The growing gap between the rich & the poor

As the rich wine and dine, the poor are left contemplating their next meal
As the rich wine and dine, the poor are left contemplating their next meal

The month of September is one of the most eventful months in this country. This September will see revellers attend the Sean Kingston concert, the goat race at Munyonyo and many album launches that are littered across the September calendar.

However, while the “rich” will be out watching goats race, the poor will be busy herding their goats. This is the discrepancy in the Ugandan society. KD talked to Prof. Augustus Nuwagaba who gave a deeper insight into the problem of the widening gap between the rich and the poor in this country.

KD: Is the gap widening between the rich and the poor?

Prof: Absolutely. There is a widening gap between the rich and the poor. This is happening against a backdrop of high economic growth estimated at 6.7 percent, which is the third highest in the world. However, the gini coefficient — the index of inequality — is currently estimated at 0.47 indicating high levels of inequality. This is what we call growth amidst exclusion. This is a dangerous scenario because people cannot yawn when they see others over- eating.

KD: What are the indicators of this increase in inequality?

Prof: As I have already said, the gini coefficient, which measures the level of inequality in an economy, was 0.43 in 2006. However, this has increased to 0.47. The higher the value of this index, the more the inequality. Secondly, chronic poverty has increased currently estimated at 9 million people from 7 million in 2006. Chronic poverty means those who do not share any hope of ever coming out of poverty.

KD: Why is this gap between the rich and the poor widening?

Prof: The main explanation is the skewed distribution of opportunity. As I have indicated, it is only a few people that are benefitting from the current economic growth. Secondly, there is a very high prevalence of corruption and poor accountability. Those who have access to public funds misappropriate them with impunity as they flout the accountability regulation. The situation has been compounded by lack of punishment of culprits of corrupt practices. The situation has made corruption a big lucrative business. Those who espouse integrity are perceived as naive, while those who “prosper” through embezzlement of public funds are referred to as heroes.

KD: How can this trend be controlled or revised?

Prof: The only solution is making corruption a high-risk venture. This can be done through instituting and implementing heavy punishment to culprits of corrupt practices. Singapore has the best public sector management and public services in the world. How did they do this? There is absolutely zero tolerance of corruption premised on ONLY one thing, and this is implementation of rules and regulations. In Uganda, we have the best policies, laws and action plans but what fails us is of course failure in implementation.

KD: Is this gap/difference reflected in individual or societal behaviour?

Prof: Because of the failure to implement laws and regulations, most people in Uganda have become apprehensive. For example, the National Integrity Survey (NIS III) conducted by the Inspectorate of General Government in 2008 clearly showed that people did not want to report corrupt people because they know it does not help. They said even if you report an individual who has openly embezzled public funds, nothing will be done to him or her. Instead, people feared retribution as they said culprits will turn against the unprotected reporter and harm him or her with the same impunity used to steal public funds in the first case.

KD: Could you explain why some people tend to spend more on luxurious/recreation/leisure activities while others don’t?

Prof: The explanation is simple. How do you spend on recreation while on an empty stomach? You see, leisure and recreation belong to what we refer to in economics as “high mass consumption” level of growth. But most of us in Uganda are still at the level of looking for basic needs namely: food, shelter and clothing. Therefore, the poor are just marginally surviving. Even if you pay for a hungry person to go for leisure, one will not. After all he does not appreciate it if his basic needs are not taken care of.

KD: What is the situation in East African states?

Prof: The economic and social infrastructures in all the five states of East Africa are almost the same. Of course, the Kenyan economy is much bigger (four times the Ugandan economy) than other economies. However, the level of corruption is equally high. Recently our President was on a state visit to Rwanda and he was able to observe a big difference between Uganda and Rwanda. He himself acknowledged that Uganda had more thieves of public funds than Rwanda. The question is what measures has he implemented to fight these thieves?

KD: Is there any common factor? If so, why does it vary?

Prof: The common factor in all the East African community is the lack of economic opportunities, high unemployment and high poverty levels. Rwanda has the highest poverty levels (60 percent) that live below US$1 per day, while Uganda has the lowest (31 percent). Others are in the middle. However, when it comes to productivity, Kenya has the highest. One Kenyan performs the task of six Ugandans, while one Tanzanian performs the task of four Ugandans.

KD: Does this trend reflect anything toward people’s attitude to work vis a vis employment opportunities?

Prof: The explanation for the above levels of productivity emanates from the incentive structure. It is not that Ugandans do not want to work. The problem is poor remuneration. For example, while a lecturer at a Kenyan university earns an equivalent of USh9 million per month, the Ugandan counterpart earns USh1.5 million. If you calculate these ratios of remuneration, the equation balances perfectly.

KD: What do you say about government’s priorities to expenditure vis a vis the citizens’ welfare?

Prof: Well, government may argue that they have their priorities but any analysis of the Ugandan budget for any financial year reveals gross irregularities. In Fiscal Year 2005/2006, the agriculture sector received 1.6 percent of the total budget. In the current FY 2011/2012, agriculture received 4.8 percent of the National Budget. This reflects gross under budgeting of a sector that is claimed to be the backbone of the economy. Secondly, the education sector has been a priority sector in FY 2010/2011 and FY 2011/2012. However, most of the funds go to formal primary and secondary education. Only a negligible population is allowed business technical vocational education and training, yet it is through technical training that we can transform the economy. There is greater marginalisation of technical schools as many people have a negative attitude to technical education. They prefer theoretical universities, which are mushrooming everywhere, but passing graduates who cannot find jobs.