Monday, March 26, 2012


Last week I had a meeting on Lumumba Avenue. In planning to make my 10 am meeting I set off 30 minutes ahead of time from home. I was not anticipating any traffic but was providing for the street’s horrendous potholes.

Having braced myself for the rough ride on that road I was therefore pleasantly supplied when I found that the road had been freshly laid and uncharacteristically smooth ride I so enjoyed I almost passed my destination.

About a week prior to my trip KCCA boss Jennifer Musisi announced that they had collected sh520m in dues from tax operators in a single day – the most Kampala’s authorities had ever collected in one day in their history.

Meanwhile whenever I am in the Wandegeya area I can’t help but marvel at the speed at which the market is being put up. By this time next year I can bet they will have completed the project.

All these bode well for KCCA in more ways than just good PR.

A few years ago people involved with capital markets argued that KCC at the time, had sufficient revenues to flot a bond of the stock exchange. A bond is the way companies or governments borrow using the stock exchange. My friends argued that given the real estate KCC commands they could collateralize it and issue a bond against it. The major challenge they pointed out was that it was hard to verify the monies KCC was getting from its assets around the city and worse still whether city hall was getting all the money due to it.

But now the taxi operators paying straight into the banks a situation that may also obtain when the new markets are up are running, for the first time in a long time KCC’s revenues are looking more transparent.

It goes back to the old say, money follows towards good organization. KCC’s money woes have always been more a function of bad management than a general lack of money.

KCCA may not take advantage of this potential new funding options because they can get cheaper donor money and secondly in order to access this donor funding any bond issues are discouraged.

Besides now would not be a good time to borrow from the local markets, as yields on benchmark treasury bills are only just coming off historical highs. Often times corporate or municipal bonds are priced a few percentage points above treasury bill yield rates. In Uganda the 182-day bill is usually used as the reference point. At least week’s auction the yield on this bill was 19.81%.

But if inflation continues to fall prompting a reduction in treasury bill issues by the central bank, we can then expect a drop in yield rates making bond issues more viable.

That aside an argument can still be made for borrowing more dearly from local markets even if the donor money is cheaper because such issuances will help firm up the bond market infrastructure reducing our over reliance on foreign funding.

Beyond KCCA’s ability to have independently verifiable revenues they need to rejig their image to one of impeccable integrity. Investors want to know that they will be paid back whatever the circumstances, an impression the government and the central bank have managed to create over the years with their Treasury bill and bond auctions.

Regardless of what is happening in Uganda’s politics or economics investors, going by the record of the last 20 years, investors know they will be paid when the government paper they are holding comes due. We all like to keep our money where we are assured we will get it when we need it.

The point is we as a nation are not as helpless as we have been led to believe. We just need to get more organized and subsequently transparent in our dealings and the money will be there for the taking. And secondly relying on foreign capital – sensitive to its own political interests that may not necessarily be aligned to ours, is an unsustainable model.

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