HOW IS IT THAT INDIANS PAY MORE TAX THAN US?

The Indian Association has made the claim that their businesses account for 60 percent taxes collected by Uganda Revenue Authority (URA).

It is an amazing figure given that our Indian community does not make up even one percent of our 40 million population.

I asked online how this was so and the knee jerk reaction was to dismiss the figure, argue that they serve as  “tax agents” collecting VAT, withholding taxes and excise duties on behalf of URA and that the direct taxes component is considerably lower.

They have a point.  In 2016/17 URA collected sh12.9 trillion. Of this the largest single individual tax head was Pay As You Earn (PAYE) charged on workers’ salaries, which brought in sh2.1trillion.  The second largest is corporation tax, levied on company profits, which was about a third of the PAYE receipts at sh764b. Given their small size in comparison to the general population the Indians are unlikely to be the highest payers of PAYE.

We know they are in business and it would not be a stretch to assume that they account for a significant proportion of corporation taxes remitted to URA. And through their business too they collect excise duties and VAT on everything from airtime, alcohol, fuel and any number of the products on which government recovers indirect taxes.

So the doubters are correct to point out that in terms of direct taxes the Indian community is not the leading contributor to the exchequer. On the other hand their contributions to the URA through indirect taxes levied by their businesses is what sets them apart.

"Clearly the Indian community in our midst is punching above its weight in its contributions to the treasury...

The knee jerk reaction to shoot down the Indian community’s claims took me aback at first but maybe it shouldn’t. Because to acknowledge that fact would raise the uncomfortable question, “What the rest of us are doing?”

Either we are working just as hard or harder and dodging taxes or we are just not as productive as our Indian friends. I suspect it is a lot more of the latter than the former.

In a roundabout way it would be nice if it was that we are dodging taxes than being unproductive, because then all URA would need to do is widen its reach and tighten its processes and we should be collecting more and more tax.

If you grew to a sizable company and were dodging taxes it wouldn’t take much for URA to find you. 

So then maybe there are thousands of companies small enough to fly under URA’s radar not paying taxes on their profits or remitting indirect tax. Which is possible given our business landscape where less than a handful of companies have successfully transcended a generation. Longevity is a factor in growing businesses, to avoid URA’s attention can only be sustainably managed if you are a small company not supplying government.

It is widely believed that many companies evade taxes. Evading taxes put a ceiling on your company’s development, you can’t for example supply government if you do not have tax clearance. 

Of course there are companies that supply government that evade tax anyway but at least they pay something.

But tax dodgers can eventually get caught and this is often fatal. The owners of one company, a highly visible company, which had been giving the taxman the run around, saw their owners miss millions of dollars because when potential buyers did heir due diligence and found they had huge tax liabilities walked away from the deal. But that was not all, I think the owners exhausted he leverage they were using to keep the taxman away and URA eventually came around to take over the company and sell it to collect its pound of flesh...

So then we have to ask the question what are the Indians doing that we are not doing. One of the doubters finally managed that the Indian businesses are more formal than our own. A double edged sword because while it means their businesses can grow it also means URA can find them easily. 

Unlike our businesses the Indians seem to have decided that paying taxes is a business expense they need to endure to achieve their business ambitions. We would rather just dodge the tax and stay small. We cut our nose to spite our face?

Informality is not a uniquely Uganda problem. Businesses all over the world start informally. They remain so because the cost of going formal is too high in term of money, time and effort. Our raking nearer the bottom than the top of the World Bank’s Ease of Doing Business rankings provides sufficient proof that this the case in Uganda.

It takes 24 days to register a company versus half a day in New Zealand, it cost you 195 hours a year to pay your taxes versus 50 in Estonia, it takes 122 days to get a construction permit versus 27 days in South Korea.

But the Indians suffer all those obstacles and formalise their businesses why don’t we?

There are four reasons to start a business – to feed yourself, to leave a legacy, to sell it or for philosophical reasons.

"The difference between us and Indians is that we normally build businesses to feed ourselves, for lifestyle purposes. The most basic Indian businessman builds a business to pass on to the next generation. The mentality, levels of commitment and organisation needed for either business are worlds apart...

There maybe many other reasons but if we are to examine the reality and learn from it that would be a good place to start looking.

MARKETS QUIETLY CHANGING THE ECONOMY

This week it was reported that Uganda is in danger of becoming the continent’s biggest exporter of dairy products.

According to the report Uganda’s dairy producers are in line to export $150m worth of dairy products which will put them at par or ahead of South Africa whose export receipts have oscillated between $130m and $150m.

This good news on many fronts. To begin with it means that the investments in the dairy industry over the last three or so decades are beginning to pay off. In the 1990s there was a determined effort to dot the milk producing countryside with milk coolers. These would take delivery of farmers’ milk and serve as a collection center for transporters to the processing plants. Milk which was previously fed to the calves or poured down the village paths now had new market.

Secondly, the millions of dollars in processing capacity has more than compensated for the start-stop nature of operations of the previously government owned Dairy Corporation. This has created more demand for milk products.

But what was even more heartening for me to read was that as a result of our own low milk consumption of about 65 liters per person annually as compared to the World Health Organisation (WHO) recommended 200 liters, some producers have chosen to specialise in producing powdered milk or extracting casein, a protein contained in milk and used widely in the health and fitness industries.

"However this burst of activity and in several other agricultural sectors have been spurred by the increasing connectivity in the region, which has pushed Uganda’s trade with East African Community (EAC) to $5.5b last year from $1.5b in 2005...

While greater regionalisation has increased our commercial interactions, as a proportion of total trade it only constitutes 9.4 percent. That is both bad news and good news. The bad news is that we are still locked in the colonial trade networks which mean we trade more with Europe than with ourselves.

The colonial trade networks were designed to extract raw materials from Africa for their industries and us serving as token markets. This network meant for example that we do all our trade through Anglophone Kenya and very little through former Belgian colony Democratic Republic of Congo.

The bias is seen in the transport, energy and ICT networks between Uganda and its eastern and western neighbour.

As a measure of how deficient we are in this aspect, trade with Asia accounts for almost 60 percent of the region’s trade. The same figure for the European Union is about 70 percent.

In both these instances their transport infrastructure is well developed whether road, rail, air or water compared to our in the EAC or in the continent as a whole.

The African Development Bank (AfDB), which has identified this shortfall as an impediment to the continent’s development has committed some resources to bridging the deficit. It said in a recent report it had financed the development of 400 km of cross border roads and a single one-stop border post.

They believe regional trade will be more competitive with continued improvements in transport, energy and ICT infrastructure, lowering and/or elimination of tariff and non-tariff barriers and the harmonisation of monetary policies.

The challenge of course is that our bureaucracies, slow as molasses, out of incompetence, corruption or because they are aligned with powerful lobbies that want to maintain the status quo are clearly not doing enough, fast enough.

That means on one hand there are farmers in the region either stuck with their produce, being forced to dispose of it at a bargain for lack of access to markets. While on the other hand there maybe areas of food shortage that cat be helped once again for lack of access to the producing areas. Needless stress on either side.

"In fact with improved connectivity greater efficiencies can be created around the region. Why should anyone else bother growing matooke in the region when we have the best soils and weather for it in Uganda? With improved infrastructure our banana industry would be able to deliver matooke anywhere in the region. This would allow those areas to focus on what they are best at....

As a region to take this even further we should seriously consider setting up commodity exchanges, where produce can be traded. This will ensure farmers get them most favourable prices available on the market by bulking, guaranteeing quality and as a result lowering the transaction costs of their clients.

For that to work  we need greater volumes of what we are producing.

But for a start the promise is there. All we need is greater urgency in lowering barriers to trade, accelerating the development of intra-regional infrastructure and maintenance of peace and security.

TO LINE UP OR NOT TO LINE UP

When it was first suggested that elections at the lower local council levels will be by lining up the excitement was palpable.

This excitement was partly because of the novelty of it, but I think more importantly that people were going to choose in an election and their desire would be hard to dispute.

The background of course was the narrative that the 1980 general election was rigged. To this day the Democratic Party (DP) still wag an accusing finger the Uganda People’s Congress (UPC) for burgling their victory.

So it was empowering for Ugandans in 1987 to think they could vote for their leaders and before the day was done know the polling results “And let us see how they steal the vote now”.

"Which is as it should be. The people should be given the opportunity to choose their leaders in a transparent process and in so doing affect the course of their lives. At least until the next election...

The critics of lining up , then and now, argue that this lining up system does not further the cause of the democracy. That it is subject to blackmail, corruption and coercion and does not allow people to freely express themselves.

Since 1987 we have had numerous election at various levels and mostly by secret ballot. Interestingly the criticism of these process say they have been marred by corruption, coercion and blackmail, the very ills the system was supposed to cure.

Interestingly in the Nigerian presidential elections in 1993 were conducted by open ballot – the technical term for voting lining up, and have been declared the freest and fairest elections in the country before or since.

One can see how the ruling party can benefit from an open ballot. The government apparatus – security and civil service can be mobilised to force people to line up “properly” and be on hand to make sure this happens. The logistics of such an event around Uganda’s 60,000 villages would be quite a feat, even for the NRM which has a representation at every level around the country.

However in an environment where the ruling party and opposition are evenly matched such intimidation of the voters will be near impossible. One would expect serious fracas as opposition supporters resisted the strong arm tactics of the government.

It would also be impossible for one side or the other to claim more support in an area than is represented in the voting lines.

The silver lining on the process is that it could very well reduce post-election court suits.

"Which makes you think . While some people are not willing to even consider the option, what would a return to the open ballot mean for our elections especially at the parliamentary and presidential levels?...

If people feared intimidation from the government as the critics of the NRM suggest there would be massive absenteeism. The NRM and its candidates would win with such thin mandates as to call the whole election into question.

Another scenario would be that the opposition supporters, who it’s claimed are actually in the majority, would turn up in numbers and put the NRM to the sword. The proof would be indisputable.

Or the flip side would people turn up in their numbers and vote for the NRM anyway, which would put to rest the perennial claims that the opposition has the numbers around the country and is just being cheated of its rightful place at the high table.

It’s cheaper, less time consuming and quicker. Let’s give it a try. At the bare minimum every side will come out of the election knowing what happened for sure.

UGANDA AIRLINES WILL BE A POISONED CHALICE

A few weeks ago I put out a public request for the business plan for the revival of Uganda Airlines. Nothing happened until a few days ago, when the full feasibility study that justified the project fell in my laps. So to speak.

According of the writers of the feasibility plan, which was the National Planning Authority (NPA) the justification of the airline is based on the assumptions that it will facilitate tourism, stimulate economic growth, promote exports, improve our widening trade deficit and reduce cost of air transport.

They also added that it will help break foreign dominance of our airspace, help market the country abroad and create employment opportunities for Ugandans in the aviation industry.

The planners set the start-up costs at $400m (sh1.6trillion) which will be spent on buying six planes -- $330m, start-up costs $20m and contingency money of $70m or about three months of expenses assuming no revenues.

The airline will fly seven international routes – London,  Brussels, Dubai, Doha,  Mumbai, Johannesburg and Lagos and 18 regional routes, which would include all capitals of the East African Community as well Kinshasa, Juba, Khartoum, Asmara, Addis Ababa, Lusaka and Harare.

From this point on things begin to get fantastic.

According to the plan the airline will manage a passenger load factor – a measure of how many passengers they will carry per flight compared of available seats, of 49 percent. In other places in the plan they put the load factor in year one at 62 percent.

This is important because the more people you can carry from day one the faster you can become profitable, if your costing is correct.

Industry experts have pointed out two flaws in this scenario. 

One that it is impossible, especially given the anaemic advertising budget of less than $5m per year in the first four years.

Secondly and related to that the airline, business is dependent on reputation and loyalty, neither of which the new Uganda Airlines has. As a new entrant they will be starting from scratch in an extremely competitive market, so to have half a chance of working they need to have a bigger marketing budget.

And the competition is real to Brussels, Dubai, Doha, Johannesburg, Addis Ababa and Nairobi, the new airline will be flying into hubs with established competition on those routes. Even with bilateral flying agreements between the respective points, one should not expect those airlines to roll over and hand over their market.

One aviation veteran pointed out that there can be no Uganda Airlines without an Entebbe-Nairobi route. But that route happens to be one of the most lucrative for Kenya Airways and it will be a fight to the death for them to even give an inch. The failure to gain traction on this single route has been the downfall of all airlines trying to fly out of Entebbe.

"The choice of routes is also curious because the promoters of the airline have consistently argued that the airline would provide non-stop flights from tourist markets that are not currently served. That rationale flies out the window with the plan to compete directly with existing players....

Their argument would have been supported by routes to Frankfurt or Barcelona or Tokyo or any number of other destinations serving potential toursim markets.

Experts are divided on whether buying planes or leasing them is the better option.

One expert said the better deal would be to buy the planes and do away with leasing costs which would come due whether the plane is flying profitably or not, but that is if we can buy them cash down.

The feasibility study does not forsee such a scenario, so have provided for borrowing to finance the $330m plane purchases. They plan for interest and amortisation payments of at least $14m annually from the third year onwards.

Another industry source said  buying the planes is a bad idea because it would be locking all that money in planes with no guarantee of traffic. All the projections in the feasibility study are not realistic, he said and he hoped the planners did not think that because it is Uganda Airlines, Ugandans will be falling over themselves to fly it.

“There is no loyalty in this industry. Passengers are looking for reputation and convenience. We won’t care about Uganda Airlines,” he said.

The money he suggested would be better spent in the first two years code sharing, where an airline sells tickets but passengers fly other airlines, to establish some traffic before you invest in the airplanes. This money would be used to heavily market the airline in the meantime.

"There was unanimity though that there was no way that the airline would attain profitability by the fourth year....

“That would be a world record,” one industry expert said as he all but rolled in the aisles.

“You are building a reputation, especially reliability. You cannot believe how many empty flights you are going to make to all your destinations before passengers begin to take you seriously. That is all money. But in this industry it’s an understandable cost of business.”

In fact he added, that $70m they have budgeted for contingency will be done in a sooner than three months.

Across the border Rwanda Air, which has been flying since 2001 have never made a profit. A few months ago they gleefully announced that they had cut losses last year to one million dollars.

The supporters of the project however counter that the benefits to the economy in job creation – all of 439 jobs over five years, promotion of exports and lower fairs out of Entebbe will more than make up for the losses the airline will make.

On exports the planners had a curious insertion about exports, 

"It would seem that the limitation to the development of a good export industry has been the lack of regular air services to transport what is produced in Uganda to other markets."

This seems to suggest that if we have our own planes suddenly people will start exporting by air.

Most of our exports – coffee, maize, beans are bulky and more cost effectively shipped by land than air. We have some fish and horticulture products, which can be flown out, but this has been going on for the last two decades without our own airline. Thank you.

Interestingly, despite projecting how profitable the enterprise will be the authors cover themselves by asserting deep in the plan that the airline need not be profitable and should be considered as a piece of infrastructure like a road, which the tax payer finances without caring about the bottom line.

That is not only lazy thinking but encourages moral hazard and corruption. Given a blank check like that to start a business, what incentive would the management have to make it self-sustaining?

Richard Branson, who has started and owned an airline, joked one time that the best way to become a millionaire is to start with a billion dollars and buy an airline. He should know.

"It is an amazing plan with more holes than a kitchen sieve. No wonder it is a closely guarded secret...

We do not need an airline of our own. We have more than a dozen airlines flying into Uganda already. 

There are cheaper ways to get what we want – connectivity to the world, higher tourism numbers and export receipts.

This is particularly true in this time when we are trying hard to raise revenues to finance badly need public goods – education, health and infrastructure.

A CESSATION OF HOSTILITIES CAN UNLOCK REGION’S POTENTIAL

Last week two major peace initiatives gained much needed traction after years of stalemate.

After a week of shuttle diplomacy the two rival parties in South Sudan put pen to paper in signing a new peace deal. The deal which  brings back President Salvar Kiir and his rival Riak Machar back in the same government has taken a lot of effort by the governments of Ethiopia, Kenya, Sudan and Uganda to broker.

Analysts wonder whether it addresses the fundamental issues of the continent’s newest country, primarily appeasing all the rival factions and laying the groundwork for institution building, but agree that it is better than nothing and as good a start as any.

"The agreement failed to beat a UN imposed deadline of June 30^th for a stop to the fighting. The UN had warned that without a cessation of hostilities and a viable political agreement, targeted sanctions, including travel bans and a freezing of the assets of six individuals inside and outside the Juba administration, would be triggered...

Hot on the heels of that event Ethiopian Prime minister Abiy Ahmed made a historic trip to Eritrea to meet Isaias Afwerki. The two countries have been in a state of hostilities for close two decades following a war over disputed border areas in 1998. Eritrea once a province of Ethiopia seceded after a long civil war that led to the ouster of Haile Mengistu Mariam’s government.

Ethiopia currently in the grip of a currency squeeze, has in recent weeks moved to appease Egypt with whom they have disagreements about damming the White Nile.

Ethiopia has over the last decade been on an ambitious infrastructure building spree that has included increasing the stock of their road and rail networks, seeding industrial parks. At the center of it all is the tapping of their vast hydro-power generation capacity.

The Ethiopian Grand Renaissance dam alone will have a capacity to generate 6450 MW or more than seven times Uganda’s current capacity. The filling of the dam’s reservoirs is what Egypt is unhappy about.

When complete the dam will have a volume of 70 km³ with a surface area of 1,874 km² or assuming a square, would have one side the length from Kampala to Entebbe. Egypt and Sudan fear that filling that reservoir could cause water shortages downstream and the resulting political fallout may be hard to contain.

Ethiopia which currently employs less than half it current generation capacity during peak hours needs market for its power and long standing feuds with its neighbours do not help. So whereas the antagonists in South Sudan may be content to continue in their state of underdevelopment it is in Ethiopia’s and the region’s interest that peace comes to South Sudan so the market there can be developed.

By the time fighting flared up at the end of 2013 South Sudan had become a $200m a year export market for everything from mineral water to eggs.

"The movement towards peace in the region is being driven by more than goodwill...

The huge infrastructure investments in the region can become redundant if the sweetener of growing neighbouring markets are not thrown in for potential investors in the region.

It would not be a stretch to assume that a combination of factors – political and economic, have made the region’s leaders wake up to the fact melding these markets together is the only way to attract more and more investment into the region.

The global financial crisis and the disengagement of the donors as they sorted their own woes back home may have been the latest, meant aid flows have not kept pace with the region’s populations’ growing needs.

Prior to that the end of the cold war, where billions of dollars were sloshing bout the world to by allegiance with little regard to economic feasibility, democracy or human rights records.

The rise of China has served as useful stop gap, as a financer of grand infrastructure projects that have often been breath-taking in their scope and ambition.

The regional economies have designed spare capacity into all the projects in anticipation of future growth. But for the growth to come the infrastructure has to be employed. A chicken and egg situation. This infrastructure is intended to unlock the great abundance of resources and people in the region.

A geosurvey of Uganda done a few years ago showed that were we to maximally exploit the riches under our feet we would have to first relocate all Ugandans.

When, and not if, peace comes to the region it will because of some hardnosed economic and geopolitical considerations and not out of the goodness of the hearts of the region’s leaders. The resolution on intractable conflicts in the region is just the beginning.

THE WORLD CUP … IT’S THE ECONOMY STUPID!

I suffered withdrawal symptoms last week when, on Wednesday and Thursday there were no World Cup matches to watch.

It surprised me because I thought I was not emotionally invested in this year’s edition in Russia. Clearly I was wrong.

I have also been rereading my copy of Soccernomics, the enlightening book by Simon Kuper and Stefan Szymanski, whose promise to explain, “Why England lose, Why Germany, Spain and France win and why one day the rest of the world will finally catch up” caught my eye, when I bought if before the last world cup in Brazil....

There is a new updated version that came out earlier this year.

Using data the authors unravel the mysteries of why Africa teams struggle on the international stage, that football clubs are best when they make losses, how the health of populations determine whether a country will be successful or not and that World Cups do not make money for hosting nations among other subjects.

It’s a veritable page turner.

What interested me was the author’s assertion that to be successful on the soccer world stage a county needs to have a GDP per capita of at least $15,000.

They worked out by going over hundreds of data points this was the magic number as it suggested that such countries have taken care of their basic needs and have enough money left over to build the infrastructure to identify and nurture world beating soccer players.

In World Cup history of the eight countries that have won the World Cup only two countries have economies that do not meet this criteria. Interestingly they are all from South America. Argentina winners in 1978 and 1986, Brazil in 1958, 1962, 1970, 1994 and 2002. Uruguay who lifted the cup in 1930 and 1950 have a per capita GDP of $18,000. Brazil and Argentina’s numbers come in at $10,224 and $14,000 respectively.

But interestingly even those countries all European, which meet the criteria, the catchment area for their stars was the poorer sections of their society.

The explanation was that the middle class kids have school and other extracurricular activities while the poor are not only playing all the time but are more likely to give up their education to pursue a professional sports career.

With differing degrees of sophistication all these winners have an extensive soccer networks with teams at every level from toddler to the professionals. The Europeans have more sophisticated infrastructure compared to the South Americans, famed for learning their skills on the street using everything from oranges to stuffed socks.

They also showed that these countries are exposed to a lot of competition. Not only are their respective leagues very competitive, they have very competitive continental tournaments and play a disproportionately large number of friendlies annually.

And finally the corporate backing of the sport in all these countries is significant but it is underpinned by functioning governing bodies. Football associations who facilitate the recruitment, nurturing and placing of talent....

The long and short of It, the book, shows is that making it to the World Cup leave alone winning it is not the sole responsibility of the respective football federation. To paraphrase, it takes the whole country to win the World Cup.

There are no miracles. And whenever there is overnight success in soccer know it has been years in coming.

So we want to go to the world cup and even win it.

To get a seat at the table – you will not get a chance to win the World Cup if you are not participating in it, we need to grow our economy significantly.

At $15,000 per capita at the current population we need to grow our economy to $600b – about the size of Taiwan’s economy, from the current $25b.

Assuming the current economic growth rate of about 6 percent it would take us 55 years to hit the target.

A daunting prospect.

In order to increase the economic output this level investments infrastructure would have to remain consistent for the said period. We have a long way to go. For instance just to get to a middle income economy we have to quadruple the stock of paved roads to at least 88 km per square km of land from the current 20 km per unit area. And we would have to then quadruple it again to even come close to a $600b economy.

We need to get our power consumption to at least where Brazil’s. A 2014 estimate put Brazil’s power consumption per person at 287 kwh per year. At the same time Uganda’s was about 70 kwh per person.

And we haven’t even started talking about the quality of our human resource, which is key because you can have all the infrastructure in the world but if the quality of your human resource isn’t at a certain level this would count for nothing.

"There are no shortcuts. We will not fluke our way into the World Cup if our context is wrong...

If winning could be forced a former communist country would have been one of the eight winners of the World Cup. Only Czechoslovakia and Hungary have ever made the finals.

TO TAX OR NOT TO TAX …

This week protests burnt the wires as everybody who was anybody, complained about the new taxes on social media and mobile money transactions.

It was interesting to me was that the loudest noise was made about the sh200 daily tax on social media and not the one percent tax charged every time you touched you screen to do a mobile money transaction.

Strange because there are about one million internet users in Uganda and about ten million mobile money accounts.

Clearly the mobile money users were feeling the pain. It was reported that in the first few days of the tax transactions collapsed to a fraction of their previous levels.

There was no evidence that social media activity had gone the same way, but then again the protesters had switched to the Virtual Private Networks (VPN) which bypassed the mobile network operators.

"How is it that such a relatively small number can make so much noise? Or were they actually? Isn’t it that I am also on social media that I felt the incessant fury of the chattering masses? The vast majority of mobile users were probably oblivious to this noise?..

It’s not worth my time to protest against the social media tax. I am more interested in the mobile money tax(es).

If we step back a bit from the forest.

According to the 2018/19 budget the government has earmarked sh32trillion to be spent on providing security, education, health, infrastructure and other public goods. This comes down to about sh800,000 for every one of the 40 million Ugandans.

I hope that number provided some pause for thought. 

That sh800,000 is for the whole year. Chances are that anyone reading this column by virtue of the fact that they can read English, shell out sh2000 for this paper or know someone who does, would not begin to even contemplate getting by on sh800,000 a year.

Food, rent, transport, school fees, power, water etc etc would consume that sum before the three months were done. And I am obviously being very conservative.

And we know government is struggling to provide.

Look at the state of Universal Primary Education (UPE), our public health system, our security and even our roads. I will be the first one to point to corruption as a key driver of these inefficiencies but even I wonder how much government can do, even if they spent everything as was planned. Not very much I fear.

Across the border in Kenya the government will spend the equivalent of sh1.6m on each Kenyan or double our own government’s outlay. Anyone who knows people in Kenya they make the same complaint about inadequate service delivery. From afar their corruption seems makes our own practitioners seem like they are in kindergarten, but you have to wonder about the amounts, even there.

The equivalent for little Botswana in the south is 3.2m.

"The figures suggest to me as a Ugandan that the government is spending way too little on me. It is even shocking when you see how much the government plans to spend on health, sh57,000, Education, sh78,000 and security sh53,000. All these figures are for the whole of the fiscal year 2018/19...

And how much does government plan to collect from every Uganda this financial year, on average? Sh400,000!!!

Now if you are Pay As You Earn (PAYE) payer like I, you must have done a double take at that figure. If I speak for myself, if my annual PAYE bill was sh400,000 you can charge me sh10,000 a day in social media tax and I would not care.

The point is that a small group of us – about a million workers out of a workforce of 11 million, are shouldering the burden of the government budget. No wonder nothing works and us the same workers who fork out the money to provide health, education and security still have to pay for the same services privately.

I and the other tax payers are the real victims of Uganda’s poor economy.

So some of us vote with our feet and leave this god forsaken land.

If we were to land in the Netherlands, the government would spend the princely sum of sh11m per person and we would get free education, health, credible security and all the other good things that come with a functioning government.

However my share of that government expenditure would be sh10.2 million in taxes or 92 percent of the Netherlands taxes come from domestic revenues. They have no donor countries to help them. They are the donors.

The point is clear if we want world class services at home like we see when we land at Schipol or Heathrow or John F Kennedy airports we have to pay up....

Which brings me to the mobile money tax.

The mobile money tax as designed and at the rate being asked is a disincentive to the whole payment ecosystem that has grown around it and by extension it’s doubtful whether the government shall get the taxes it planned for.

The logic is sound. As the finance ministry pointed out this week last year sh54trillion coursed through the mobile money networks but 70 percent of that money, the income which generated it was not registered at the URA’s data base. We know we are a largely informal economy so how better than to catch the untaxed monies than using mobile money?

The President on Wednesday evening clarified that the tax was not to be leveled on deposits to the system, effectively a digitisation of money, and that the rate should come down to 0.5 percent, this is great but still punitive when you levy it on two sides of the same transaction.

With the above being said government needs to walk the tight rope between extracting maximum tax and throttling the goose that lays the golden eggs.

"A comprehensive review of the mobile money tax is long overdue – a week into its implementation...

IF YOU BUILD IT, THEY MAY NOT COME

Earlier this year the World Bank reported that Ethiopia’s economy grew the fastest in the world last year at over eight percent.

These prodigious growth numbers that have been sustained for a decade, have been driven mainly by the big infrastructure investments in road, rail and power generation the country has been engaged in since 2010.

Unfortunately a commensurate flow of Foreign Direct Investment (FDI) has not followed the infrastructure development and as a result Ethiopia is now facing a foreign exchange crunch – it has been reported the country’s reserves have fallen to a month of imports. Three to four months of import cover is considered safe.

It is hoped that this is a temporary bleep, but it nevertheless holds important lessons for Uganda, which has been ramping up infrastructure development spend for almost as long as Ethiopia has.

"The rationale for the aggressive infrastructure development is based on the simple premise that we have a huge infrastructure deficit and in order to enjoy continued economic growth we need to bridge it, fast....

Looking at the road network alone, for a typical middle income country they have about 90 km of paved road for every 1000 square km, Uganda’s comparable figure is about 20 km. Similar figures or worse can be quoted for power generation, railway coverage or any other infrastructure including telecommunications where while we have almost universal coverage our use of the attendant technologies is woefully poor.

Infrastructure lowers the cost of doing business and therefore improves the attractiveness to investors wanting to commit to a country.

However we should not fall into the same trap as Ethiopia by believing that “If we will build it, they will come”.

For starters infrastructure is only part of the overall picture of what businessmen look at in planning to invest. Beyond infrastructure, affordable infrastructure, there are things like the sanctity of property rights, the policy consistency of the relevant governments and the politics of the country. 

Politics in as far as it will not threaten their investment through unpredictable policy environment that may come from a lack of and inability to implement a strategic vision or worse,   political upheavals.

And even if we have all that in place will anyone know about it?

This speaks to the important role of marketing, which makes this week’s fracas at the Uganda Investment Authority (UIA) all the more saddening.

"You can have all the infrastructure in the world all laid out and functional and no one turns up to the party....

An aggressive marketing plan synchronised with the time lines of these projects is critical to ensure the fully and timely utilisation of our spanking new infrastructure.

Related to that our officials need to stop operating in silos and emphasise the building of ecosystems beyond the individual infrastructure projects they are championing.

So for example the Standard Gauge Railway (SGR) is supposed to be a key driver of the nation’s industrialisation agenda. But how is it linked to the plans to boost power generation or the oil production efforts or the development of industrial parks around the country or even the expansion of Entebbe airport.

To extend the argument is there a deliberate and systematic plan that synchronises the development of these infrastructure and the increase in production of any number of things from coffee to fish to a planned petrochemical industry to the attraction of increased tourist numbers?

The point is, by now a prospective investor wanting to tap into Uganda’s power surplus should be able to see from afar not only how far along we are with increasing our power generation capacity but how too we are priming regional markets for our future investors.

The pushing for the free flow of goods and services in the region is visionary. And while most people didn’t see the point, we are beginning to see how this will help alleviate the job issue as we boost our production to serve the region.

A potential investor would be heartened by the progress in that direction.

"An investor wanting to invest in tourism would be glad for the Entebbe express way. But it does not help if he can wheeze from the airport to Kampala in half an hour, but then can’t get around as easily to our prime tourist sites or guarantee the safety of his guests or their health....

A few years ago while visiting Paris I was shocked that there was no bottled water in my room. Thinking it was an oversight by the staff of the small business hotel, I made the “omission” known to the staff at the reception the falling morning.

“But there is water in the tap,” the man at the front desk told me, mirroring the surprise on my face with his own. I could see him wonder how I couldn’t have worked that out.

Well where I come from it is not recommended to drink tap water.

This was a small illustration that tourism is not the business of the tourism sector alone.

One last lesson from Ethiopia, or to emphasise the previous points. They say markets can remain irrational longer than you can remain liquid.

Again we hope Ethiopia after all the work and sacrifice they have put in, that this is just a temporary situation, that investment will begin to flow, production will jump and they can export their way out of their current predicament.

Unfortunately the market is a brutal task master and is often wont to mete out the test in order to teach the lesson, not the other way around like in the classroom. We need to plan accordingly.

THE PROMISE OF REGIONAL INTEGRATION

This week was a hectic one as far as regional diplomacy goes.

In Khartoum erstwhile enemies President Yoweri Museveni and his Sudanese counterpart Omar El Bashir brought together rival leaders of South Sudan, President Salva Kiir and Riak Machar to sign a peace deal, which it is hoped will bring the near five year blood bath in our northern neighbour to an end.

Meanwhile Ethiopia and Eritrea opened talks after almost 20 years of hostilities. The two countries went to war in 1998 over disputed land along their common border, cutting off Ethiopia from its most convenient route to the sea.

In Kenya President Uhuru Kenyatta hosted his counterparts on the Northern Corridor Integration Projects Museveni and Rwanda’s Paul Kagame. The body language of the latter two did not betray any unusual tension between the too which was a relief given the rumours that have been swirling around in recent weeks.

During the Nairobi leg Museveni said that Uganda was benefitting massively from the East African common market, reporting that the dairy and maize industries in Uganda would have long been dead had it not been for the free access they have to the region.

This last point is crucial and is one our leaders should focus on rather than any parochial of perceived slights.

The Dairy Development Authority reported this week that dairy exports more than doubled to $130m in 2017 from $60m the previous year. It would not be a stretch to assume that this jump in export receipts has something to do with regional demand.

Uganda’s ambition to be a middle income country in coming years will be greatly aided by open markets, because our market is too small. The same goes for our neighbours.

"The population of the East African Community (EAC) stands at about 170m. The urban population of the region is 34 million or just about the size of Uganda’s population...

However to unlock the potential of this market, billions of dollars in joint infrastructure investments have to be put in place. The nature of these investments and the long term obligations that come with them means that as region our leaders cannot be seen to be bickering among themselves.

For example Ethiopia has invested massively in power generation. It has more than doubled generation capacity to 4200 MW from 1800 MW, which is double their 2000MW peak demand. SA if that is not enough there is an additional 7000 MW of power generation capacity under development.

Ethiopia needs to exports its power otherwise be saddled with these white elephants. So it needs to mend fences with Eritrea, ensure South Sudan cools down and demand its power. Ethiopia has also dialed down its language in negotiations with Egypt, which is concerned about Ethiopia’s damming of the Nile. Egypt too can be a massive market for its power.

Kenya, Uganda and Rwanda need to be pragmatic about their dealings since investments in power, rail and road are critical for all three and none of them can go it alone.

Clearly our mutual dependence, for decades blurred by artificial borders, is now at the fore of driving the geopolitical agenda. Which is as it should be....

Centuries of war in Europe came to an abrupt stop after the Second World War with the creation of the European Coal & Steel Community (ECSC), the precursor to the European Union. The ECSC was a recognition that to rehabilitate Europe resources – physical and human had to be pooled for the benefit of every one.

The politicians can maintain their little fiefdoms but the economy should transcend the borders.

The people of the region have no issues. Our borders are really only on paper if one were to see how border communities interact. It is often that our leaders have their own issues that are extrapolated to the rest of us.

However increasing dependence means that our leaders will have to shelf their issues or resolve them personally to maintain their relevance in our lives. We first approaching irreversibility on regional integration and they are being forced to seat up and take notice.