On the evening of 31st December, 2019, the president delivered his end of year speech. In the speech, the president highlighted security, environmental degradation, corruption, value addition for import substitution, markets for Uganda’s commodities in the region and abroad, mass education, and land evictions as key government priorities during 2020. While the identified priorities in the speech are vital for the wellbeing and development of the country, there are a number of other key biting challenges which government priority has granted limited attention over the last decade. These priorities include rising income inequality and youth unemployment. The two are crucial because while Uganda has previously registered impressive economic growth averaging 5.7 percent per annum in the last decade, rising income inequality and unemployment has persisted. The two challenges are potential triggers of a wide variety of economic, political and social unrest if not effectively addressed. Below, I discuss each of them. For each, I highlight past government effort to address it as well as the shortcomings faced and further present my predictions for 2020.
Since the 1990s, income inequality has been rising. Figure 1 shows that the Gini-coefficient—the standard measure income inequality increased from 0.36 in 1992/93 to 0.42 by 2016/17. Indeed, Figure 1 based on the nationally representative household surveys shows that while poverty has declined, income inequality has significantly increased. It is worth noting that change in income inequality are largely driven by urban than rural areas. The trends suggest that government priorities concentrated more on poverty reduction and less on the distribution of incomes within the country. The continuation of this state of affairs implies that social evils such as crime are unlikely to recede during 2020 and beyond with rising income inequalities. As such government needs to think about increasing finances towards social sectors such as education and health, on top of funding priority infrastructure. In addition social safety strategies such as pension reforms needs to be expedited to cater for Uganda’s elderly. Moreover, effort should be undertaken to increase farmers’ ability to cope with shocks such as heavy rains, drought, pest and diseases and hailstorms in order to reduce the rising income inequality.
Secondly, youth unemployment in Uganda remains a serious public policy issue in Uganda. According to the 2014 population census, the youth aged 18 to 30 years constitute about 23 percent of the total population. The 2016/17 Uganda National Household Survey report indicates that youth unemployment rate increased from 12.7 percent in 2013/13 to 13.3 percent in 2016/17. To address this challenge, government has previously undertaken various interventions such as the Uganda Youth Capital Venture Fund, the Youth Livelihood programme, Uganda Women Entrepreneurship Fund etc. However, the pace of creating new employment opportunities has lagged behind labour force growth. Without strategies to reduce the country’s annual population growth rate of 3.3 percent, unemployment creation is likely remain a challenge in 2020 and beyond.
Given the above evidence, addressing both challenges requires long term government policy action. According to the IMF, addressing inequality requires among others, increasing social spending towards education and health to an on average of 15 percent of GDP every year up to 2030 by low developing countries such as Uganda. With regards to unemployment, government needs to implement an effective strategy for industrial development. It is essential that government addresses skill gaps, private sector investment constraints and, above all, prioritize industrialization especially in of the agriculture sector. Otherwise for 2020, I anticipate an increase in ad hoc government interventions including giving cash handouts youth to address youth unemployment. This is likely to come at the backdrop of an upcoming general election in 2020/21 where the president is likely to face a youthful opponent.