Wednesday, July 23, 2014

MAKERERE ENDOWMENT FUND, BETTER LATE THAN NEVER



IN clear case of better late than never Makerere University last week launched its endowment fund board of trustees led by Dr Martin Aliker.

The fund which will be funded by existing university surpluses, donors and alumni of the university will be used to alleviate the institution’s financial deficit.

This is a long overdue initiative as the university is staggering under the burden of providing quality education to thousands of students only funded by government’s inconsistent contributions and the fees from students.

The reality is that over the years the government has shifted its emphasis more towards primary and secondary education, feeling little need to fund university education. And the university can only raise its tuition fees so much before they compromise their mission to provide university education as widely as possible.

A third way had to be found and the endowment fund may just be the answer if managed well.

It’s not a new concept. Universities around the world have built up huge endowment funds, the most famous being Harvard’s, which last year reported assets of $37.2b or almost double the economy of Uganda.

These universities have used a portion of these funds to pay for operations and capital development.
Makerere’s fund is going to kick off with £800,000 (about sh3.5b) that has been managed up to now by Crown Agents in London.

Anecdotal evidence suggests that beyond this fund Makerere can leverage its huge holdings in real estate, on Makerere hill and around the city and intellectual property to fund itself.

There is probably some work to do in revising the law that Makerere or public universities operate under allowing them to raise money and invest for themselves but we are off to a good start with setting up the endowment fund.

It will liberate the university from its dependency on government funding and reduce the pressure to raise fees out of reach of the majority of Ugandans.

But more importantly in my mind, it will open our eyes to how much resources are floating around but are ineffective because they are not aggregated into meaningful sums.

By accident or design (I think more the latter) we have been wed to this mentality that when there is a need we have to look for someone else to resolve it, our brightest minds at the university are not averse to this way of thinking.

Makerere is a microsm of the Ugandan condition. Sitting on an embarrassing bounty of resources – human and land, but cash poor and hard to really feel sympathy for.

It is all very nice to say government has a responsibility to its citizens to educate its citizens but what happens when government cannot or is lukewarm about its commitment? You roll over and die?

Recommendations on how the university can raise money is through the building of multipurpose income generating structures like amphitheatres, halls of residence, computer labs and cafeterias. In addition it has been suggested that staff residing on the campus vacate to make way for paying students. The possibilities are endless.

But let us just take the sh3.5b that will kick off the endowment fund and for which there already plans to examine the possibilities.

The 364-day Treasury bill yield is now about 11.8 percent. Assuming the university invested this money in 364-day bill they would get an income of about sh400m after a year. Assuming the yield remain constant for the next decade and Makerere kept rolling back the profit they wold have grown this single threefold to sh10b. And we haven’t even started on fund raising drives, sale of properties, income from property etc.

Of course they have to have good money managers and not fall prey to the snake oil salesman hawking products with no real returns.

Its fantastic that Makerere is at last taking the bulls by the horns and the other universities both public and private should pick a leaf.

Ideally Makerere should have launched the fund decades ago but you know what they say, “the best 
time to plant a tree was 20 years ago, the next best time is today.”

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