cient audit systems fo≥ t≥acking expenses incu≥≥ed in big p≥ojects ≥emains a big ba≥≥ie≥ in gene≥ating value fo≥ money f≥om la≥ge public p≥og≥ammes, obse≥ve≥s say. “The idea of investing a lot in inf≥ast≥uctu≥e p≥ojects fo≥ pu≥poses of d≥iving economic g≥owth is not ve≥y useful be- Allocations Funding to the works and transport sectors rose from Ush1.7 trillion ($634 million) in 2013/14 to Ush2.6 trillion ($970 million) in 2014/15, mainly driven by new projects such as the expansion of the Kampala Northern Bypass Highway and rehabilitation of several district roads and bridges. This allocation is equivalent cause these p≥ojects tend to delive≥ in the long te≥m befo≥e local businesses sta≥t taking advantage of these investments. Bigge≥ allocations to wo≥ks, t≥anspo≥t and ene≥gy secto≥s a≥e focused mo≥e on c≥eating ≥oom fo≥ supplementa≥y budget ≥equests othe≥ than achieving economic g≥owth ta≥gets. Benefits f≥om the national identification ca≥d p≥oject and population census appea≥ questionable due to gla≥ing weaknesses in data collection and compilation. But ≥ecent cuts in non-co≥e expenditu≥e items might be e≥ased by dive≥sion of funds to a≥eas like fuel expenses that a≥e oftenly p≥one to f≥aud,” a≥gued F≥ed Muhumuza, an economist at KPMG Uganda, an accounting and audit fi≥m. Gove≥nment technoc≥ats on the othe≥ hand, appea≥ defensive on challenges faced in ≥aising e∞ciency of gove≥nment expenditu≥e in va≥ious secto≥s. “The National Identifica- tion Ca≥d p≥oject achieved its benchma≥k ta≥gets, with 15 million people above 16 yea≥s of age ≥egiste≥ed. We have also ≥educed ove≥all expenditu≥e on non co≥e items like t≥avel f≥om 17 pe≥ cent of the budget to 17.1 per cent of the Ush15.5 trillion ($5.5 billion) budget committed for the current financial year. The energy sector received Ush1.7 trillion ($646.5 million), with a large share of the money dedicated to the construction of the 600MW Karuma hydro power project, according to Ministry of Finance data. in 2010 to a≥ound 10 pe≥ cent in the last financial yea≥,” said Kenneth Mugambe, the budget di≥ecto≥ in Uganda’s Minist≥y of Finance, Planning and Economic Development. Howeve≥, gains ≥ealised f≥om changes in ≥oad secto≥ p≥ocu≥ement appea≥ sustainable and a≥e likely to accumulate sizeable savings in implementation of la≥ge p≥ojects, economists noted. Adoption of inte≥national bid evaluation fo≥ instance, has helped ≥educe ave≥age costs of ≥oad const≥uction f≥om $1 million pe≥ kilomet≥e to ≥oughly $700,000 pe≥ kilomet≥e to date, acco≥ding to indust≥y sou≥ces. “The inte≥national bid eval- uation method has di≥ectly cut p≥ocu≥ement ≥elated costs in the ≥oads secto≥. Th≥ough use of anonymous fo≥eign evaluation fi≥ms that assess bids submitted by gove≥nment without disclosu≥e of the bidding companies’ identity, costs pegged to co≥≥uption in the tende≥ing p≥ocess have been ≥educed conside≥ably. Equally, the ent≥y of Chinese cont≥acto≥s has also b≥ought down unit costs of ≥oad const≥uction,” M≥ Muhumuza added.
Oct 6th 2014
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