THE TOP TEN SHILLINGS & CENTS POSTS OF 2016

Uganda never bores. For better or worse we are always making news. This blog tries to go beyond the news to explain, interpret and decipher the news.

2016 has been a good year for news and below are the top ten Shillings & Cents posts by page views. This is the second edition -- the first having been at the end of 2015, of what will be an annual event

#10: WILLIAM KAJOBA, IN THE EYE OF THE BAILOUT STORM

On an evening talk show early last week Kampala businessman William Kajoba came out strongly in favour of a bailout of local businessmen, who are struggling through the current economic hard times and are staggering under the weight of the growing debt load on their businesses. more

#9: RUGASIRA ON COFFEE, CHOCOLATE AND EXPORTING TO THE WEST

 I prefer to seat upstairs at the Good African Coffee shop. But Andrew Rugasira had other ideas. We sat downstairs with a display of Good African’s various offerings as a backdrop to our conversation.

Rugasira is launching a line of chocolates to complement his company’s line of coffees, which project started a decade ago and took him from the foot hills of the Rwenzori Mountains to Buckingham palace to the rarefied heights of high finance in the business capitals of the world. more

#8: THE UPDF SHOWING THE WAY ONCE AGAIN

Last week the UPDF’s Wazalendo Savings & Credit Coop had it annual meeting.

According to its financial report they made a profit of about sh12b, which was 30 percent higher than the previous year when profit after tax came in at sh9b. Savings almost doubled to sh60b while the loan book came in sh146b. The 69,000 member group had invested sh80b in their SACCO by subscribing to the SACCO’s shares. more

#7: POST ELECTIONS, FOCUS ON JOB CREATION

As the dust from the just concluded polls settles it’s time to move on, use the lessons of the campaigns as a stepping stone to a better future for all Ugandans.

As far as I am concerned everything – political or social has its root in how the economy is faring, how it’s being run.more

#T5: THE GHOSTS OF KARUMA PROCUREMENT RETURN TO HAUNT PROJECT

The troubles that dogged the Karuma Hydropower project’s procurement continue to stalk the project, threatening the multi-billion dollar dam’s future usefulness.

In the current spurt the Energy ministry and the Uganda Electricity Generation Company Ltd (UEGCL) are in a heated battle over the supervision of the Karuma and Isimba dams, with accusations and counter accusations being traded, a situation that has been brought to President Yoweri Museveni’s attention. more

#T5: INTERVIEW -- WAPAKHABULO IS REARING TO GO AT UGANDA OIL COMPANY

Josephine Wapakhabulo was last month appointed the Chief Executive Officer of the Uganda National Oil Company (UNOC). Dr Wapakabulo sat down with Business Vision’s Paul Busharizi to discuss her company’s role, her plans and the prospects for oil in Uganda, below are the excerpts of the interview. more

#4: BREXIT AND WHY YOU SHOULD PAY ATTENTION TO PEOPLE IN LARGE NUMBERS

Last week the headlines were all about the shock UK vote to leave the European Union (EU).

By a four percentage point margin the British were scared into believing that immigrants from eastern Europe, the middle East and Africa would overwhelm their shores, and a vote to keep them out would be better than staying wed to the largest economy in the world. more

#3: SOUTH SUDAN'S IMPLOSION IS OUR WAKE UP CALL

The flare up in fighting in South Sudan is disheartening for the disruption and loss of lives that it entails but also for the economic loss to Uganda that it signals.

Clearly the recent peace deal between the South Sudan government of Salvar Kiir and the rebels led by former vice president Riak Machar has failed to hold. more

#2: WILL THE MUSANA CART BRING THE ROLEX TO THE WORLD?

Almost two decades ago two young men asked themselves what it would take to create a “Rolex” chain of restaurants.

The ideas would be take the rolex, which at the time was championed by one Sula in Wandegeya, create a menu, standardise the ingredients, upgrade the sanitation issues, license the Sula name and employ him for good measure. more

#1: WITH THE CABINET ARE WE BARKING UP THE WRONG TREE?

This week a double take was necessary on news that NRM members of parliament were sulking over not being appointed to the cabinet and went further to task President Yoweri Museveni to explain  his selection criteria.

Museveni ever the consummate politician, it is reported, listening to their griping, said he would take their concerns under advisement and would get back to them. more

RETHINKING POVERTY AND UNEMPLOYMENT

Two weeks ago I had the pleasure of interviewing Nobel Laurete Muhammad Yunus.

Starting in the late 1970s Yunus’ work with lending to the poor and the eventual founding of the Grameen Bank popularised the microcredit concept. His pioneering work gave traction to the notion that the poor don’t need charity but the opportunity to pull themselves out of poverty. It’s where the notion that there is wealth at the bottom of the pyramid begun to get traction.

Yunus, a trained economist himself, through the work he was doing among the poor of Bangladesh begun not only to rethink but to challenge the conventional economic wisdom.

He sums up his mission now as the three zeros – zero unemployment, zero-poverty and zero-carbon emissions.

"Yunus argues that employment as we know it is a recent concept a creation of the industrial revolution, prior to that if a person or a community had a challenge there would either learn a craft  or band together to sort it out – essentially creating a business....

Poverty he says too is an unnatural condition to the human being. How can one fail to meet his basic needs – the minimum definition of poverty, when we live among plenty and there are people all around us who are wealthier than us. Poverty he argues is imposed upon us to sustain an unfair system that thrives on inequality.

It’s a bit hard to argue against the man given that he not only has impeccable credentials in the subject but also because he has tested his thinking and despite what the text books say, has empirical evidence to prove his point.

Every once in a while, not very often maybe a handful of time during one’s life these type of people cross your path who take what you know, the conventional wisdom , and turn it on its head opening up a whole new perspective.

His Grameen bank started as a well-meaning attempt to free the poor from the yoke of the loan shark. 

The poor needed financial services but the high street banks couldn’t be bothered to service them. It would be too much bother and economically unviable to manage their many, but small accounts they argued – and still argue today. Besides how do you lend to a person without a regular income or recognisable assets.

Grameen Bank and the numerous microfinance institutions that have followed suit have put the high street bankers to shame. Grameen Bank now employs more than 20,000 and pulls in an annual net incomes in excess of $10m (sh36b) all from a clientele the regular banks did not want to touch with a ten foot pole.

Which raises the question, it can be argued that the patrons of the bank always had the resources so how come they couldn’t martial these same resources sooner?

"Clearly the people could not see the potential around them and had bought into the idea that poverty was the natural order of things for them and they rather accept their lot. Its interesting how the mind works. Once it hears “No” it stops working, essentially gives up. And its possible for a mass conditioning to occur where a whole society believes it is lesser than its true potential because that is the accepted wisdom...

So poverty comes from the mind. The inability to conceive the possibilities and therefore take advantage when the opportunities present themselves is the beginning of all poverty.

While some people can pull themselves out of this mass hypnosis out of either self-education, stubbornness, faith that they deserve better or all of the above, most people need to be shown the way, led by another with recognised authority.

Essentially if my neighbour can do it, pull himself out of poverty why can’t I?

I imagine tooling around the squalor and deprivation of Bangladeshi slams Yunus could easily establish authority by virtue of the fact he had been to school.

Given the Grameen story all one needs to pull out of poverty is an open mind and leadership or mentorship.

Self-help author Robert Kiyosaki once wrote  that realigning the mind to think in a wealthy way is the hardest part but once that is achieved the physical part, the actual going about accumulating the wealth is the easier part.

It makes sense doesn’t it. The reason we are poor as individuals or as a country is because our minds have been conditioned to focus on the negatives – low income, poor education or lack of technical know-who to explain our inadequacy. Once that thought has found a comfortable place in the mind we stop thinking about the possibilities.

In a strange way despite these same thought processes causing us grief we rather stick with them than do the hard work to change our thinking patterns.

"Our agrarian background equates work to visible physical activity and cannot relate to the internal
work one has to do on themselves to change their mindsets.  Hence we are daily involved in frenetic activity, micromanaging everything and generally being loud as proof that we are working...

So thinkers are lazy people. So we remain poor.

The story of Grameen Bank is that whatever we need to pull ourselves out of our malaise is around us, better still inside us.

PROMOTE MORE SOLAR USE IN UGANDA

This week a 10 MW solar project, the largest in the region was launched in Soroti district.

The power from this $19m (Sh68b) project is enough to power 4,000 households or about five times the number of homes in Bugolobi flats.

Promoters of the Soroti  project estimate that if we were running generators to produce the same amount of power, we would need 15,000 liters of diesel daily.

They also report that to run a project of this type a key requirement is that there be between four to six hours of sunlight daily, Soroti gets about eight hours of sunlight daily making it one of the best solar resource areas in the country.

Rwanda recently commissioned a 8.5 MW solar project which is projected to power 15,000 households there.

But Morrocco, while not using photovoltaic technology like Uganda and Rwanda, earlier this year launched the first 160 MW of an eventual 510 MW solar farm, the largest in the world. The project which covers an area equivalent of 200 soccer pitches will eventually export power to Europe.

The issue of energy is critical to us. 

One because our power generation to our population is way below the average for the middle income country that we aspire to be.

According to the CIA Factbook next door neighbour Kenya was generating 189 kwh per capita of electricity in 2012 (the most recent year for which there were figures). Uganda in comparison was generating less than half that at 91 kwh per person that same year.

But even Kenya is a poor comparison. In the same year Egypt was generating 1,856 kwh per capita, Mauritius 2,182 and South Africa 4,896 kwh per capita.

These figures serve to show how far behind we are in our ambitions to make middle income status. Kenya already is so, at a bare minimum we need to double our generation capacity.

And secondly, to paraphrase the second law of thermodynamics, any country will regress into chaos unless energy – in this case electricity, is injected into the system.

"We don’t need theoretical physics to tell us that. A few years ago when we were not generating enough power to meet our needs, we suffered frequent loadshedding to the point that at one time a study showed that Ugandan manufacturers were losing at least 30 days per year in production as a result....

This would be disastrous because not only would our local businessmen be uncompetitive at home and abroad but one is unlikely to attract the kind of investment required to push the country to the next level of development.

They say we have at least 4,000 MW of hydropower generation capacity on the Nile, another 160 MW potentially from small hydro plants, geothermal capacity of 450 MW and another 800 MW from the use of peat from our numerous wetlands.

Given that our population continues to grow at about three percent annually, meaning it doubles ever 24 years, the urgency to unlock our power generation potential cannot be over exaggerated.

While we should be pushing for more and more generation we would not forget the other side of the story – directing even the little power we have towards productive sectors of the economy.

The campaign to get us to use the pricier energy saving bulbs has recorded a saving of about 30 MW according to the energy ministry.

In addition and related to the Soroti power plant we should find ways to move residential consumption to solar energy. A solar unit on every residential roof to power our bulbs and boil our water would probably save multiples of that saved by the new bulbs.

This is not as farfetched as it seems. The price of installing power has been falling precipitously over the last 40 years. The price per watt of solar power is now at around $57cents compared to $76 in 1977....

In preparation we should be looking at what policy changes need to be done to the current situation to kick start a move towards more residential use of solar power.

LET HOUSEHOLDS PAY A HIGHER TARRIF

It’s a simple concept.

It is based on the premise that there are only two ways to spend your money – you either eat/consume or invest it.

When you consume your money you will get instant gratification – a full belly, an emotional high from the new shoe, gizmo or car or the envy of your peers. When you invest your money – committing money with the hope of earning a return, you make and can accumulate more money.

"So to get rich you have to shift your expenditure away from consumption and towards investment.
Simple but not easy...

What works for individuals works for companies and countries.

Which brings me to the power tariff. It’s that time of the year when the Electricity Regulatory Authority (ERA) goes out into the public to get our views about the possible adjustment of the tariff in the coming year.

As it is now domestic consumers pay sh626 a unit, commercial consumers pay sh566.9, medium industrial sh524.7 and the large industrial consumer sh349.5 per unit.

Going by the above domestic consumers pay at least 80 percent more than the large industrial consumers and just over 20 percent more than the medium industrial concerns.

If I had my way domestic consumers should pay at least sh1000 a unit or three times what the largest consumers currently pay.

Going by the previous prescription of how our nation can be rich we need to shift more and more resources to the more productive sectors of society.

In our homes little economic value is created using our power – hopefully none of us is cooking using power anymore, so most of our power usage is for lighting and entertainment. Of course the argument can be made that these recreational activities – reading, watching TV or listening to music, enhance our value through learning and improved peace of mind, but that is often for a small number of people.

A large scale manufacturer who employs hundreds of people and may very well expand production or at the bare minimum be a bit more competitive in the market, has the benefits accruing from his business being spread much further afield.

The arguments against this are many but just to pick a few.

There is a fear that too high a tariff will encourage more power theft. While this may be the reality it is to be held hostage by wrong elements in society, emboldening them while messing up the business environment.

Greater investment from the power companies and government in stamping out power theft – even by well-connected individuals, cannot be put off because we are worried about raffling a few feathers.

"Strangely enough opposition to too high a domestic tariff comes from the same businessmen who want to see their own tariffed lowered. They argue that if power tariffs are raised it will lead to a higher cost of living for their workers and putting them – the employers, under pressure to raise wages...

This sounds like they want to eat their cake and have it. They probably are avoiding the higher choices that would come with making their companies more efficient by cutting wastage in their administration budgets or having to share their savings from a lower tariff with their employees.

That really should be handled by themselves. Government should work for the greater good.

However anecdotal evidence suggests a higher tariff will not necessarily lead to a higher standard of living or are unnecessary degree of discomfort.

For one people will become more frugal with how they consume their power – we shall turn off the lights when we walk out of rooms, we will do away with our electric cookers (finally), we may even install solar energy if not to light the house but at least to boil our bathing water and we will have to stop the wasteful business of having security lights on all night.

On that last point the increased revenue from domestic consumers can be used to help roll out solar powered street lights so we won’t have to keep our security lights on all night.

Already the almost universal switch to energy saving bulbs has made 30 MW available on the grid according to the energy ministry.

So our lifestyle won’t suffer that much.

"But secondly and probably more important is that the rollout of the pre-paid power meters is already affecting power consumption patterns. The feedback is instant and in fact power has become more affordable because not only can we pay for the power as we need it but also that we don’t have to wait to be slapped with a massive bill at month end or whenever the Umeme people choose to deliver the bill ...

Of course the only challenge for the people who run the electricity industry is that the people who will have to bear the brunt of this tariff hike – we the urban elite, will make so much noise, disproportionate to our small number, that government will be cowed into making one concession or the other.

When that happens government should just call our bluff.

THE CHALLENGE OF GOVERNMENT PROGRAMS

It was reported this week that MPs had visited an abandoned ice plant in Buyende which had cost government sh2.4b and has not as much as produced an ice cube since it was “completed” in 2011.

The plan was that ice plant would benefit the fishermen of the nearby Bukungu landing site by providing ice to preserve their catch, which ice they wold have to buy – and still do now, from faraway Jinja or Kampala.

This single desolate building with an overgrown compound and now overran by vermin, encompasses all that is wrong with government projects.

"Government projects are mostly backed by good intentions but often the deliverable is not that it works for the benefit of the intended beneficiaries but that it is there. Governments tend to focus on inputs and little on outputs...

So you will here this or that official bragging about classrooms, health centers or even ice plants built rather than the out puts of the said projects, how many students graduated from the schools, patients were treated or how was the fisherman’s productivity improved respectively.

Politicians are not wired for long term thinking. They are always on the lookout for the quick fixes. 

And because they know public opinion is fickle they have worked out that better to have a pipeline of projects – even if they don’t work than have that one project that will transform lives over time.

That is why despite the best intentions and better than average brains government is a poor businessman --- around the world.

A businesses viability is determined by its profitability, which is basically that the output is greater than the input. Governments because they are plugged into an almost inexhaustible source funds are not fixated on the bottom line or even better the return on investment.

Essentially government – and not only in Uganda, is incompetent when it comes to business. And this is the charitable view.

The more cynical view is that since government is a vehicle for doling out patronage to its supporters – all over the world, there is a tacit agreement that these government projects are the reward for the loyalty of its supporters.

So if they steal a little here or there or even stall whole projects its ok as long as they remain onside.

"Governments cannot really help themselves. The NRM recognised this early and sold off all its parastatals or broke up government monopolies 20 years ago. As a result we have more efficient services in transport, telecommunications, power generation, hospitality business and in any number of businesses sectors that the government let go of...

I wish it could be different but it cannot.

That being said there are instances where government needs government can get involved in business. In projects for instance where the returns are not discernible immediately but which are critical to the economy and where the private sector wold have an interest if the risks were mitigated against.

Enter public private partnerships where government would partner with private players. The model though should be that government should exit the enterprise as soon as it is up and running, otherwise for the same reasons for it not going into business, it can collapse a perfectly viable industry.

One other reason for government to be in business is so that its officials can learn how business operate and disabuse themselves of the suspicions technocrats tend to harbour against businessmen.

This will be useful exposure that will allow them better understand what makes business tick and the need for incentives and concessions to make ensure success.

But otherwise clamouring for government to go into business is not unlike doing the same thing over and over again and hoping for a different outcome.

And just one last thing about that forlorn ice plant in Buyende. It did not work because it was not connected to the power grid!!!!!

A SOLUTION FOR UGANDA’S BUSINESSES?

The numbers are quite disheartening.

Only one in a hundred businesses in Uganda make it past their fifth birthday. There are a handful of businesses with a nationwide presence. The same goes for companies that have transcended a generation – passed on from founder to son/daughter and continued the legacy.

This is a cause for alarm for several reasons, not least of all that if we cannot create viable businesses, we cannot create jobs or expand the tax base or create wealth sustainably. Never mind the negative effect to democracy that we do not have a viable indigenous capital class.

We have tried everything over the last three decades.

"Palmed off juicy assets during privatisation to locals only for them to accelerate, rather than reverse their downward spiral. We have tried seeding businessmen -- small and connected, with some start-up capital, only for that too to come to naught. We have offered preferable tax terms and concessions to our own but wapi!..

It would be funny if it weren’t a scandal, that during the fastest growing phase of economic growth in our history we have little to nothing to show in the way of solid businesses.

If it is any consolation we should keep two things in mind.

Even in the US, the bastion of freewheeling economics, start-up statistics are not very much different in relative terms. What helps there is that the process of creation-destruction is ongoing, non-ceasing , a numbers game which ever y so often throws up a Facebook, Google, Microsoft, Coca Cola or GE.

And secondly that Uganda is one of the most entrepreneurial countries in the world only second to Chile at last count. This is good because it means we on average have no fear of going into business for ourselves.

Believe it or not our companies don’t sputter and grind to a halt for lack of money but more for a lack of entrepreneurial and managerial capacity.

So what is the solution?

I think I might have stumbled upon it last week in the form of the book “The Start Up J Curve” by Howard Love.

Love, a serial entrepreneur and venture capitalist, after years of starting up his own companies or helping others has distilled his experience into a model of how startup companies go from inception to maturity.

His six phases of the J-curve starts with creation, dips down into “long cold winter” or the “valley of death”, the phase when after you start a company reality hits that your idea is not so brilliant and requires much more work than was anticipated.

If you manage to survive the valley of death and pull out, you can then scale up your business and eventually reap a rich harvest either by selling the company or earning serious money from it.

This model is important the author says, and the sequencing of events more so.

His suggested order is product development, then creating a business model – how the business makes money, around the product and once those are sorted you can then begin to scale and eventually cash in.

"He makes the point that startups fail because either entrepreneurs jump to soon to create a business model before they have created a product that is acceptable to the market. Or try to scale the business before you have determined the business model or even got the product right...

And it each phase of the J-Curve there specific tasks to perform and targets to aim for before you can go to the next stage. To short circuit the process is increase the certainty of failure.

How many times have we seen startups taking out huge office space – scaling, before they have even tested their product in the market or nailed down a business model?

He also has some interesting thoughts at how to finance each stage of the process. All finance is not the same and what may work at the creation phase – angel funding will not necessarily work when it comes to scaling the business, where venture capital may be more desirable. And vice-versa.

No one can tell anyone about how a business will turn out. The mere fact that businesses are different, start at different times and in various locations alone mean no two experiences can be the same.

But they also say if you want to climb a mountain study all the routes to the top and then ask someone who has already been there.

"That last part – finding mentors, is notoriously difficult in our context, because as described at the beginning there is a dearth of businesses that have gone beyond providing a lifestyle for their founders...

During the grand finale of the NSSF Friends with Benefit show I learnt that NSSF has 1.5 million members out of a workforce of 15 million Ugandans. This statistic is a proxy for the size of the formal economy to informal economy. That the informal economy is ten times the size of the formal economy.

This could be significantly changed if more businesses could go from inception to maturity. Just imagine if we had 1000 companies of the Vision Group’s size – the size having been achieved by successfully charting the J-Curve, how qualitatively better the economy would be?

LESSONS FROM KASESE

Last weekend a crisis that was on a slow boil in south western Uganda burst into full eruption when police and army units attacked the palace of the Omusinga of Rwenzururu, Charles Mumbere.

A series of attacks on security personnel and civilians in the districts of Kasese, Bundibugyo, Notorko and Kabarole in recent months has caused unease in the region. The taking refuge in the palace by some of the perpetrators of these attacks served as an excuse for security agents to storm the palace.

In the process between 60 an d100 people were killed, including 16 policemen and Mumbere was arrested and charged with murder in a Jinja court.

Since then numerous commentators are have highlighted certain issues critical to understanding the issue.

One, that the resistance of the Rwenzurru comes from a fight against marginalisation by Kampala and the Toro Kingdom under which they were. Secondly, that among the Bakonjo there is a difference of opinion about engagement with the central government and finally , that the genesis of the situation also lies in a certain amount of lethargy with which our own government goes about enforcing the law.

Last week I had the benefit of reading second prime minister Kirunda-Kivenjinja’s Uganda: The crisis of Confidence. In the section of the build up to the 1979 invasion of Uganda by Tanzanian forces and a combination of anti-Amin forces several things appeared obvious to me.

One, that the Uganda army at the time, after eight years of decay was incapable of any meaningful stand against the invaders. And secondly were it not for the Tanzanian army’s involvement it’s doubtful that Uganda exiles would have been capable of such a swift ejection of the Field Marshal on account of their disorganisation.

"For every romantic tales of success of rebel movements in Cuba, Mozambique or even Uganda there are dozens even hundreds of “rebel” movements that have been unsuccessful, the hopes of their buccaneering leaders dashed against the formidable defence of a coherent state or floundered for lack of strategy beyond wishful thinking...

The time for forcing government’s hand by force are long gone in Uganda.

People in disagreement with Kampala are going to have to use a little more brain and a lot less brawn to have their way. It is easier to resort to violence than intelligence in resolving disagreement. The hope being that if you can catch your opponent by surprise or overwhelm them with force or both, you can impose your will.

But what happens when you don’t surprise them or overpower them?  It can only end badly for you.

Given that the government, like any other around the world, has literal monopoly on large scale violence and that this government is more coherent than others before it, to hope to force into concession is not unlike bashing your head against a wall.

Now one needs to organise, mobilise and harass the government by civil means, if only because in the last three decades or so the NRM has built a countrywide organisation, that while not always working as one, is easily mobilised in the face of external aggression.

So why haven’t divergent views managed to organise to the point that the government would be forced into concession?

"Because it is too hard. It is too hard to formulate a durable message. It is too hard to sell it to a largely apathetic population. It is too hard to organise around it. And it is too hard to stay the course in the face of stiff resistance from government...

One understands the romantic notion of a smash-and-grab attack, the reality is that it is unlikely to happen today in Uganda.

This is by no means to diminish the unnecessary loss of life and the tense situation being experienced in south western Uganda.

But unpalatable as it sounds, if one wants to win concessions from government, any seating government, one needs to be a bit more organised, a bit more systematic and a lot more tenacious.