News Column

Govt Told to Support Household Businesses

April 30, 2014

Alon Mwesigwa

The government must support household businesses to improve job prospects and reduce poverty, a new report has noted. The report, "Fostering durable and inclusive growth in sub-Saharan Africa", by the International Monetary Fund (IMF), shows that while huge projects can boost the country's growth figures, the impact is not widely spread out among the local population.

But a lift in agricultural productivity and other small businesses can touch more ordinary people.

"We show that household enterprises are the most likely source of jobs for the majority of the population in sub-Saharan Africa, at least over the short and medium term," it says.

The report urges focus on removing obstacles by easing credit access, providing agricultural subsidies, and making clear land use rights, in the service and agricultural sectors, where the bulk of the family enterprises do their activities.

Unemployment in Uganda remains the highest in the region, with more than 62 per cent of youth on the streets searching for jobs, according to figures from ActionAid, a civil society organisation.

Citing Vietnam and Mozambique, the report shows that while the two countries experienced growth in the past years, Vietnam has managed to reduce poverty and create more employment because it focused on increasing agriculture productivity and generated employment elsewhere.

Meanwhile, Mozambique focused on megaprojects in the capital-intensive sector of natural resources, which generated growth but less employment opportunities, with limited effect on poverty reduction.

Bank of Uganda says the next fiscal year's growth will be driven by huge construction projects such as the Entebbe Express highway and Karuma dam. Most Ugandans are employed in agriculture but the report says most of these people are under-employed. Government has been blamed for paying limited attention to the sector.

Discussing the report last week at Statistics house in Kampala, Abebe Selassie, the deputy director in the IMF's African department, said sub-Saharan economies had to do more to bridge the infrastructural gap.

He said the integration of agriculture into value chains would be critical to ensuring that growth comes with reduction in poverty levels. Selassie said Uganda should also focus on skills development to meet the demand for skilled labour in other sectors.

"In line with experience worldwide, a shift of labour to other more productive sectors will gradually tend to reduce the share of agriculture to GDP [Gross Domestic Product - the broadest measure of economic activity in the country]," the report said.

It recommends a business environment that does not overburden household enterprises with overtaxation or regulation. Growth in sub-Saharan Africa is projected to climb to 5.5 per cent this year, from 4.9 per cent last year.

Frequent elections in the country have been blamed for budget deficits. Keith Muhakanizi, the secretary to the Treasury, said last week during the release of the IMF report, that the cycle of elections was responsible for budget distractions.

"That's the danger of democracy pushed by donors," Muhakanizi said. "Pressures for current expenditures increase, especially for wages, due to pressures to win elections."

He said while the push for expenditure increases, the drive for tax collection also goes down. In the run-up to the 2016 elections, government expenditure is expected to shoot-up in what experts believe could be another expensive election.

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Source: AllAfrica

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