Monday, September 5, 2016

THE BAILOUT LIST IS A HOAX -- BITATURE

(This is an interview that was run in the New Vision last month following the publication of a list of businesses seeking a bailout from government. The businessmen allegedly were arguing that the poor state of the economy was driving them under and to save their investments, jobs created etc government needed to come in to save the situation)

There has been much public outcry about a planned bailout by government of stressed business. Private Sector Foundation Uganda chairman in a recent interview with Paul Busharizi gave the Business Vision his thoughts on the matter.

QN. Is it true that you are leading an initiative to seek a government bailout of distressed companies? If so why?

Ans. As the chairman of PSFU (Private Sector Foundation of Uganda) I have the responsibility to engage with government in different matters pertaining to the Private Sector and economy in general.

I used to be chairman of UIA for over 6years and gained valuable experience and insights on matters which affect our investors both local & foreign and a better understanding of how government works in general.

For the record, I was not appointed Chairman of PSFU by government; I was elected by the shareholders of PSFU at an AGM. This responsibility means I have to engage on behalf of the private sector on cross cutting issues. I declare that I am a member of private sector with interests in a diversified portfolio.

QN Justify the bailout, why don’t you let those businesses that have been careless fail or close. Why do you want tax payer’s money to bailout especially the big ailing ones.  Would you do the same for small ones?

ANS. My agenda was not necessary to bailout a certain number of businesses. No I wanted a solutions for all businesses operating in Uganda because there was a change in the macroeconomic environment.

I wanted to be certain it had not been missed by the government regular “Antenna” or govt and agencies. When the economy is overheating or slowing down, you need to be sure before you prescribe the right medicine; and this must be scientific. A vigilante group had gone great length to establish with facts what had happened lately. To take the pulse of the economy.

This group had a formidable leader that brought this matter to my attention. As I listened carefully to several business owners and challenges that they were facing. I realized that the pressures we were facing in one sector were apparently affecting nearly all sectors across the economy, agriculture, construction hospitality, trade & distribution, manufacturing, FMCG, logistics, oil & gas sector.

This got my attention and I was keen to share this with the central bank and other government officials to see if they have similar concerns consequently I wrote a concept note for the attention of the PM and he very graciously gave me an appointment at short notice  despite his  very busy schedule.

The matter was not entirely new to his office and several meeting had been held at various levels.

"As a consequence of these several meetings 3 requests were made
1.      That domestic arrears owed to the private sector by government be paid. (the PM had already consulted H.E the president  and cabinet decision  had been made. There was a directive to the ministry of finance to priotise this with immediate effect but not later than August 2016.
2.     On the side of traders that had supplied  goods to south Sudan but had not been paid , the government empathized  and would  engage directly  on their behalf in due course with the government of South Sudan but his was little more complicated and we had to realistic about the priorities there. In recent weeks we have seen clearly that there were some more pressing matters and lives were at stake there. Nevertheless the government will commit human and financial resources to this matter within a legal frame work to find a lasting solution for the benefit of Ugandan traders.
 3.    
The financially distressed companies that owed money to the banks....

The government is on record about the unusually high interests rates and was looking for ways to signal the commercial banks to bring down the interest rates.

The CBR (Central Bank Rate) has been reduced twice in space of 3months but there is a lag between CBR signal and actual commercial banks rates.

The government sets policies and the Bank of Uganda (BOU) will implement them with autonomy and independence of their understanding of these laws and regulations.  BOU cannot dictate to the commercial banks on interest rates in this liberalized free market model that was developed over the last 3 decades. It has helped Uganda maintain stable growth.

Any direct interference might have far reaching unintended consequences.

Notwithstanding the variance in CBR(monetary policy adjustments)and the Fiscal policy discipline instilled in the government lately, Government has further resolved and budgeted to capitalize Uganda Development Bank as a medium term measure to compete with commercial banks for development projects that require long term less commercially priced funds. Please do not see this as a bail out a bank to bail out ailing businesses. This is a process that the government and several government agencies are working on.

QN. So where did this list that has been floating on social media platforms come from.
Ans. There is no official list from the private sector that has been presented to government or the central bank.

How can we as PSFU or any other body for that matter be given the task of choosing who to bail out and who to leave out if there is no agreed transparent mechanism in the first place?

Let alone identifying a pool of funds that can be used after the budget 2016/2017 has already been passed.

QN. How would you make a list in a fair and transparent manner to bailout ailing companies?
Ans. Therein lies the biggest challenge. 

 Some have sighted US president (Barack) Obama's bail out of big companies in the USA and how he justified it this with taxpayers’ money.

Several other countries followed suite. Uganda’s economy today has indeed slowed down and the government agencies are monitoring closely what measures to use at their disposal to check this and get growth back on track.

Qn Is it true that your Simba Group wants sh210billion from government as bail out money
Ans. First of all that list that is going around on social media is a hoax or fake!Because there is no official list. The Board of PSFU, Executive Director and the management have not been involved in any way in making a list. I don’t think UMA or UNCCI has a list either. It has no author or signatory. I don’t know who is creating it and several people are now calling me to be included on the secret list. There is no list Period....
Debt is a relative thing better described as leverage in the corporate business world.
The bigger your business assets and cash flow the bigger the debt you can access. 

Banks employ very smart people to analyze your debt capacity and more often than not they get it right. You must remember that the banks have a much stronger responsibility to the depositors than to the lenders.

Simba's business with the banks is an internal matter for the banks and Simba group. If the borrower defaults then there is a clear process that makes the matter of public concern if necessary. By advertising in the newspapers or by going to court. So until such a time please let the legal private entity manage its affairs as it knows best. I don’t think Crane bank or any other bank as suggested will give one single customer shs200billion. Twenty billion maybe, but not 200B.


1 comment:

  1. eToro is the ultimate forex trading platform for newbie and pro traders.

    ReplyDelete