Monday, July 2, 2012



In March this column reported  how cement manufacturers Hima had woken up in January to find they had been dispossesed of the right to mine one of their major quarries.

Previously unknown firm African Gold Sniffers Ltd (you really can’t make this up), had with the help from an official in the geology department of the energy & mineral development ministry, acquired the mining rights to Hima quarry – one of two quarries, the  other being Dura that the cement producers use for manufacture.

Mining concessions change hands every so often but what was interesting with this particular case was that Hima’s concession was not due to expire for another year, it expires at the end of December 2012, and therefore not due for renewal or termination.

The transfer was even the more stranger because, the local arm of worldwide cement manfacturer LeFarge had only months before commissioned a $120m (sh300b) plant on the basis of the Hima quarry, which was to double their production to 850,000 tonnes annually.

The plot thickened even further when investigations showed that the Sniffers had got the full exploration license in under 19 days – including weekends, for a process which takes months if not years to consummate. This must be a record in efficiency for the Ugandan civil service.

The Sniffers wasted no time in asking Hima to vacate the quarry so they can take possession. This was the first Hima heard of the whole nefarious affair. One would have thought with millions of dollars on the line and having been a long term investor and with full knowledge of Hima’s business plan for the next 25 years, the geology department would have appraised Hima of what was going on. Even if out of basic courtesy.

Since I wrote the article in March the responsible – or irresponsible, official in the geology department is being investigated and the concession is back with Hima. Incredulously Sniffers are crying foul and are sniffing around for compensation.

This story is a familiar one and readers will be forgiven for nodding their heads knowingly and moving on to the next story.

Not to sound clich├ęd but these kind of machinations are at the heart of what ails this country and keeps the majority of our people suffering sub human existences.

Uganda badly needs investors – local and foreign, to unlock the wealth in its vast bounty of natural resources.

Any investor worth his salt has to be assured that his property rights are guaranteed by the state.  No serious investor is going to put in any money in an endevour in which he is not assured of at least recouping his investment. 

An exploration of why capitalism works in certain places and not in others, finds that insecurity of property rights is at the center of market failure. What happens is if an investor – local or foreign, is unsure of the security of his property rights, they tend to veer towards short term speculation, which requires little capital input and through overpricing is guaranteed to show returns in double quick time. Such investors will not create many jobs, invest in technology or even pay much tax. Clearly not the kind of investor Uganda is looking for.

They say capital is a coward. Capital would rather take lower returns on investment, which are more assured than gun for higher returns, which are not as assured.

Word gets around. What has happened to the local arm of global cement manufacturing giant, LeFarge will be discussed over cocktails in London, New York, Paris and now after reading this probably in your local kafunda as well. And investors will wonder why suffer this grief and rather invest in another more transparent country or for you in the kafunda, why not buy treasury bills and bonds and save yourself the stress.

To state the obvious, a country is only as viable as its private sector. The private sector pays tax and creates jobs. In Uganda over the last two decades as the private sector has grown their taxes account for more than two thirds of the budget. In the eighties local taxes accounted for less than a third of the budget, with the rest coming from aid. Without a private sector a country is vulnerable and despite outside pretensions, collapse is never far away – ask the Union of Soviet Socialist Republics.

We cannot treat investors – local or foreign as if we are doing them a favour. They risk money to make money, in so doing create jobs and pay us taxes. We may debate whether the taxes they pay are properly utilized but that is a debate for another day.

Ugandans need a chance and long term credible investors are what we are looking for unless one is sniffing  stuff more potent than cement or is that gold?.

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