Tuesday, May 3, 2016

CLEARLY WE ARE NOT READY FOR OIL

You can’t have missed our honourable members machinations to have taxes on their allowances waived. MPs are hopping to save more than sh5m a month in taxes with this provision they muscled into the Income Tax bill.

These manoeuvers were necessitated – in our honourable members’ minds, by a February high court ruling for them to pay taxes on their allowances like all other workers of Uganda. They somehow weren’t paying since 2004.

"Following a public uproar about their self-serving ways they, last week threatened to hold all of us ransom by refusing to pass the budget if they were not accommodated. Not unlike the toddler throwing its toys out of the play pen in a tantrum...

I am not hopeful that we can stop our honourable members in their quest for tax free living.

However this kind of attitude does not bode well for the country’s future.

All around the world, when politics comes up against economic, politics wins and often to disastrous effect.

Last week Uganda made the decision to pass the oil pipeline through Tanzania and not through Kenya as was earlier expected, which brings us one step closer to oil production now, now expected for before 2020.

At peak production Uganda expects to be piping out 200,000 barrels a day. To put this number in perspective using $40 a barrel, our exports of goods will double from around $3b annually currently. 

Of course all these monies will not find themselves into the national coffers but our share of the price of a barrel, the taxation of oil companies and the revenues from supporting industries will amount to a very tidy sum.

"As incredible as it sounds, if our political leadership is not focussed on the long term benefits of this windfall and only see the short term gains they can milk from the situation, we will soon be worse off than when we had no oil...

Hard to believe?

Well, Ghana established commercial viability of their oil find in 2006 around the same time as we did. Their fields were off the coast so easier to evacuate the oil. In the excitement and driven by bad politics – an election was around the corner, the government leveraged future revenues to raise public service salaries by 50 percent in one fell swoop, in addition to other jumps in consumption spending.
A populist move that has cost them dearly, because now with the collapse of oil prices from highs of $140 a barrel in 2007 to around $40 now, Ghana finds itself looking to International Monetary Fund (IMF) for help in paying for its imports.

Across the pond in Venezuela, during the oil boom, the Latin American nation initiated many populist social programmes and even had time to thumb its nose at the US. Since then prices have plummeted and the country finds itself unable to sustain the programs, with inflation jumping to 500 percent. It has become so bad in fact that last week it was reported that the government is running out of money to print more money to keep up with inflation.

It would have been funny if you don’t think about the man in the street there.

In all these crisis you can bet there were politicians – like our own honourables, throwing caution to the wind, disregarding basic economics to plunder the treasury regardless of the plight of the country in general.

You can bet the representatives in Ghana and Venezuela are also hatching plans to increase their pay as you read this.

But the winner has to be neighbouring Equatorial Guinea. This little country has proven that it is not population size but political management that is key. With a population of about 760,000 they have the highest GDP per capita on the continent of about $20,000, however its populations is among the poorest on the continent with more than three in four  living on less than a dollar a day.

President Teodoro Obiang, his family and cronies have squirrelled away hundreds of millions of dollars in western banks (maybe why he is the longest serving president on the continent) and squandered it on high living. But you can bet there are politicians in the country who have been co-opted into the racket in total disregard of the people.

"Politicians all over the world are the same, they will always be on the lookout for personal gain, their baser instincts tempered only to the extent that strong institutions, societal censure or basic good manners prevails...

The correct thing to do is to invest these windfalls so the returns from the investment can pay for improvements in the wellbeing of the people.

Investments in social services, which improve the quality of the human capital, or building infrastructure, which reduces the cost of doing business are better than raising MPs salaries, which is not an investment but a price we have to bear to keep up appearances of a democracy and maybe more expensive than the bother.

A fly on the wall reveals that reeling from the public backlash MPS are now trying to extend the tax exemption to teachers, doctors and other public servants, so that there plan is not seen for what it is – a shameless grab for resources which, on close scrutiny,  they have no right to over the rest of us.


2 comments:

  1. And I wonder what this country is about. These are fellows majority of whom sit and berate government for being ostentatious and lavish in their ways, and they then retreat and unleash their greed on the nation. It is a paradox that is beyond comprehending for me. This nation has become a den of day light robbers.

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