Strategies for Uganda to Harness China’s Development Finance

by Admin (Posted on February 2, 2024)

By Nnanda Kizito Sseruwagi

On 8^th August 2023, David Theis-the Press Secretary and Spokesperson of the World Bank Group- released a statement about Uganda in the wake of our Parliament’s passing of the Anti-Homosexuality Act, noting that “no new public financing to Uganda will be presented to our Board of Executive Directors until the efficacy of the additional measures has been tested…” This statement effectively meant that the World Bank had suspended further funding to Uganda although priorly funded projects weren’t to be affected.

This is the trouble with Uganda’s reliance on development finance especially from the West. Instead of respecting the sovereignty of Uganda and allowing us to build the critical internal political forces to challenge these bigoted laws ourselves, they emasculate us with these superficial interventions. We cannot perpetually rely on external sources of financial support if we are to build a stable, independent state. We must build capacity to stand by ourselves, which invites us to strategize on the best possible ways to harness development finance.

The 2023 incident was not the first time Uganda was starkly reminded about the dangers of relying on foreign financial support. Similar economic constraints and disruptions happened in 2009, 2012, and 2014 when Western funders cut the taps under similar circumstances, crippling our fiscal operations.

However, over the years, China has become a valuable alternative to the West’s development financing and its attendant conditionalities. We should not take this partnership for granted. We must utilize their financial support optimally to arrest chronic dependence.

Why China?

Due to the shortage of development funds, donors often prefer countries with established mechanisms that increase the accountability and effectiveness of development finance. Whereas this is well-meaning, Western donors often unnecessarily intervene in internal affairs of countries which affects the long-term reliability required for development finance to be utilized effectively. Additionally, research shows that this funding is also highly dependent on the strategic objectives of the donor. China’s strategic objectives as articulated in several official statements including the “China Africa Policy” are keen on respecting our chosen development paths and mutuality.

To maximize the benefits of China’s development finance to Uganda, we must have clear national development goals and strictly implement them. President Museveni has reiterated severally that his government’s historical mission is the socio-economic transformation of Uganda. I find this a very appealing goal for any developing country to pursue. But how can we do this?

Firstly, we need to sustain Gross Domestic Product (GDP) growth for a long time. The NRM government has commendably achieved this with a 6.92% growth average sustained between 1986 to 2015 (33 years).

Secondly, two key elements must also be realized to achieve Uganda’s socio-economic transformation. We must transition from an agrarian economy to a manufacturing hub in order to transform our people from hand-to-mouth peasants to working-class citizens who participate in the nation’s financial environment. To do this, we need the availability of long-term cheap credit to support industrialization and indigenous ownership of the most productive sectors of our economy. This is where China comes in.

China’s development finance to Uganda comes in multiple forms such as concessional loans, grants, and investments in infrastructure projects. Sometimes, the interest rates on their concessional loans are below the market rate, which makes them attractive as a source of cheap credit. The Belt and Road Initiative (BRI)- China’s project where this development finance comes from- is also a long-term initiative, which meets the time scale requirement.

We should further focus on local workforce development through skills and technology transfer from our Chinese partners to local populations. As a global technological powerhouse, China possesses advanced technologies in various sectors which we should borrow. This can be done by ensuring that Ugandans collaborate with Chinese technocrats on managerial and maintenance areas of implemented projects. China has many big infrastructural projects in Uganda including roads, power plants, mines, industries, etc. These are strategic areas for us to acquire skills and build capacity among locals to take on such projects by ourselves in future. Chinese expertise should provide us with invaluable training opportunities for our engineers and laborers but should never create chronic dependence.

It is not a given that pumping development finance into our economy will lead to structural transformation. It is easy to lose these investments if we do not maintain our selected purposes for utilizing these funds. Therefore, we must adopt strategic approaches systematically from careful project selection, transparent negotiation and local workforce development. We must always remember that the end goal in all this is to be independent from this assistance. With a thoughtful and well-executed strategy, we can harness China’s development finance to propel ourselves into a more prosperous and sustainable future.

The writer is a Lawyer and Research Fellow at the Development Watch Centre.

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