The middle class on strike in Uganda

The World Bank and IMF have warned Africa that a fresh economic crisis could hit the continent hard in 2012. This downward trend has to do with ripple effects from the Eurozone financial crisis and weakening growth in emerging markets. The Daily Monitor reports:

The bank also cut its global growth forecast for 2012 to 5.4 percent from 6.2 percent for developing countries and 1.4 per cent from 2.7 per cent developed countries. The global growth is projected at 2.5 and 3.11 per cent for 2012 and 2013, respectively.

That means that living costs on the continent will continue to rise. In Uganda, where the general populace is growing dissatisfied with rising prices, this is already fueling a fresh round of non-violent protests. Early in the year, traders in Kampala, under their umbrella organization, Kampala City Traders Association (KACITA), announced a strike. The traders, small shopowners who are a mainstay of the Ugandan economy, closed their shops for three days earlier this month to protest the new interests on existing bank loans. In November of last year, Bank of Uganda increased its base lending rate from 13 percent to 23 percent. Commercial banks then increased interest on their loans to 28-29 percent. Bank of Uganda’s reluctance to intervene, and the commercial banks’ refusal to lower their interest rates, triggered the strike. KACITA declared that it would mobilize its members to withdraw their money from banks en masse if the decision was not reversed.

The strike forced President Museveni to leave a political retreat at Kyankwanzi to address the traders. He met with over 1,000 traders at the Serena Hotel in Kampala to work out a solution. He called on the traders to diversify their imports and exports, and promised to get Bank of Uganda to look into scaling back its interest rates. He warned the traders not to sabotage their own businesses. He stressed that banks and the businesses belonged to Ugandans. Analysts had warned the traders not to mix their strike with politics.

I believe the president needs to let the relevant authorities deal with the conditions that provoked the strikes instead of trying to have the final say in all disputes. This meeting shows that a culture has been cultivated where Ugandans do not believe in their institutions; as a result, only the president can solve every crisis. This culture of misplaced patronage needs to be addressed, since it is a symbol of a weakness in the democratic process.

The public called the banks "thieves" who were out to exploit poor borrowers. At least one banker tried to explain that borrowing costs are dictated primarily by two factors: inflation, which is likely to be high in the year to come, and the cost of funds, which is set by market conditions as well as the central bank rate. But people aren’t necessarily in a mood to listen.

The strike cost the government millions of dollars in lost tax revenues. With the traders back to work, it is not clear whether it has been a win-or-lose situation. No sooner had the traders’ strike subsided than other Ugandans resumed their walk-to-work protests, which were greeted by the government, as usual, with mass arrests and indiscriminate use of tear gas. On several occasions this week the police deployed at dawn at the homes of different opposition politicians in order to prevent them from taking part in the demonstrations. On Thursday (Jan. 19), main opposition leader Kiiza Besigye was held for several hours — along with a few sympathetic members of parliament and supporters — at Kiira Road Police station in Kampala after he attempted to launch a new phase of protest. (The photo above shows him shortly before his arrest.)

The gloomy state of the economy means that other professions are gearing up to protest. Teachers have promised to strike after Jan. 22 if their salaries are not increased. It will be interesting to see how the government reacts.