Monday, December 3, 2012


The recent spate of revelations about stolen government monies blew away the argument that government does not have enough money to improve education and health services or build roads or dams or any of those things we badly need.

But more importantly it cemented my belief that the best thing this government did for us in the 1990s was to privatize all our state owned enterprises.

Can you imagine what would happen if Uganda Posts & Telecommunications still had a monopoly or Uganda Commercial Bank still straddled the financial or UEB was in charge of our power sector or …. We would still be in the Stone Age.

This may or may not be an indictment on the managers who run those companies, but the truth is government agencies have little or no incentive to be efficient never mind what the politicians say.

A government’s main pre-occupation is to hold on to power. How a government does that depends on the peculiarities of that society but is often a combination of improving service delivery and doling out patronage.

The need to improve service delivery in itself is the stuff successful companies are made off but when you include rewarding political supporters, service delivery becomes badly compromised.

That’s how services are concentrated in certain places and denied others, certain people have their debts to the company waived or certain people get jobs in that company and not others. And when government’s change it is out with the old and in with the new. Not the ideal business model to ensure sustainable success.

Given the above it goes without saying, government is not the most efficient allocator of resources. That’s why the world over governments indulge in projects with questionable universal benefits, white elephants, diverting much needed resources from more important services to massage constituencies and personal egos.

Which brings me to the issue of the reviving Uganda Airlines. Some MPs were in Kigali recently and came back singing praises about the Rwanda Air, their national carrier. The airline which is 10 years old flies to all the EAC capitals as well as South Africa, Dubai, Nigeria, Gabon and Congo Brazaville.

This was the cue for other interested parties to offer their two cents on the matter.

That as Ugandans we are embarrassed because we don’t have a national airline. That a national airline would make it easier to develop Entebbe Airport into a hub.  That there is now enough traffic to make a national carrier viable.

Is American pride hurt by its lack of a national airline?

An airport becomes a hub because of its location, infrastructure and the traffic going through it. Do you need and a national airline to become a hub?

The airline does not make your airport a hub but people wanting to come to your country or transit through your airport is what makes it a hub.

If the government really wanted to develop Uganda into a hub they would have done it as part of a wider strategy to improve tourism numbers or promote high value exports.

The billions of dollars that will be required to set up the airline and baby seat it to profitability will be better spent expanding and revamping Entebbe airport, improving infrastructure generally and to the tourist sites in particular, financing and executing a well thought out marketing plan for the country. Those actions will get us the much desired hub.

The way I see it we have more pressing matters than opening up more avenues for a handful of elite to rip off our taxes.

Some people argue that an airline will make the government money. I manage to fall off my chair every time this one comes up. Government would benefit from an airline if it was profitable so they can collect corporation tax and earn a dividend. The operative word there is profitable.

To be profitable the airline will have to capture a sizeable share of the several hundreds of thousands of passengers flying through Entebbe airport. To do this it will have to offer a competitive service at a good price or government would have to institute some protectionist measures against other airlines. In the first instance government would be tempted to subsidise the company’s operations or make service in and out of Entebbe suffer in the case of the second course of action.

Returning to the issue of governments seeking to perpetuate itself in power – service delivery and patronage, connections out of Entebbe  are good so should we think that calls for a new airline are just a way to widen the surface area for “eating” in government?

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