Thursday, April 24, 2014


Last the week the Business Vision published a story about how new initiatives in the finance ministry may be partly behind the current cash squeeze we are all experiencing.

This is not to discount the crisis in South Sudan, which in recent years has not only served as ready market for our produce but has also been a significant source of liquidity into our market.
However the story about the finance ministry’s moves to block the leaks in government is significant on many grounds.

Government spending everywhere is the world is a key driver of economic growth. However how this money is spent makes the difference between whether the growth is experienced more equitably or is concentrated in a few hands.

"If government spending is targeted at infrastructure development and the shoring up of social services then more people benefit on a day-to-day basis but it also gives more people a chance to climb the social ladder and improve their standard of living....

If however monies are pilfered with impunity --- as was shown with the OPM and public Service ministry scandals, then the majority miss out on quality service while a handful of individuals live lives of the ostentatious consumption totally at odds with the reality around them.

A cursory look over the budget performance up to the third quarter on a handful of ministries, departments and agencies (MDA) had spent 80% of the monies released to them compared to the same time last year when most had consumed 90 percent and above of monies remitted to them.

Did the management of the ministries change? No. Did government release less money than was expected? Yes, but even the little government handed out was barely consumed.

So what has changed? The key seems to be an overhaul of the government payment systems which has introduced a combination of stronger accountability for expenditures, devolved the public service payroll to the local governments and introduced a single account from which all government payments will be made, which payments can be tracked real time from the  finance ministry.

It is strange that suddenly the MDAs are running smoothly despite getting a fraction of the funds they had budgeted for.

With these few initiatives government has stressed the business community and the economy by extension.

"Interestingly economic growth figures have consistently shown that most of the growth in the economy came from services and construction and not agriculture where the majority of the workforce was. These new revelations go some way in explaining why this is so...

For long people have argued that Kampala’s land prices were unrealistic. Land banking and speculation had become the favourite past time for many of Kampala’s elite. Until recently it was a given that if you bought some land today by this time next year you would have seen some serious appreciation in the market.

In fact the scandal in the public service ministry was burst wide open when one of the implicated officers beat one of our most seasoned real estate magnates to prime commercial property in the city.
Ugandans have become jaded and expect that this is just another anti-corruption initiative that will be defeated. There is cause for worry. You can expect that the main beneficiaries of these leaks are working tirelessly to subvert the system. One way would be not to access money even for genuine expenditures, cause an uproar and force the government’s hand in releasing money as usual.

We hope the finance ministry can maintain its resolve in taking this fight to its logical conclusion as it will make a difference between the benefits of our economic growth continuing to be enjoyed by a few at the expense of the vast majority.

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