Monday, June 27, 2016

HOW WE SHOULD RUN UGANDA AIRLINES .... IF WE MUST


President Yoweri Museveni has made a revival of a national carrier a major target for his cabinet in the coming five years.
My opposition to this development is well documented.

Going by our history the proposed carrier will end up being a drain on our treasury, shifting valuable resources away from key services and infrastructure development for years into the future. I have argued that the project is unnecessary, asking what can a state owned carrier do for us that other airlines are not already doing for us?

If it is cheaper fares that we want it would be cheaper to give concessions to airlines flying into Uganda – lower fuel taxes, cheaper landing fees etc in exchange for lower fares than to try and set up our own airline.

The $300m we are supposed to have earmarked for the project is a drop in the ocean. Ask our neighbours whose airline’s losses are being carried by the state and which are in hundreds of millions of dollars over the lifespan of the carrier.

But since we are hell bent on going ahead with the project maybe we can still save the project, or at least give it a chance of success.

For starters I am not opposed to a national carrier but I am opposed to a state owned one. If we helped a private sector player set it up with minimum loss to ourselves I have no problem.

In line with that I propose a model for the new Uganda Airlines.
First of all let us recognise that starting up an airline is not like starting up a taxi company. We do not have the expertise and it would cost us hundreds of billions of shillings to bring our skills up to scratch.

Keeping that in mind it would be useful to partner with an established player, who brings the managerial competence and we provide the capital.

This would help smoothen the expected sharp learning curve and also help us feed into that airline’s existing network.

Of course our officials and representatives on the board have to be seasoned businessmen or managers who will ensure we don’t get the short end of the stick. With this model we will ensure our concerns are addressed within reason and our people and institutions will develop the capacity we need to run an airline.
In this way we share the risk with a partner who has a material interest in the airline’s success.

I shudder when I hear comments like, “Parastatals in emerging economies play a bigger, liberating role beyond balance sheet profitability” advanced by the proponents of setting up the state owned airline.

In not so few words such people are saying that the Ugandan tax payer should forgo better health and education services as a minority indulge their egos.

It also suggests that the laws of economics can be suspended because we are a developing nation.

Neither the economics nor the mathematics favour a state owned airline now.

People who have set up airlines – and we have a few in our midst, will tell you that  you would have to brace yourself for losses in the tens of millions of dollars for years before you can have a hope of turning a profit. Particularly with a none air faring population like our own. Of course the proponents argue that the reason we don’t fly more often to our villages is because of the high airfares. They are high for a reason, and a lot of it has to do with our regulatory, legal and tax regimes.

For one thing those with experience will tell you it takes a while before you get the confidence of the flying public. One way to get is to fly the plane as scheduled regardless of whether there are passengers or cargo or not. Veterans of Uganda Airlines, Alliance Air and Africa One will tell you horror stories about the crew flying virtually alone to London, Johannesburg and Nairobi and not for free, as the crew’s salaries, fuel, various fees and the aircraft’s wear and tear have to be catered for.

I would be the first one to be proud that we have a functional airline but not at the cost of more essential services, but if we must have it now let us be prudent about how we set up, if only to minimise the losses to us.

A better use of our hard earned money would be to beef up our aviation infrastructure and afford airlines better concessions to attract more traffic in and out of Uganda.



Tuesday, June 21, 2016

ONDUPARAKA AND THE SPORTING SUMMER

West Nile soccer team Onduparaka has taken the Uganda soccer scene by storm. A few weeks ago they achieved promotion to Uganda’s premier league. And then as if to prove that it was no a fluke they qualified for the Uganda Cup final, putting Entebbe to the sword with a 4-0 aggregate victory over two rounds in the semi-finals.

By the time you read this the Uganda Cup final would have been decided and you know whether the Onduparaka fairy tale will have run its course or has grown even bigger.

In Europe summer is sliding in and with it the seasonal flurry of sporting activity.

The European Football Championships are in full flow, cyclists are about to start the tortuous Tour de France, the grass court tennis season is looking to peak at the hallowed grounds of Wimbledon and the British Golf open will tee off in the west of Scotland in the middle of July.

One cannot help but marvel at the incredible facilities in which the sportsmen compete, the thousands of the paying public who turn up to witness these contests and the amounts the sportsmen win for the effort – the Wimbledon winner will pocket £2m (sh9.5b).

"If you go beyond your-jaw-hitting-the-floor and examine what it has taken to raise sport to such a lucrative endeavour, that sportsmen have found it fit to acquire the bare minimum of education before going off to travel the world and make a living, maybe teams like Ondurapaka will have a sustainable future...

Essentially the growth of sports in Europe went in parallel with the growth in those economies. The sports facilities started off as a deployment of surpluses drawn from those economies. These surpluses date back to the agrarian revolution, swelled into the industrial age and have literally exploded in the information and now, the conceptual age.

Of course sports have their place in the management of society. The more cynical will say sports is a useful distraction for the masses away from the more pressing issues. Sports of course has health benefits, necessary because our lives are more sedentary we are not out half the day chase our food around the savannah.

So clearly attaining national sporting excellence requires a robust economy sustained over years even decades.

In addition there have to be patrons willing to back these teams. The history of Europe’s top soccer teams is littered with rich businessmen supporting the clubs and setting a strong foundation for their eventual glory years.

We have had our share of sporting patrons but their initiatives have died with them or floundered with the patrons falling fortunes.

"What the European teams have been able to do, to varying levels of success, which our teams have failed to do, is build a corporate structure that can not only support the teams but ensure they outlive the original patrons...

In short our teams have to become businesses in order to sustain themselves.

Using Onduparaka as an example, while it has no stadium from which it can collect revenues, it has a passionate following that contribute to its finances.

There is the usual company structure that can be employed, with shareholders and a management that oversees the club’s running or they can adopt a cooperative structure like Barcelona FC’s , where the club belongs to the fans who contribute to its up keep regularly and may enjoy a return on their “investment” every so often, depending on the surplus the club can generate.

With either structure egos will have to be set aside and strict corporate discipline adopted.

This template, which can be used for any other sports team and association is not rocket science but it will not be smooth sailing as well as differences in opinion between the owners, management and  fans will inevitably rock the ship occasionally. This will test the credibility of the club’s or association’s vision and mission and depending on how deeply ingrained these are will make the difference between success and failure.

"The point is, developing a viable sporting infrastructure like you find in Europe is not impossible but we will have to break our way from the self-destructive ways of our current business owners, harness our existing assets and embrace a long term view going years, decades even centuries into the future...

It can be done. The question is have the right conditions of growing economy, savvy business promoters and sporting challenge come together yet to make it happen?

Only time will tell.