By Adellah Agaba

Published: 27th July 2016

Arguments for and against minimum wage in Uganda are intriguing, forcing one to wonder if we actually need the minimum wage or if we should simply implement the already existing legal framework efficiently bridge the gaps brought out by lack of a standard minimum wage.
To understand what the proposers of minimum wage are all about, we have to break down the ingredients and meaning of minimum wage for easy absorption to all audiences.


Minimum wage can be defined as the lowest remuneration that employers can pay their workers. This is also a ceiling of which employees may not sell their labour to employers usually as a protection measure from exploitation. One can further define this as a measure of fair returns to the labour used all to cater for the welfare of workers. The first Minimum Wages Board in Uganda was set up in 1935, and the first Minimum Wage Order was implemented in 1950, with the last minimum wage adjustment being in 1984 at Shs6,000 per month. Imagine what Shs6,000 can do in this age and era!
As it stands now, remuneration for labour in most companies for most employers is determined by market forces of demand and supply. Whichever way you look at it, this is a nursery bed for exploitation of workers since no one regulates the employers on how low they can go or not go in setting up wages for their workers.


Uganda as a member of the International Labour Organisation is mandated to enforce the conventions as a requirement and hence must have a minimum wage. The state in itself has a duty to ensure that her citizens’ welfare is paramount in all spheres upholding their fundamental rights as supported by the Constitution of Uganda. However, with the latest attempt to amend, repeal and reform minimum wage legislation in Uganda, there are skeptics arguing that labour market interventions that raise wages artificially will ration jobs and displace low skilled workers increasing the level of unemployment.
They further argue that setting up a minimum wage will reduce investment and growth in the economy, increase cost of labour and running of businesses and some countries like Kenya, which have a minimum wage are not so different from Uganda in terms of their Gross Domestic Product, which when they, hold water looked at on face value. But again, what is the plight of Ugandans in this picture?


Putting emotions aside, minimum wage in Uganda is not only a necessity but a means to rectify issues of social protection and poverty in the long run.
The first deduction from the above arguments is that Uganda currently has high percentage of unemployment of over 80 per cent, which means that minimum wage is not the cause of unemployment at the moment. Talking about affecting investment, a minimum wage increases individual worker and household income, which in turn raises consumption, savings and investment. This further propels economic growth, employment and expansion of opportunities and choice call it the multiplier effect. Therefore, increased consumption expenditures increase demand for goods and services which stimulates investment, innovations and productivity in an economy.


The spirit behind minimum wage is to set a guideline to prevent payment of a wage that is below the “natural wage” or “subsistence wage.” To protect workers’ livelihoods and our economies at large. Failure to set minimum wage guidelines exposes our people to potential exploitation by unscrupulous employers/ investors and undermines economic advancement. Minimum wage should be considered for the multiplier effect opportunities it presents into an economy. We should aim to create an economy whose central purpose is to uplift, dignify and empower the workers on whose shoulders livelihoods of many other Ugandans depend.Uganda has initiated steps towards enacting the minimum wage law to provide for a legislation that will guide the determination of a minimum wage based on the different sectors of the economy.


This is a step in the right direction as minimum wage can be a stimulus for breaking the fangs of household poverty and economic advancement of a nation.

Published: 21st July 2016

 
Uganda Debt Network (UDN) through her Community Based Monitoring and Evaluation System (CBMES) approach, different strategies have been employed to build communities’ capacity to effectively carry out monitoring and benefit from Government programmes. Oversight Committees/User Committees and Community Based Monitors in different districts have been trained with an aim of enhancing local accountability and local activism for improved service delivery.
As a result, stories of change capturing impact have given UDN the morale to continue the commitment in training oversight Committee members and Community Based Monitors for a better Uganda.

1. Empowering accountability and oversight committees.

Lubira parish, Buyanga sub-county in Iganga district reported cases where water users committees for three community boreholes regularly collected money from users as contributions to maintain and sustain functionality of the boreholes without ever accounting to the beneficiaries’. This is because the service users did not have the knowledge on how to hold the Water User committee accountable.
For example the treasurers and secretaries were in the habit of sharing money collected for their personal gains as repairs of the boreholes would be referred to area politicians including the Member of Parliament for Bugweri constituency and Bumozi primary school which shared the water source with the community.
Following the joint training of accountability committees with Community Based Monitors (CBMs) who were provided information of their roles and responsibilities, the group led by Damali Nalugoda during their monitoring found out that all the boreholes were not functioning well.
On the 10th, November 2015 they organized a successful stakeholders meeting for Bumozi village borehole where she explained to community members, the guidelines for the roles of Scholl Management Committees (SMC) and Water User Committees (WUCs) and service users and another on 15th, March 2016 at Buswaga village on the issue money amounting to UGX 80,000 which had been embezzled by the Treasurer and Secretary of the WUC. Consequently the community of Bumozi resolved to disband the old committee and elected a new committee to manage the borehole and mechanisms for future repairs to be rotational by village. The 80,000 for Buswaga village that had been embezzled was recovered and borehole repaired in April 2016.
This intervention empowered community members to be vigilant on accountability and increased functionality and management of water sources has improved. It was noted that: “Calling a meeting is possible but to tell the community what is expected from them is hard because we did not know about the guidelines”- Nalugodha Mubaraka- member of the Water User Committee Bumozi village in Buyanga sub county Iganga district.
 
2. Functionality of the Parish Development Committees (PDCs).

In Kumi district, the PDCs were non-functional in a number of sub-counties. After the training of oversight sight Committees and Community Based Monitors (CBMs) in February 2016, the PDCs of Mukongoro and Atutur sub counties immediately held a meeting the district planner and CAO. The PDCs and CBMs demanded for more responsibility in the planning and budgeting processes in the district and other development activities.
As a result, PDCs from the two sub counties have taken on a more active role in quarterly Sub County and district budget, planning and review meetings. The facilitation of PDCs was included the district budget for FY 2016/17 and specifically Mukongoro sub county Local Government budget provided for 1,000,000/= for continuous mentoring of PDCs and data collection in the FY 2016/17 and 46,841,500/= for grading and maintenance of community access roads in Mukongoro sub county.

3. Installing of Power in Aparisa Primary School.


In Amuria District, after the training of Oversight committee members in February 2016, the Chairperson of Aparisa Primary School in Asamuk Sub County on realizing that it’s their responsibility to improve and develop school facilities using various means called for a PTA /SMC meeting and among others things agreed to install power in the two classroom block constructed by the district in the FY2015/16 at the cost of UGX 109m. As a result of the SMC meetings, parents were mobilized to contribute UGX 5000 and a total of UGX 970,000 was raised and used to install power at Aparisa primary school in April 2016.

4. Hospital Beds received in Kolir HC III in Bukedea District


Since August 2015, Community Based Monitors (CBMs) in collaboration with members of Health Unit Management Committee (HUMC) reported inadequate beds at Kolir HC III in Bukedea district to the District Health Officer (DHO) who promised to liaise with Ministry of Health to acquire more bed through the district dialogue. In February 2016, Kolir HCIII received four beds i.e. 1 Labour bed, 2 for the female ward and 1 for the male ward, all worth over UGX 10 million. The community based monitors followed up these developments to establish the facts at the district and the Health Centre.

5. Health Personnel wearing Uniforms while on duty.


In Kamuli district, Health Personnel used not to wear uniforms while at duty yet this is a requirement by Ministry of Health. This caused some fraudsters to extort money from patient since it was difficult to identify a health worker especially in the General ward. After the training of Oversight committee members in November 2015, Chairperson of Namwendwa HC IV called for a HUMC meeting in December 2015 after the last meeting held in 2013. The meeting was attended by the In charge of the Health Centre and HUMC members. Among the resolutions made, it was agreed that all workers should be clad in their uniforms lest they don’t report to work and this resolution was effected immediately.
UDN is proud to be apart of life changing experiences in different districts and will continue the struggle to achieve her mission of a prosperous Uganda with sustainable, equitable development and a high quality of life of people.

                                                                        Together we can make a difference.

Prepared for Global strategy meeting, Nairobi, July 2016, by Julius Kapwepwe.


Preamble and synopsis of Debt context in Uganda:

Uganda Debt Network (UDN) is an advocacy civil society organization (CSO) formed in 1996 as a result of concerns about the unsustainable level of Uganda's debt, under the global Jubilee campaign movement then. The Mission of UDN is to promote and advocate for poor and marginalized people to participate in influencing poverty focused policies, demand for their rights, and monitor service delivery to ensure prudent, accountable and transparent resource generation and utilization.

Uganda’s Debt situation is older than its independence from the colonial Britain in 1962 e.g. a) $24 million WB loan in 1955 under the broader regional railways & harbors connection in Uganda, Kenya & then Tanganyika b) $8.4 million WB loan for purposes of Owen Falls Dam electricity, eventually commissioned in 1954 (see WB reports). Under HIPC & MDRI initiatives; Uganda has previously defaulted on debt repayment in 1980s. Coming to the 1990s, Uganda was the 1st country in the world that qualified to benefit from the HIPC initiative- with forgiven debt cycles initially in 1998, then 2000 and 2004; and later the MDRI (G8- Gleneagles) window in 2005— leaving the country with a paltry public debt of about $900 million by March 2007. Before HIPC and MDRI initiatives, Uganda’s Debt: GDP stood at over 70%. Whereas Uganda has in place a Legal, Policy and Institutional framework for prudent Debt Management and the Debt Sustainability Indicators (DSAs) seem okay compared to the1990s and early 2000s situation, Civil Society remains concerned, given some of the following issues;

1)    Uganda’s level of Indebtedness- is a moving target; With varying figures depending on which source/ method for calculation (e.g. contracted versus disbursed; debt stock plus interest- real versus nominal; only current debt stock; with/ without a factor of inflation), Uganda’s gross public debt was approximately $8.81 billion by end of FY 2015/16 (i.e. June 2016) with a) External debt ($5.48b) and b) Domestic debt ($3.32b)- as per the Budget Speech for FY 2016/17 fiscal period. With official Debt: GDP estimated at 34% (GOU) and 38% (IMF) by May 2016, Debt still appears sustainable.

2)    Any economic rebasing linked to appetite for Debt? We are yet to ascertain if the appetite in some EAC States to opt to front load esp. infrastructural projects, has any link with recent GDP expansion due to rebasing. Even when we are resizing (real or perceived) our economies/ GDP- e.g. rebasing by Kenya (2014) & Uganda (2015); UDN analysis; UDN analysis gives higher % figures of Debt: GDP and indebtedness to about $13.7b (not $8.81b), whether 34% (GOU) and/ or 38% (IMF)- thus moving target. Yet the above levels exclude new lined up borrowing e.g. a) $14.2b Standard Gauge Railway b) refined products pipeline c) $400m 8th municipal Infrastructure dev’t (USMID project) d) $500m for Kampala Light Rail construction e) Fertilizer plant f) Ebb airport expansion g) $4.27b Oil refinery and h) phase three of National Transmission Backbone (ICT) Project.
 
3)    Low External loan absorption/performance; Due to  long procurement process and lack of transparency, co-funding/ counter-part funds by Government, Delays in approval by Parliament, given inadequate guidelines for approval.  How then do we smoothen investment expenditures over time, in broader view of limited absorptive capacity of Uganda’s economy- estimated at $25 billion in 2015?

4)    Rapidly growing Domestic Debt; This includes total domestic debt of UGX 1.632Bn (Treasury instruments) & (Domestic arrears) in 2003, to UGX 4.5359 trillion in June 2012, to even higher figures by Dec. 2015. With a rise of 178% (i.e. average annual growth rate of 16.6%) between June 2003 & 2011, the growth rate is simply too big and raises concerns to the Ugandan economy. Yet this excludes debt due to oil recoverable costs for private companies; Public acquired Private debt (under PP Partnerships); cost of debt servicing.

5)    Domestic debt was bigger than total domestic revenue; In FY 2015/16, total domestic debt was bigger than total domestic revenue, so for 2nd year running Uganda has had to roll-over a portion of her maturing domestic debt of about UGX 5 trillion each year, leading to UGX 7.3 trillion (or $2.1 billion) budget allocation in FY 2016/17 for both external and domestic debt i.e. 25% of the total national budget. More than 80% of annual interest payment over the last two years is to domestic markets. In some cases where we are borrowing for feasibility studies, we risk pre-determined biased positive feasibility reports.
 
6)    Poor adherence to existing debt management control systems; Orchestrated by Accounting officers (AOs). So far with no evidence of punitive sanctions to AOs who disregard policy provisions.  This is coupled with Fiscal indiscipline – reflected in escalated domestic arrears debt; also due to under -budgeting for fixed expenses (like utilities).

7)    Oil-related rapidly growing trends of borrowing (Domestic & External)- i) Just one case, between FY2013/14 and 2014/15, new external borrowing increased by 82% ii) With Debt: GDP growth from 24.2% in 2012 to 38%- IMF/ or 34% (GOU) by May 2016, is Uganda mortgaging her oil with increased borrowing (esp. for infrastructural projects, appetite to opt to front load projects)- even when oil real production is estimated for around 2022? What are the risks with spending in advance on account of future oil revenues? While Government may not borrowing on account of oil, the lenders seem to do so, esp. China through the EXIM Bank.

8)    Debt still sustainable? Whether Debt: GDP was at about 34% (GOU) or 38% (IMF) or UDN higher % figures by May 2016, that UGX 2.1 trillion out of UGX 13 trillion projected domestic revenue in FY 2016/17 has been allocated to interest payment alone, or 25% (UGX 7.3 trillion or $2.1 billion) of the budget due to debt repayment (interest & principal) , does that point to sustainable public debt?

9)    Increasing debt-related risks?-  Is Uganda increasing risks of debt restructuring (e.g. shifting the repayment burden to future generations, with bigger debt obligations? Will Uganda borrow for bail-out or ask for new debt relief- even amidst non-concessional and commercial creditors, or there will be defaulting on repayment? What is the implication on the economy, households, poverty reduction & dev’t?  Have we learnt any lessons from the Ghana-rapid borrowing since 2012 and implication on the currency or economy in general, e.g. with $1b IMF bail-out already? Broadly, East Africa’s growing debt levels to finance infrastructural projects could push regional economies into financial distress in the wake of volatile local currencies and falling export earnings.
 
Specific Recommendations

  •      A guide/tool to MPs; UDN so far has a draft tool, “Guidelines for Loan Scrutiny and Approval Process in Uganda to influence the loan contraction process” to support Members of Parliament (MPs) in assessment criteria for approval of loans.
  • Advocacy Campaigns; For responsible borrowing, including reduced Domestic debt; and broader citizens’ participation - especially the intended beneficiaries for they understand better the local context where implementation is to take place- beyond MPs.
  • Campaign against short-term borrowing for long-term investment; Else, how will Uganda pay back if the assumption is that investment will spur economic activities that generate returns (e.g. taxes, self-financing after commissioning) to sufficiently meet debt payback obligations? The burden also weighs heavily on Uganda’s dev’t Budget component (with debt servicing making up to nearly 25% of FY 2016/17, thus being the largest “sector”.
  •      Resist Eurobonds where possible; Even with the apparent rising debt, Uganda has not been to financial markets/ global market/ e.g. floating a Eurobond. Given the experiences & challenges through this debt instrument, Uganda should continue resist the modality- instead look at reduced opulence & huge consumptive spending- largely recurrent.
  •      Phased borrowing & investment; Through sequencing of planned projects, rather than Debt/ projects frontloading, given absorption challenges of a small economy.

Finally; Enhance broader North- South; and South-South linkages and corroborative advocacy actions at national, regional (e.g. EAC/COMESA, AU- UNECA) & global levels