Government must invest where private sector is reluctant

By Denis Jjuuko

If you are reading this article on your phone or laptop or you have just hailed a taxi or boda boda using an app, just know that without government’s involvement, it wouldn’t be possible. Treatment of a lot of diseases wouldn’t be possible as well. The US government funded the research that enabled the Internet to be what it is today. The Global Positioning System (GPS) that enables you reach places you have never been to is a result of government funding. Yet governments rarely get the praise or value they deserve through the funding they provide to key industries. Silicon Valley executives and big pharma CEOs become billionaires and posture how innovative they are while using infrastructure they didn’t build or even invest in.

In fact in the late 1980s and early 1990s, governments especially in Africa were told to get out of business, which led to privatization through the infamous structural adjustment programmes. Laid off staff in the name of austerity and in the end their economies contracted It was a mistake they regret even today. Government agencies that were turning profits or enabling others with the backbone necessary to build profitable businesses were sold to sometimes people who were only interested in real estate or turning machinery into scrap.

Yet governments that want to grow the economy must invest in sectors where private investment may be lacking or not yet mature enough to attract it. That is why the US government invested in the Internet, GPS and drone (unmanned aerial vehicles) technology among others. The aim may have been militaristic but no private sector players were interested in technologies that would only become profitable many years later. Big pharma rarely invests in the research and development (R&D) that leads to drugs or vaccines that cure previously incurable diseases.

This brings me to Uganda’s automotive industry as an example. In 2015, the market for brand new cars in East Africa was 285,000 units and it will double by 2027 to 500,000 vehicles. The capacity to make vehicles in East Africa at the moment is at a mere 35,000 units a year. So if governments don’t invest seriously in automotive technologies, they will be importing much more than they can produce at home. East Africa has one of the fastest growing populations in the world and the automotive industry provides opportunities to employ millions of these young people. Instead of importing complete units, why not assemble or manufacture here? Imagine if all 285,000 vehicles imported into East Africa, just 50% were made here. Our entrepreneurs would be providing lots of the parts that make a car. An average car has 30,000 parts. We would easily reach the middle income status.

The government already owns 100% of a company that aims to make cars in Uganda but its arms are not synced together when it comes to strategy. That is why government approves a budget and a parliamentary committee without any technical expertise asks to review the product. The year ends without anything done. The different arms of government must know that you are either in or out. If the US government was half funding the Internet and then parliament finds pride in delaying approvals for government programmes, a country cannot move forward.

No country develops when everything is left to the private sector. Business people are driven by profit and will only put their money where they think there is a high return on investment in the shortest time possible. Big pharma, for example, would rather sell malaria drugs than spending money on R&D for an Ebola vaccine. Once a vaccine has been invented, private sector comes in to scale. That applies to the automotive industry as well. What is actually even more important is that in Uganda, government owns 100% Kiira Motors so the beneficiary when the company becomes profitable is government as opposed to the US government that gets a small fraction of what the world’s unicorns (Facebook, Amazon, Microsoft, Apple, Google etc.) and their founders take home using the infrastructure they didn’t invest in.

The author is a communication and visibility consultant. djjuuko@gmail.com