A RETURN TO SAPS IS A REAL POSSIBILITY

In his latest report the Audit General drew a painful picture of how our domestic arrears are doubling every five years with no effective action to slow down this accumulation or pay them off.

The Auditor General John Muwanga in his report of the year that ended in June 2023 said domestic arrears continued to mount by 16 percent annually, inexplicably and illegally.

“Some accounting offices are concealing domestic arrears and paying for arrears which previously were not disclosed nor budgeted for,” Muwanga reported.

“In other instances, the arrears disclosed are not properly supported by evidence of goods or a service. I further observed that some entities have entered in to multi-year commitments without parliamentary approval.”

In simple English officers are paying for ghost products and services, hiding legitimate claims on government while paying the fictitious ones and committing government to debts without proper approvals.

The net effect of this, is that what government owes to suppliers has nearly tripled to sh10.5trillion in 2022/23 from sh3.335 trillion in 2018/19, with no corresponding growth in revenues. During the same period URA collections grew by just over 50 percent to sh25.2trillion from sh16.6trillion. Just by that simple calculation it is inconceivable that government will ever fully pay these domestic arrears.

The worst offenders are Kampala Capital City Authority (KCCA) who in the last year’s domestic arrears jumped almost tenfold, followed by the works ministry, prisons and the finance ministry. That is ironic because the finance ministry is supposed to be overseeing and implementing the discipline around accumulating domestic arrears.

This is a scary situation than is being acknowledged by the government.

So I have a friend who does business with government. They owe him a few billion shillings for work that has been done and certified. His business is on its knees because between government not paying him, URA is baying for his blood, as is his bank. To survive he has been forced to regress into informality. He has adopted two sets of books, cut back on his official payroll and basically insists on being paid in cash and not through the formal financial system.

It does not take a rocket scientist to see what will happen if his methods are replicated across hundreds or even thousands of companies.

URA will huff and puff but will find little love in the private sector. That is not a threat but a promise.

It is so bad, that many banks are refusing to discount government invoices. Previously if a business man won a deal he could take an invoice he had made to government and borrow against it in the bank. Now banks don’t want to touch that “counterfeit” paper with a ten-foot pole. Businesses are slowly grinding to a halt.

This is an unsustainable situation. Our taxes come from private companies and individuals. With businesses struggling they will close down altogether costing jobs in the companies and among its suppliers.

What the Auditor General was describing up there was corruption in very many words. Despite a policy and new blood in the ministry the interest groups around this racket are so firmly entrenched they can openly defy Ramathan Goobi’s best efforts to bring some sanity to the system. Isn’t it just a matter of time before he throws up his hands in defeat or joins them anyway?

"There is even a scarier scenario.  That these interest groups that are a law unto themselves, have actually captured the state...

Ebola is particularly dangerous parasite because it feeds off the host and when they die abandon them for a new host. When it is feeding off the host it has no thought of coexistence, it just feeds off the host in disregard of the hosts continued life.

That is what the Auditor General is reporting is happening in the Uganda government. That the corrupt are feeding off the state without regard for whether it will continue to exist. In fact when every one else is tightening their belts, these leeches are accelerating their eating and to hell with everything.

This cannot end well, especially if good people decide to join in the plunder.

While it may sound drastic you just have to look across the border to Kenya to see what happens when a rapacious clique takes over the state and bend it to their own over the national intersts. For all intents and purposes, they are going back to Structral Adjustment Programme (SAP) -- raising taxes, cutting subsidies and privatizing public enterprises to qualify for much needed cash.

All this because revenue inflows have long been surpassed by government expenditure. If corruption was tackled decisively you would be shocked how dramatically government expenses would collapse.

And this is not just macroeconomics. As a proxy of economic activity mobile money transactions in Kenya last year for the first time in 17 years. The small man is feeling the pain in a very real way.

God forbid that we find ourselves back in SAPs because of our indiscipline. But how improbable is that given what we know?