Privatisation versus the poor

David Obot

Although in some areas such as telecommunications and electricity, the liberalisation has improved quality, in others, the improvement is hardly cosmetic. While most of the poor and rural population do not have access to basic services, for women in particular privatisation has increased their work load. So that those excluded receive better basic services it is necessary to develop policy and regulatory mechanisms that reinvest the resources generated by privatisation in the social infrastructure.

Thepopulation of Uganda was projected at 22.8 million in 2001 with 88.7% and 11.3%living in rural and urban areas respectively. Thirty-five percent of thepopulation live below the poverty line.[1]Although pro-poor budgeting of the components of the Poverty Eradication ActionPlan[2]aims at improving services for the poor, poverty is still between 30% and 65% insome regions of the country. Theimpact of privatisation on basic services varies. Health status indicatorsreveal no improvement in infant, child and maternal mortality rates. There was adownward trend in the rates of immunisation between 1996 and 2000.[3]Research on HIV/AIDS revealed an increase in cumulative reported AIDS cases of15.6% from 1993 to 1995, an average of 3% per year, but a decline on newreported cases from 3,032 (1996) to 1,149 (1999).[4]There has been improvement in access to clean and safe water, currently reachingabout 55% of the population, with piped water mainly in urban centres. The ruralpopulation mainly depends on protected springs and bore holes.[5]

Enrolmentin Universal Primary Education (UPE) increased from 2.7 million (1996) to 6.59million (1999), due to increased budgetallocation to primary education and benefits arising from the savings from theHIPC Debt Initiative and other bilateral support channelled through the PovertyAction Fund. This trend reversed after 2000 as a result of high pupildropouts, the main reason for which was parents’ inability to pay non-tuitioncosts.[6]Programmes to improve quality of education, which is uneven, include training ofteachers, textbook distribution and classroom construction. The Functional AdultLiteracy Programme, launched in 1992, has enabled a majority of adultparticipants to attain a fourth grade level of literacy and number proficiency.[7]

Reviewof the legal and political framework

Ugandahas been implementing liberalisation policies since the early 1990s. Subsidiesfor small farmers have been cut and the diversity of exports has narrowed.There has been a downward trend in economic performance due to a fall incommodity prices (especially coffee and cotton) and high oil prices. It isestimated that the GDP growth will fall from 6.0% in 2000/2001 to 5.6% in2001/2002. The economy is heavily dependent on agriculture, which contributes42% of GDP and creates employment for about 80% of the population. Unfortunatelyagricultural contribution to GDP is on the decline and earnings from thenon-traditional exports are stilllow.[8]Since exports are mainly of unprocessed products that fetch low prices andimports consist of mainly high-value consumption and capital goods, there havebeen persistent trade deficits since 1996.

Theprivatisation process was put to public debate, mainly through the Parliament,but the contributions of the parliamentarians were more “endorsements” ofgovernment proposals than in-depth analysis of the issues. Some corruption waslater revealed; it is alleged that one Minister received a bribe of USD 10,000to manipulate the Electricity Generation Bill then at the development stage, aswell as push for approval of construction of Bujagali Hydroelectric Dam. Thepresent laws and policies regarding privatisation, such as those for investmentin hydroelectric power and financial institutions, demand revisiting.

Oneof the government’s key economic reforms, to be completed by 2004, has beenthe privatisation of public enterprises, including Uganda Hotels Limited, UgandaCement Corporation and the Uganda Development Corporation and its subsidiaries.[9]Government plans to continue supporting privatisation in such areas aselectricity generation and distribution, rail transportation and water in thehope that competition will improve efficiency, quality, cost and access, whichare seen as requirements for improved living conditions. However, privatisationis not contributing effectively to increasing household access to basicservices.

Ithas had somewhat more success in such areas as transport, communications,mining, quarry, manufacturing, construction, wholesale and retail sectors, butthe jobs created in these sectors tend to be mainly unskilledand low-paying.  According toparticipants at the Social Watch Stakeholders Workshop at Hotel Africana,Kampala, in September 2002, “The Government poorly managed itsprivatisation programmes and failed to involve public workers and citizen groupsin these processes, while existing regulatory mechanisms have proven ineffectiveat ensuring adequate oversight.”

Finally,there is a significant gender gap in access to quality social services.Women’s access to privatised services is insignificant because only a smallpercentage of women own productive assets and the majority still cannotparticipate in the privatisation process. Although women are 51% of thepopulation, fewer than 10% of them own land or other productive assets.Privatisation of services has meant an increased burden on women who must jointhe labour market but must still perform their domestic chores.

Incentivesto private companies: ‘Tax Holidays’

Inthe early 1990s, the government offered investors ‘Tax Holidays’ in the hopeof attracting Foreign Direct Investments (FDI), which were supposed to createemployment and improve basic services. The government scrapped this idea around2000, perhaps because of the many violations that occurred. Most privatecompanies in Uganda, national or foreign, lack business plans that incorporatesocial responsibilities to the poor. Responses such as support of tree plantingby tobacco companies have linkages to international production chains, and notto specific social capital related to basic services. Therefore, there is nologic in subsidising corporations.

Liberalisationhas improved quality in some areas, such as telecommunications and electricity,but these services are limited to the people who can afford them in urbancentres. Prices are left to market forces and exclude most rural and poorpeople. For example, most mobile phone services cover only major cities, yet thecompanies portray coverage as national. The mechanism to monitor performance ofsuch companies is lacking, as most of their agreements withthe government are kept secret. Indicators to show impact and quality arealso lacking and the poor are least empowered to monitor performance. Currentlythere is no regulatory institution for hearing public complaints about servicedelivery. The offices of the Inspector General of Government and Ethics andIntegrity are more concerned with corruption and financial mismanagement thanmonitoring provision or quality of basic services.

Privatecompanies have not offered a successful alternative to the poor state provisionof social services. In the health sector, ‘clinics’ offer a whole range ofservices with questionable professionalism and quality. Similarly, privateeducational institutions provide more attractive infrastructure than qualitylearning services but most are urban-based, excluding rural and poor people.

Table1.- Proportional morbidity of the top ten causes in the Outpatient Department(%)













ARI*- Not pneumonia






Intestinal Worms






Diarrhoea diseases






Trauma (injuries, wounds)






ARI* - Pneumonia






Skin Diseases






Eye disease












Ear diseases












Source:Resource Centre, Uganda Ministry of Health

*Acute Respiratory Infections

Benefitsfrom export of services

Ugandahas a high potential to increase its earnings from the export of services suchas nursing and teaching, but benefits from exporting services are insignificantbecause there is no legal framework ordevelopment strategy to support service providers in foreign countries.Local firms in the construction, manufacturing and non-traditional exportsectors have been stimulated bygovernment negotiations to access foreign markets through such arrangements asthe Africa Growth and Opportunities Act, but still lack businessstrategies for sustained competition at the international level.

Shiftof ODA to private sector

OfficialDevelopment Assistance(ODA)emphasises gender equality in its programmes. ODA gender policy includes roomfor capacity building, space to inform on inadequacies in governance,accountability and transparency. ODA conditionalities emphasise utilisation offunds for social services, provision of counterpart funding by government andreduced defence expenditure. Some ODA funds have supported privatenot-for-profit hospitals, such as missionary hospitals, which provide importantservices.  However, it is difficultto assess the impact on the poor of the shift of ODA funds to the privatesector. Benefits of ODA to society have gone far less to the rural poor than tothe urban population.


Privatisationand the poor are on parallel lines. Privatisation aims at profit, and neglectsthe responsibility to provide basic services that are needed by the poor. Thepoor cannot access the benefits of privatisation and policies and regulations ofthe public sector have failed to facilitate their access. For the poor tobenefit from privatisation and receive improved basic services there is a needto develop policy and regulatory mechanisms that encourage keeping the resourcesgenerated by private firms in thecountry and reinvesting them in the social infrastructure.


DevelopmentNetwork of Indigenous Voluntary Associations, TheEffects of Economic Globalisation in Uganda. Kampala, 2001.

DENIVA,The Socially Marginalized; Which Way toTheir Liberation? Kampala, 2000.

Ministryof Finance, Planning and Economic Development, UgandaParticipatory Poverty Assessment Process. Kampala, 2000.

Ministryof Finance, Planning and Economic Development, Backgroundto the Budget: Financial Year 2002/2003. Kampala, 2002. (2000/01).

Ministryof Finance, Planning and Economic Development, “Uganda Poverty Status Report(1999)”, The Challenges of Implementingthe Poverty Eradication Action Plan. Kampala, 2000.

Ministryof Finance, Planning and Economic Development, UgandaParticipatory Poverty Assessment Report Learning from the Poor. Kampala,2000.

Ministryof Finance, “Poverty Eradication Action Plan,”Building Partnerships to Implement the PEAP, Vol. 3. Kampala, 2001.

Ministryof Gender, Labour and Social Development/World Bank, Reportof Evaluation of the Functional Adult Literacy Programme in Uganda. Kampala,1999.

Ministryof Gender, Labour and Social Development, Social Development Sector Strategic Plan. Kampala, 2002.

TheRepublic of Uganda. The National Frameworkfor HIV/AIDS Activities in Uganda 2001-2005/6. Kampala, 2000.

UnitedNations Development Programme, Human Development Report 2000. Oxford: Oxford University Press,2000.

UgandaBureau of Statistics, StatisticalAbstract. Kampala, 2001.


[1] Uganda Bureau of Statistics, Statistical Abstract. Kampala, 2001.

[2] Ministry of Finance, Poverty Eradication Action Plan, Building Partnerships to Implement the PEAP. Vol. 3. Kampala, 2001.

[3] Ministry of Heath, Resource Centre, Entebbe, 2001.

[4] Ministry of Health, AIDS/STD Control Programme. Entebbe, 2001.

[5] Ministry of Finance, Planning and Economic Development, Budget Speech: 2002/2003 Budget. Kampala, 2002.

[6] Ministry of Finance, Planning and Economic Development. Background to the Budget: Financial Year 2002/2003. Kampala, 2002.

[7] Ministry of Gender, Labour and Social Development, Annual Report. Kampala, 2001.

[8] Ministry of Finance, Planning and Economic Development, Op.cit.

[9] Ibid.