“The delay of 90m will have a cost,’’ reads a tweet by Prime Minister Amama Mbabazi to the World Bank.
On the other hand, minister for Finance Maria Kiwanuka observes: “We are safe. Uganda’s economy can stand without aid though speed of development may not be as fast.”
These two top officials agree in principle and in the public domain that aid is important to Uganda. Much of donor money goes through Office of the Prime Minister; so, he is the best person to tell us the potential impact of the aid cut on the economy.
When donors withheld their aid over Kazinda saga, there was real suffering and it’s still felt today. So many projects stalled, and some kids never reported to school in time. That is how tough it can get.
There have been concerns over misuse (over Ugx 69bn used annually on new cars and Ugx 50bn on maintenance, reads a report from Uganda Development Network). The problem is not the donor, but the receiver.
What is reality on the ground?
Western Europe, Northern America and World Bank have announced intentions to review aid to Uganda. So, what would happen if they did? Recently, when some donors withheld support to Uganda over Kazinda case, the effect was indeed felt. The donors first withheld the aid, and then started implementing the projects directly. The direct impact was that some Ugandans lost jobs. Any loss of expected inflow has to negatively impact on the economy. That is a fact.
The said projects used to employ indigenous Ugandans. Not forgetting that these projects had a multiplier effect. A host of indigenous community-based NGOs, local supplies directly and indirectly benefited these projects. As result, some NGOs cut on number of employees while others closed down. How many Ugandans were employed during construction of schools, health centres, etc in northern Uganda?
‘‘For the nine months I was working for a project in northern Uganda, donors spent US one million dollars. Today, since they started implementing projects directly, they spent Ugx 500m on the same projects. Some of them are paying the money to themselves and the impact is not being felt. It is tricky. Some donors themselves are not good at managing the donor funds.’’
‘We were 50 Ugandans working with this project, but since donors withheld funding, none of us is working. Such is the impact of donor funding. I had to tell my maid to leave. I had to move into a two-roomed house since I could not afford the main house I was renting.”
We used to procure things like computers, cars office consumables, etc. All these Ugandans used to earn from donor-funded projects which are no more. The donors do not buy such things.
Price of property goes down
Donor-funded projects pay a lot of money. This money ends up in the economy. Available information indicates that since the donors withheld aid, the price of some properties is stagnant, while others have fallen. Moving around upmarket place like Ntinda, Kiwatule, Najjeera, Bweyogerere, you get to see posters, for rent or sale. But there are hardly any buyers. According to a 2013 quarterly market report, property did not sell as it usually does. The report was compiled by Knight Frank, a property management firm, and it highlights the following.
Property prices dropped; there were not that many buyers. It took longer to let houses. It was not easy to sell houses. There was very little to no demand for houses. There were also fewer discounts on houses since the people who were selling them were operating in losses.” Judy Rugasira Kyanda, the managing director of Knight Frank, was quoted in the Daily Monitor.
Late last year, newspapers were full of adverts of houses for sale by banks and moneylenders. The bottom line is when donor money is spent; money is used to support the economy.
Donor-aided projects like the modern Wandegeya market (which accommodates close to 1,200) has had a multiplier effect. The contractors who built the markets, suppliers of building materials and now the Ugandans who are currently operating in the market.
Much of government money ends in paying salaries (which are very little) and the few projects that government undertakes take ages to get ready or never get finished.Until the government is able to reduce or stop fraud and corruption, the impact of donor cuts will be felt a lot especially by the folks at the lower end of the pyramid.