Fighting Poverty With Cash

from All Africa

The Monitor (Kampala)

COLUMN

By James Abola
Kampala

According to the 2005/06 Uganda National Household Survey (UNHS) report produced by the Uganda Bureau of Statistics, the national percentage of people living below the poverty line declined from 38.8 percent as per the 2002/03 UNHS report to 31.1 percent in the 2005/06 UNHS report.

The absolute number of poor Ugandans according to the 2005/06 UNHS report is about 8.4 million people. That is a lot of people, to put it another way, almost one out of every three Ugandans is poor.

The government of Uganda together with its development partners have not been oblivious to the level of poverty in Uganda; as a result they developed the Poverty Eradication Action Plan (Peap) whose principle goal is to provoke social transformation by raising incomes of smallholder communities. In order to achieve that goal, the Plan for Modernisation of Agriculture (PMA) was formulated to specifically address the reasons for low productivity.

I hope the reader is not already getting bored or lost; hang on for a second because nothing that involves the input of bureaucrats is simple and straightforward. Under the PMA there is the National Agricultural Advisory Services (Naads) programme which was launched in 2001.

Naads was designed to focus on increasing access to knowledge, technologies and information for profitable agricultural production and contribute to income generation through agricultural-based enterprise development. Both donors and the government have poured billions of shillings into Naads.

The current government campaigned on the platform of "Prosperity for All" during the 2006 Presidential Elections. Come 2008 which is the third year of the five-year presidential term period and some seven years since Naads, there is little to show in terms of improved household income. It is understandable that the political leadership is beginning to demonstrate both frustration and impatience.

In mid February President Museveni was reported to have announced that Shs60 billion which was budgeted for under Naads will be disbursed as free capital for investing in high value agricultural products to 30 homesteads selected from every sub-county in Uganda.

In the second phase, the government shall inject seed capital in each sub county's Sacco, which members will borrow to invest along the same models of the pioneers who received the free capital. And in the third phase, the government will encourage and get involved in the primary processing of the produce so that the farmers receive returns. Will the President's plan work?

From the point of view of Naads, the recent pronouncement by the President must have come as a vicious kick. Well before the Shs60 billion money distribution plan, officials at Naads were already privately complaining that the poverty eradication campaign by the Vice President, Prof. Gilbert Bukenya, was destabilising their efforts to create different agricultural zones in the country and promote appropriate agricultural activities in each of the zones.

Injecting Shs60 billion into rural households will be a good thing for the economy. A group of students visiting with the legendry investor Warren Buffet asked what he thought of investing in infrastructure to stimulate the economy. This is how Warren Buffet replied "I think the best way to stimulate the economy is to give money to the poor. They will spend it. Don't give it to guys like me.

Infrastructure investment makes sense, but we haven't done it in a while and it won't do anything for the next six-12 months. Infrastructure is not big relative to GDP. We are a consumer-driven society, spending 106% of production."

Uganda is a lot less developed than the USA where Buffet lives, but one thing we have in common is our ability to consume which we top up with a good dose of corruption. By proposing to give the Naads funds directly to poor families, the Museveni cabinet could have as well got advice from Buffet.

First, bureaucrats are going to skim off a sizeable portion of the Shs60 billion, then the farmers will be very hard-pressed not to use a portion of what they get to buy mobile phones and pay off long outstanding balances of the bride price owed to impatient in laws. The result is that our economy is going to grow quite briskly in 2008 and 2009.

The next household survey will also report a significant reduction of the number of people living below the poverty line. On the question whether distributing cash to rural households is an effective antidote to the scourge of poverty, I would say the jury is still out.

Mr Abola is a business/finance consultant