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Transforming Uganda’s Economy for more and better jobs

August 13, 2013

With an unemployment rate below 5 percent, Ugandans are working hard, but are for the most part involved in low productivity formal and informal sector activities

KAMPALA, August 13, 2013 – The Uganda Economic Update that was launched today projects a GDP growth rate of 6.5 percent in 2014. The Update attributes recovery to renewed macro-stability and increased public investments that address binding constraints to growth. It also underscores the importance of accelerating diversification of the economic base and providing new sources of employment for Uganda’s rapidly growing and increasingly urban labor force, even as the agricultural sector remains the predominant employer for the foreseeable future.

While Uganda's economy has grown rapidly over most of the last decade and will continue to do so into the future, a significant proportion of the country's population is not benefiting from this growth,says Philippe Dongier, World Bank’s Country Director for Tanzania, Uganda and Burundi. “The vast majority of Uganda's labor force remains employed in low productivity activities.” “To break away from this trend, the government is rightly placing emphasis on infrastructure and skills. In addition, we think it is essential to better understand the enterprises and the zones that are already growing and that have potential and to remove specific barriers to further accelerating their growth”.

Access to good jobs will be driven by the transformation of production to higher productivity activities. By accelerating transformation, jobs in the manufacturing and services sectors could reach 8 to 12 million by 2030.  Even then, the bulk of the workforce will likely remain employed in the agricultural sector, mainly because it is performing the role of residual employer.

In order to ensure that a greater proportion of the Ugandan population has access to productive jobs, the report proposes measures related to five objectives: (i) creating better jobs on the farm; (ii) making the informal sector more productive, especially in urban areas; (iii) improving survival, growth and productivity of firms in the formal sector; (iv) ensuring that the labor force has the appropriate skills and (v) promoting a more efficient urbanization process to support firm growth and job creation in urban areas.

With Uganda’s labor force growing above 4 percent per annum, 20 million workers are expected to be added onto the labour market by 2040, adding to the challenge of creating goods jobs and achieving equitable growth,” says Rachel Sebudde, the Bank’s Senior Economist for Uganda, and the lead author of the report. “The challenge for Ugandan policy makers will be to manage the labor force's transition from a predominant involvement in low productivity subsistence agriculture to increased involvement in higher productivity manufacturing and services sectors.”

The report acknowledges that the government’s policy agenda on jobs is complex and its impact will likely mainly be realized in the medium to long run. The report however notes that the agenda for action has to be concrete and clear to the stakeholders.

In the short term, the government should prioritize agriculture so as to increase productivity in this sector as this is where the bulk of the population works. Government’s current efforts in this direction are commendable, says Ahmadou Moustapha Ndiaye, World Bank’s Country Manager in Uganda. “However, people are also moving off the farm and similar attention will be required in addressing constraints in the non-agricultural sectors.”

In order to address constraints in the non-agricultural sectors, the report recommends four short term actions that can create impact on the job creation agenda: (i) buttress large firms by supporting growth of clusters and full value chain for strategic sectors, such as light manufacturing, exportable, building and construction industry and oil industry (ii) Improve the business environment by industrial zoning and innovative financial solutions that can improve survival and growth of small and medium term enterprises, which will be an important source of formal employment; (iii) Promote linkages between large industries and small and mainly informal manufacturers; and (iv) Building urban infrastructure to ease movement of people and products.

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