Wednesday, October 29, 2014

SERIOUSLY, LET’S SELL THE COUNTRY



The painful beauty of the free market is that, what doesn’t work is discarded to make way for that, that works.

Actually this the basic mechanism that drives evolution in the natural world. So capitalism does not hold the patent to creative destruction.

As in the natural world as in business when we try to oppose this natural selection process we do it at great cost to the general system before eventually failing or at least falling back to earth. Think price controls, centralised planning and jet airplanes.

Companies which fail go bankrupt – fail to meet their obligations and are liquidated – their assets are sold off to pay the creditors. What causes problems often isn’t that the company does not hold valuable assets, after all what would the liquidators be selling off, but that they run out of cash.

Thanks to creative accounting and other dodges a company can keep up the illusion of wellbeing before it is exposed and comes crashing down.

Last week UK supermarket chain Tesco’s had to admit that their profits were over stated by at least £250m (about one trillion shillings) leading to a collapse of its share price and not before the scandal had accounted for its chairman.

It’s a whole debate about why otherwise upright and competent workers indulge in this kind of fraud. I tend to lean towards the side that argues that, the incentive structure for top executives has been skewed towards delivering a profit and away from providing service to the customers and clients.

So managers understate expenses or defer them to a later period or scrounge on capital investments so their profit-pegged bonuses can continue to balloon. Our banks are not averse to such practices.
So what about a country? When our politicians clearly don’t have our best interests at heart, the technocrats are pigging out on our taxes with no corresponding benefit to ourselves and generally making us wonder whether we don’t deserve better the country has stopped working.

If a country doesn’t work, we can’t liquidate it in the way we would a company.  But maybe we can lease it out to a serious firm for a fixed period of time, with definite expectations framed by pre-negotiated targets.

What would Uganda look like on the market.

An advert for the job would probably describe the country as small economy -- $20b GDP, poor infrastructure, a functionally illiterate population, and little internally generated revenues but nevertheless with potentially, commercially viable deposits of all sorts of natural resources, huge energy sources and millions of acres of unexploited land.


"The country’s potential will have to be weighed against the huge investments in infrastructure – social and physical that will have to be made to unlock the aforementioned potential to come to a fair concession fee. It might turn out that we will have to pay the investor to take us off our own hands! ....


Top of the new manager’s to-do list would be to cut expenses and increase revenues. Unbundling the huge public administration sector would have to be a priority, knocking off two birds with one stone – cutting the wage bill and making more savings on the reduced “eating”.

Next he would want to pour the billions of dollars required in power generation, road and railway construction in the short term, education, health, law and order over the long term. Interestingly we may get these services free because with increasing economic activity and reduced theft it will be more possible than it is now.

But it will also be in his own interest to have a locally productive workforce as these would be cheaper than employing the expat-set with their insistence on living in Kololo, chauffer driven four wheel drives and private club memberships.

To ensure that he works for our benefit we have his incentives pegged to improvements in the quality of life of the people, measured in terms of social indicators like access to quality education, health services and opportunities for economic advancement rather than the misguided parameter of lifting people above the dollar-a-day poverty line.

We will have the manager reporting to us through an annual general meeting, a national video conference even. His contract will be renewable every five years.

One can expect that there will be a lot of disruption in the beginning as the manager tries to regularise our daily lives -- shutting out boda boda from the center of town, ensuring everyone liable for tax pays and evicting rogue investors from our wetlands.

But once the basics are in place they would serve as an effective springboard to the Promised Land.
The key to success is to extract our politicians from the process. Once they are out of the way with their parochial world view, progress can be made.

Of course the danger is that once the manager becomes entrenched in his position he may turn to dictatorship or worse into a monarchy and we might have nothing to say about it. I guess we will cross that bridge when we get there.

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