Tuesday, February 28, 2017

AFRICA HAS DEVELOPED, AND CONTINUES TO DEVELOP, THE WORLD

Last week Gerald Capland writing in The Mail and Globe in response to his prime minister’s Justin Trudeau’s intention to rethink Canada’s African strategy pointed out that the west has been ripping off Africa for 700 years and that would be a good place to start from.

And he says beyond the colonial era the plunder continues and has in fact accelerated. In 2012 Africa received $1.3trillion from the west this includes aid, investment and income. But in the same year $3.3 trillion flowed the other way. We gave away more than we received.

If we go back in history colonialism was about extraction of raw materials to fuel home industries and to ease the pressure for jobs at home. Of course it was couched as a humanitarian effort to civilise the black man, but don’t tell that to the Congolese or South Africans or Algerians who suffered the worst excess of the era.

"The second world war so severely drained the colonial powers that they allowed independence to happen but by that time they had so rigged colonies to continue serving them that independent Africa continued to supply western industry and to serve as a cash cow for them...

For instance the infrastructure from the producing areas to the ports are better developed than the infrastructure between towns in our countries.

Of course the few leaders who took independence too seriously got overthrown or paid the ultimate price.

Fast forward to the present and many of Africa’s nations had shaken off the post-independence economic down turn and were beginning to look up again – with leaner governments, increased revenues and booming private sectors.

However, taking Uganda as an example we still continue to export raw coffee, cotton, tea and any number of commodities along the same roads and railways, to the same ports that the colonialists built.

This is important because development history shows that before you can become a great exporting nation you need to be able to trade with yourself first. This happened with US, with the European Union and even with the Asian nations. But somehow we are going to turn history on its head and become export led economies without being able to trade with ourselves first?

The global financial crisis was a god send. With demand for our exports falling in the west, the East African common market kicked in. To the point now that Kenya is Uganda’s biggest trading partner and a leading source of investment and not the UK or Europe as was the case before.

"But to subvert our independence there had to be willing accomplices. The elite in these nations who had gone through a colonial education system and continue to take lessons at the feet of the master either actively subverted efforts for greater self-reliance or unknowingly helped the project along, content with the status quo and unwilling or incapable to question why things are the way they are.
And this last scenario is particularly worrying...

As a nation we are poor because we are unable to aggregate our great wealth and employ it for our benefit.

They say that the estimated value of all the extractable natural resource in the Democratic Republic of Congo is worth $12trillion. This the equivalent of the USA’s GDP. But Congo’s per capita GDP is about $500. And why can’t the Congolese harness this wealth to benefit themselves?

In Uganda we have almost half the region’s arable land, about a fifth of our land is under water and we have two planting season’s annually but right now we are in the throes of drought induced starvation in many parts of the country.

The same can be said for any number of countries on the continent.

And why don’t we aggregate these resources of ours – human resource, land and capital? Because it is too difficult when factored against the handouts we get from abroad.

About a decade ago when we were making tentative steps towards beefing up our treasury bond and bill markets – avenues for domestic borrowing, those opposed argued why should we bother when donors can lend us or even grant us multiples of the money we could raise locally at much lower rates.

The detractors were ignoring the long term good of having the local mechanism to mobilise resources versus the expedient option to raise money from donors.

Thankfully the promoters of developing our local bond markets soldiered on because as sure as night follows day we continue to fall out with donors and they keeping cutting off or threatening to cut off their aid.

Where would we be if NSSF had not been launched in 1985? The fund now has assets totalling sh6.6trillion the biggest in the region. While most of NSSF’s assets are concentrated in fixed income products – bank deposits, bonds and bills, a process is under way to ensure more investments go towards companies and real estate. However a lot of the money the banks have to lend to the public come from NSSF. In fact since NSSF mechanism in place government to aggregate more resources should raise member contributions to seven percent of the income up from the current five percent.

A two percentage point increase in worker savings can increase monthly contributions to about sh80b or s120b a year. A net benefit of this may even be a lowering of lending rates.

"The point is that we have been made to believe that we are helpless, even hopeless. That we cannot develop unless we are helped from abroad. That our challenges are so vast that trying to mobile our resources will be wasting time so we should look abroad...

And we with our degrees, MBAs and PhDs have swallowed this thinking, hook, line and sinker – of course the token consultancy fees, free business class flights,  big salaries we earn as big fish in the small ponds we paddle in, are enough to deaden our thinking.

But then day of reckoning is fast coming.


Monday, February 27, 2017

AGRICULTURE IS WHERE IT IS AT

In his book Acres of Diamonds author Russell Conwell tells of the man who sold his land and went out to seek his fortune. After years of work and travel he returned convinced that making a fortune was not for him, only to find that the new owners of his land were now working a diamond mine on it worth multiples of what they had bought the land at.

As analogies go, that perfectly mirrors Uganda’s experience.

Last weekend the Vision Group had its inaugural Agriculture Expo at which suppliers and practioneers (actual and wannabes) came together to share and learn from each other. It was a wildly successful event – long overdue for an “agricultural economy” and a good eye opener to what opportunities are literally lying around us.

The numbers roll of officials’ lips – at least two in three Ugandans live off the land, agriculture accounts for at least 30 percent of economic output, the country has almost half the region’s arable land, we are blessed with two rain seasons annually (which maybe something we may have to revise in future) and so on and so forth.

But in those numbers is the explanation why income and wealth inequalities are widening.

"If 70 percent of your population is sharing 30 percent of your output that means there is a 30 percent that is wolfing down 70 percent of our output. Interestingly Uganda’s urban areas account for about 30 percent of the country’s population...

It is not a stretch of logic to see that most of Uganda’s GDP is generated and consumed in the urban areas.

How can this be?
To begin with urban areas mean concentrations of people. These people are easier and cheaper to serve with social amenities – education and health services and infrastructure – roads, power and telecommunications than the more dispersed rural populations.

The net effect of this is that urban populations can do more and more with less and less, while the opposite is true for their rural cousins. So for example for a cook in the village they have to gather firewood, light the firewood – whose heat cannot be regulated accurately, start cooking with flour which has been ground manually and then …. You get my drift. The amount in time, leave alone energy needed to prepare a meal means other activities have to be put on hold. A similar housewife in an urban area can whip a meal in a fraction of a time it takes for her counterpart in the village leaving her free to help with her children’s homework or go to evening school or just hang out with girls.
Its those time saving devices that make people more productive in urban areas and by extension richer.

There is very little our rural cousins can do about population densities in the short term. But they can improve their production methods immediately by using modern farming methods. And we are not talking about mechanisation.

Simple things like using good plant spacing, inter cropping, improved seeds and reducing post- harvest losses to begin with, would be a good start.

I remember about a decade ago the quality of coffee farmers’ harvests and hence their income, in the  south western Uganda improving in leaps and bounds because instead of drying their coffee on bare ground they were laying a tarpaulin on the ground before they poured their coffee on it. This was in the 21st century...

We can do all this before we even start talking about inorganic ferterlisers, irrigation systems and value addition.

We are a small holder agriculture economy because the colonialists opted for that model of agriculture production than the plantation methods used in Kenya, Zimbabwe and South Africa. Which while it means our farms are less productive, also means we are more in control of our own food security.

It also means that improvements in farm productivity would directly benefit the average man than some big time farmer with hundreds of acres under ginger.


While we whine about being poor as a nation, pander after mineral wealth that is hard to exploit and wonder what curse has befallen our nation the acres of diamonds lie under our feet. And isn’t it true that we are already abandoning our lands to find our fortunes in the cities and abroad? And who will come from outside to show us what we left behind?