Monday, June 6, 2011


Last week President Yoweri Museveni appointed Maria Kiwanuka, Finance and Economic Development Minister in what many consider an inspired appointment.
Kiwanuka a former World Bank economist turned media owner, it is hoped will bring a better understanding of business by government.

There in will be her biggest challenge in government.

If we learn anything from the cold war it’s that a country is only as strong as its private sector. The collapse of the Soviet Union and its satellite states put to rest the fallacy of central planning. What the free market does is harness the individual efforts of the population by allowing numerous experiments, failures and recoveries driven by the learnings from previous failures. This process throws up a sort of spontaneous order or what Adam Smith called the Invisible hand, where everyone working in their own self interest advances society.

This process cannot be planned, no central authority can initiate all the experiments and therefore replicate the learning that comes from these failures needed to advance society. The Chinese unlike the old bureaucrats of the Kremlin, have been very smart to understand this.

"The proper role of government is to ensure the sanctity of property rights and ensure that certain basic rules are adhered to....

So strengthening the private sector should be a government’s first target. Government’s strengthening of the private sector does not mean going into business, but creating the enabling environment that allows business to grow and thrive and part of this enabling environment is removing the walls of suspicion between the government bureaucrats and businessmen.

Government bureaucrats by virtue of their everyday jobs are not wired to think like businessmen. A bureaucrat does no work if there are no resources, a businessman on the other hand does not make a lack of resources be a reason for no activity. He goes out and finds or creates the resources. This is at the heart of the perennial tension between the two groups, everywhere.

If Kiwanuka with her experience in business, can lower the walls of suspicion between government and business she would have done more than her job.
Government needs to understand that to have private sector led growth we need to construct the necessary hardware – physical infrastructure and more importantly software – the institutions and attitude to business.

On the other side of the coin Kiwanuka will do a great service to this country if she can sell to her colleagues the benefits of formalizing their busineses.

It is estimated that up to 70% of our economy is in the informal sector, most of our businesses are unregistered, do not have bank accounts and die with the founders.

By formalizing more of our businesses, credit, training and partnerships with larger concerns will be more readily available.

Kiwanuka will do well to press for lowering the costs of business registration, according to recent survey it takes three times longer for a business to be registered in Uganda than in neighbouring Rwanda.

For the same reasons as above, the bigger concerns should also be encouraged to formalize their operations. For example she can initiate a drive to have more of them listed on the stock exchange.

In Kenya companies that list on the stock exchange enjoy a lower corporate tax rate, but beyond that they have access to a large pool of resources and easily attract investors and partners from across the globe.

"Our business may be content to remain small because the founders’ personal needs are catered for but that is not a sustainable model in an increasingly open market...

Our business men need to grow to remain viable and their growth is capped by the level of informality.

It is a tall order for anyone, but with her experience in a business that continues to thrive in Uganda’s hostile business environment, we are in order to expect that she will help t he business community’s plight better than any of her predecessors.

Being a government functionary is often a thankless job and she may have to forgo the gratification that comes with growing a business, her sense of achievement may come from intangible things she can make happen that may not even be attributed to her when history is written, but it is a job someone has to do and for now the responsibility is hers.

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