By Madina Guloba, Sarah Ssewanyana, Medard Kakuru and Ibrahim Kasirye

Uganda’s household income has been growing steadily albeit very slow since 2009. Household incomes grew at an annualised growth rate of 3.1 percent (UBOS, 2009-2015 Panel Surveys). However, there have been notable fluctuations in income, with year-to-year annualised growth rates ranging from -3.6 to 8.2 percent (Figure 1). The unsteady growth in incomes was due to the significant income fluctuations experienced between 2009/10 and 2011/12 with limited consumption smoothing strategies in many Uganda households. EPRC experts unpack the possible cause of the household income fluctuations and what these mean for attaining zero poverty by 2030.

Screenshot 4.png

Notes: Averages for all survey rounds refers to real growth rate for the entire period

Source: UNPS 2009/10, 2010/11, 2011/12, 2013/14 and 2015/16.

Shocks affect household incomes especially those dependent on agriculture

Given that most Ugandan households derive their livelihood from agriculture, this makes it clear that any shocks to agriculture, directly impact a household’s incomes. Using data from the Uganda National Panel Surveys on shocks module, there were clear indications of severe shocks that households faced between these 2009/10 and 2011/12 that could have eroded the household incomes base (Table 1).

Screenshot 3

Source: UNPS 2009/10, 2010/11, 2011/12, 2013/14, 2015/16 and 2018/19.


Specifically, there were more shocks all together between 2009/10 and 2011/12 that explain the high income poverty headcount in that period (Figure 2). The high incidence of natural calamities (droughts, floods, mudslides) and occurrence of crop pests and livestock epidemics that directly impact on agricultural production in 2009/10 could have resulted into acute reduction in income, and hence increased headcount poverty in the subsequent two years. In addition, improvement in income related shocks (food prices and income) between 2011/12 and 2013/14 (Table 1) also subsequently led to a reduction in head count poverty by 2015/16 which was 17.3 percent (Figure 2).

 

Screenshot2.png

Source: UNPS 2009/10, 2010/11, 2011/12, 2013/14 and 2015/16.

 

Poverty is declining at a very slow pace to meet the SDG 1 target

Unpacking the dynamics of poverty, it is important to note that Uganda households are vulnerable to poverty with nearly 48.7 percent of the households in and out of poverty. This is marked by significant variations across regions and rural/urban divide. The households resident in the eastern and northern regions and rural areas are more likely to move in and out of poverty relative to their counterparts in other regions and urban areas. One notable observation is the strong growth in incomes for those households that remained poor in all the years (4.2 percent), though the growth was not enough to shift them above the poverty line.

Unpacking the transient poor households, the results indicate that the number below the poverty line varied, with nearly one in every five households having an income below the absolute poverty line at least once in the five waves (Table 2). This is a significant share of the households for a country that aspires to be a middle income by 2020 and also committed to attaining “Zero poverty goal by 2030”. These transitions often occur after a major change in income which might be related to economic factors such as employment and less of household structures.  The probability of falling into poverty at least once under the study period is higher in rural than urban areas; and in the eastern region compared to the other regions. Only 2.8 percent of household (3.3 percent rural, 1.1 percent of urban) were poor in every wave (classified as chronically poor households), and only 5.2 percent (6.3 percent rural, 1.1 percent urban) were poor in four of five waves. Simply put, chronic poverty is driven by the northern region (21.8 percent), followed by the eastern region (10.8 percent). Households in this region stay in poverty longer, a sign of permanent limitations in income and employment opportunities. The development programming for the region in terms of targeted interventions has not demonstrated the potential to help even the poorest to break free from income poverty. These spells (duration) in poverty have implication for policy especially for those households that typically have incomes near the poverty line and quite often have limited savings/resources to smooth their consumption.

Table 2:  Share of times households lived below the poverty line, %

Screenshot poverty 1

Zero poverty by 2030 for Uganda may not be possible unless!!Source: UNPS 2009/10, 2010/11, 2011/12, 2013/14 and 2015/16.

Given the above poverty trends, it is unlikely for Uganda to attain the SDG 1 goal on Zero Poverty by 2030 unless profound development planning and implementation is well targeted towards who the poor are.  The poverty dynamics indicate that the prevailing income fluctuations were mainly from agricultural related production shocks. In attempt to reduce the effects of shocks, households adopt risk averse production strategies that come at a cost-persistent poverty. The persistent poverty we are observing is a cost that comes as smallholder farmers attempt to smooth their income with less resilient coping strategies.

What is needed to break the poverty cycle is building households’ asset base. Assets contribute directly to the income generation process, hence, policies that support savings, more precisely the accumulation of productive assets, are critical for a sustainable income growth and poverty reduction. Furthermore, developing well-functioning financial markets (insurance and credit) targeting farmers would in the end compensate for reduced agricultural incomes in bad years. In the presence of such markets, the need for income smoothing is less urgent.

Given that poverty is multi-dimensional in nature, addressing programmes that are complementary to income generation are vital such as education, health, water and sanitation. In addition, the ability to ensure stable available market for agricultural produce cannot be over looked for poverty reduction. This is because, markets create avenues for selling goods and services which boost incomes.

RSS Feed