tag:blogger.com,1999:blog-91361874963478744722024-03-21T16:19:07.079+03:00Shillings & CentsThe harmless observations on business, economics and politics of Ugandan, Paul Busharizi. Is it me or are we missing something here?Unknownnoreply@blogger.comBlogger1229125tag:blogger.com,1999:blog-9136187496347874472.post-28064736081205924462024-03-19T10:52:00.000+03:002024-03-19T10:52:02.639+03:00 PERPETUATING POVERTY AMONG OUR ELITE<p>At the end of last month a video went out showing a convoy
of high end 4WDs cars ferrying the final year students of a secondary school to
their prom.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">The young men, who probably harangued their parents to hire
the cars may be excused, we all know how it was to try and impress the ladies
at that age, but you have to wonder about their parents and school administration
for allowing this to happen. <o:p></o:p></p>
<p class="MsoNormal">I will never forget a few years ago seeing one of our
friends shelling out sh300,000 for a pair of Timberland boots for her small
brother to wear at his final year social, and thinking she was absolutely mad
to be paying the equivalent of his school fees for a few hours of flossing.<o:p></o:p></p>
<p class="MsoNormal">Inflation has clearly set in, because I can imagine in
addition to multimillion shilling outfit, parents now have to hire 4WDs and
limousines for the boys to wow their female counter parts.<o:p></o:p></p>
<p class="MsoNormal">It makes me laugh to think that we used to be ferried in the
school truck for socials. Alighting with all the dignity one could muster from the
back of the truck, must have been a very funny sight. Bless the ladies of those
days, they could see beyond that to the potential of their boyfriends. <o:p></o:p></p>
<p class="MsoNormal"><b><span style="font-size: x-large;">"These same kids will grow up to be tone deaf MPs and
thieving officials wherever they work. They have been set up for a life that
they cannot afford to maintain through hard and diligent work...<o:p></o:p></span></b></p>
<p class="MsoNormal">It is no wonder then that one big shot on social media last
week declared that to be rich in Uganda you need to have a net worth of $1.1m
(sh4.98b), live in a house valued at at least sh500m, own two sh120m cars and
have your kids in schools that charge at least sh5m. What he described was high
living and not necessarily wealth.<o:p></o:p></p>
<p class="MsoNormal">And that is the thing, we think wealth is most manifest by
our spending habits. So these young men are unwittingly being sold the idea
that you need to look rich to be rich, which is far from the truth.<o:p></o:p></p>
<p class="MsoNormal">It has been shown that wealth depends more on your
discipline with money than how much you earn.<o:p></o:p></p>
<p class="MsoNormal">There is the urban legend of the manager who cannot make his
salary stretch to the end of the month, while his driver, who earns a fraction
of his salary, not only gets to the end of the month but has enough left over
to invest in his growing empire of mizigo rentals. <o:p></o:p></p>
<p class="MsoNormal">The difference between the two men is that the boss is
focused on a consumption lifestyle while the driver is focused on investing.<o:p></o:p></p>
<p class="MsoNormal">And that is the crux of the matter. There are only two ways
to spend your money, you either “eat” it or invest it. In the former case you
look rich even while living hand to mouth, while in the latter case you may not
look rich today, but you will be building wealth, which may very well lead to a
higher standard of living in the future.<o:p></o:p></p>
<p class="MsoNormal">A friend of mine has been investing diligently for the last
15 years. He has maintained his expenses as a proportion of his income, to
about 30 percent. So while ten years ago his expenses may not have been much to
write home about, his expenses now have grown to almost sh5million a month. The
remaining 70 percent he reinvests, increasing his income annually in the
process.<o:p></o:p></p>
<p class="MsoNormal">His mantra is he would rather be rich than look rich.<o:p></o:p></p>
<p class="MsoNormal"><b><span style="font-size: x-large;">"I believe our lack of understanding of how to create wealth
is why our political leaders jump at any opportunity to dip their grubby
fingers in the public till and our company officials do the same....<o:p></o:p></span></b></p>
<p class="MsoNormal">They think that building wealth comes from grabbing. Being
men and women of above average intelligence they soon realise that in order to
sustain their high consumption living they need to grab more and more. Which
explains their bottomless greed. Hence their need to stay in government. There
are enough former public officials walking around shell shocked, wondering
where all their money went, because they do not have access to the treasury.<o:p></o:p></p>
<p class="MsoNormal">The trick with money is that if it is left seating around it
will diminish with time. A function of inflation. And if our brains are wired
towards consumption rather than investment, there is no money that cannot be
finished.<o:p></o:p></p>
<p class="MsoNormal">The lessons our children should be learning are, how to earn
money through hard, honest work, to live below their means, saving the surplus
and then how to make that money work for them through investment. The biggest
lesson of this process would then be that it takes time to create wealth.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>Coming full circle to the young men and ladies at the
aforementioned prom. <b><span style="font-size: x-large;">By enabling this ostentatious display of wealth, our
parents and schools are sending the wrong signals to their young wards, that
pretending to be rich makes you rich...</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">In trying to keep up with these artificial standards these
young men and women will not be averse to reaping where they did not sow when
the opportunity presents itself.<o:p></o:p></p>
<p class="MsoNormal"><br /></p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-9136187496347874472.post-30562334945596837592024-03-12T11:34:00.008+03:002024-03-12T11:34:51.567+03:00 MTN CONTINUES TO POINT TO THE FUTURE <p><span style="font-family: "Calibri Light", sans-serif;">Last week telecom company, MTN reported its 2023 net profit jumped
21.4 percent to sh493b, on the back of double digit growth across all revenue
centers, including voice, which in 2022, for the first time registered lower
revenues than the previous year.</span></p>
<p class="MsoNormal"><span style="font-family: "Calibri Light",sans-serif; mso-ascii-theme-font: major-latin; mso-bidi-theme-font: major-latin; mso-hansi-theme-font: major-latin;">In 2022 net profits came in at sh406b. Top line revenues were up
16.1 percent to sh2,629b from sh2,265billion in 2022.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Calibri Light",sans-serif; mso-ascii-theme-font: major-latin; mso-bidi-theme-font: major-latin; mso-hansi-theme-font: major-latin;">While voice revenues grew by 11.6 percent to sh1,117b, data and
mobile money revenues continued the now established trend of beating voice
revenues for the third year running, accounting for 53 percent of revenues.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Calibri Light",sans-serif; mso-ascii-theme-font: major-latin; mso-bidi-theme-font: major-latin; mso-hansi-theme-font: major-latin;"><b><span style="font-size: x-large;">"Shareholders will be glad to learn that final dividend of sh6 per
share is planned pending approval from the Annual General Meeting. This brings
the total dividend per share to sh18 or a 10.6 percent dividend yield which
compares favourably with fixed deposit rates in the market....<o:p></o:p></span></b></span></p>
<p class="MsoNormal"><span style="font-family: "Calibri Light",sans-serif; mso-ascii-theme-font: major-latin; mso-bidi-theme-font: major-latin; mso-hansi-theme-font: major-latin;">As an investment proposition the sh170 a share is becoming increasingly
attractive as the earning per share is now sh22.02 up from sh18.14.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Calibri Light",sans-serif; mso-ascii-theme-font: major-latin; mso-bidi-theme-font: major-latin; mso-hansi-theme-font: major-latin;">In a later conversation with CEO Sylvia Mulinge, who was reporting
on her first complete year at the helm of Uganda’s largest company, she attributed
the good results to her team’s execution of strategy. A focus on people,
infrastructure development and the sharpening of the customer value proposition,
led to the company’s market leading performance.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Calibri Light",sans-serif; mso-ascii-theme-font: major-latin; mso-bidi-theme-font: major-latin; mso-hansi-theme-font: major-latin;">She was unsurprised by the recovery in voice revenues, pointing
out that Ugandans are still buying more feature phones than smart phones, so
there is still a lot of scope for voice revenues to grow, even if data and
mobile money revenues will continue to dominate. In Kenya last year there were
about 600,000 more smartphones than feature phones on the market.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Calibri Light",sans-serif; mso-ascii-theme-font: major-latin; mso-bidi-theme-font: major-latin; mso-hansi-theme-font: major-latin;">Relatedly, as a sign of things to come data subscribers increased
by 22.4 percent to 8.2 million. Given that MTN’s total subscriber base stands
at 19.5 million, doubling of data subscribers is a real possibility in coming
years.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Calibri Light",sans-serif; mso-ascii-theme-font: major-latin; mso-bidi-theme-font: major-latin; mso-hansi-theme-font: major-latin;">This has far reaching ramifications for improving the ease of
doing business in the country with the uptake of delivery services and other
e-commerce options. MTN is aiding this growth with their MTNKabode programme by
selling smartphones on credit, helping smartphone penetration grow to 39.1
percent. The comparable figure in Kenya is upwards of 60 percent.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Calibri Light",sans-serif; mso-ascii-theme-font: major-latin; mso-bidi-theme-font: major-latin; mso-hansi-theme-font: major-latin;"><span style="mso-spacerun: yes;"> </span>But even more exciting for
me is the progress that MTN’s mobile money is making.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Calibri Light",sans-serif; mso-ascii-theme-font: major-latin; mso-bidi-theme-font: major-latin; mso-hansi-theme-font: major-latin;"></span></p><blockquote>For starters the <span style="font-size: x-large;"><b>value of transactions jumped 44 percent to
133trillion from 92trillion in 2022. To put this in perspective, this year’s government
budget is sh52trillion. What this means is that more and more of the money in circulation
is being liberated from under our mattresses into the formal financial sector,
where it can be useful not only to others who borrow it, but also to the owners
who earn interest from it. MTN paid sh42b in interest on savings in 2023, more than doubling the 2022 figure of sh19b.</b></span></blockquote><o:p></o:p><p></p>
<p class="MsoNormal"><span style="font-family: "Calibri Light",sans-serif; mso-ascii-theme-font: major-latin; mso-bidi-theme-font: major-latin; mso-hansi-theme-font: major-latin;">And finally, that MTN has sh1,488b in deposits, which would easily
have made them a top ten financial institutions in terms of deposits. The
previous year deposits closed at 1,207b, a 23 percent increase, which means the
deposits can double every three years. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Calibri Light",sans-serif; mso-ascii-theme-font: major-latin; mso-bidi-theme-font: major-latin; mso-hansi-theme-font: major-latin;">The two movements, in data services and mobile money uptake, is
where the telecom industry is going to have a transformative effect on the economy.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Calibri Light",sans-serif; mso-ascii-theme-font: major-latin; mso-bidi-theme-font: major-latin; mso-hansi-theme-font: major-latin;">Mulinge is intimately familiar with the road ahead for MTN, having
been Safaricom Kenya’s Chief Customer Officer, before she came to Uganda,<o:p></o:p></span></p>
<p class="MsoNormal"><span style="background: white; color: #222222; font-family: "Calibri Light",sans-serif; mso-ascii-theme-font: major-latin; mso-bidi-theme-font: major-latin; mso-hansi-theme-font: major-latin;">“If you think about the demographic
dividend of this country, 70 percent of the population is under 35 and they're
largely digital natives, so many of them will want to get on to our platform;”
Mulinge said.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="background: white; color: #222222; font-family: "Calibri Light",sans-serif; mso-ascii-theme-font: major-latin; mso-bidi-theme-font: major-latin; mso-hansi-theme-font: major-latin;"></span></p><blockquote><span style="background: white; color: #222222; font-family: "Calibri Light",sans-serif; mso-ascii-theme-font: major-latin; mso-bidi-theme-font: major-latin; mso-hansi-theme-font: major-latin;">And then <b><span style="font-size: x-large;">“Who is going to own the
home? Because whoever gets into your home first, in terms of fiber connectivity
and everything it will be very difficult to dislodge them.</span></b></span><b><span style="font-size: x-large;">”</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal"><span style="background: white; color: #222222; font-family: "Calibri Light",sans-serif; mso-ascii-theme-font: major-latin; mso-bidi-theme-font: major-latin; mso-hansi-theme-font: major-latin;"><o:p> </o:p></span></p>
<p class="MsoNormal"><br /></p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-9136187496347874472.post-5401828643122618392024-03-05T08:43:00.000+03:002024-03-05T08:43:07.845+03:00TO FIGHT CORRUPTION WE MAY HAVE TO RELY ON FOREIGNERS<p>It was an interesting week last week.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">We had President Yoweri Museveni reporting that corruption
had sipped into the military establishment, especially with soldiers serving as
enforcers in land disputes. It was also the week that finance ministry
permanent secretary Ramathan Goobi called for a leaner government, complaining
that the cost of public administration had galloped out of control.<o:p></o:p></p>
<p class="MsoNormal"><span style="mso-spacerun: yes;"> </span>A related story and
probably even bigger than the aforementioned was the removal of Uganda from the
Financial Action Task Force (FATF) grey list.<o:p></o:p></p>
<p class="MsoNormal">The FATF leads global action to tackle money laundering, terrorist
financing and the funding of the proliferation of weapons of mass destruction.<o:p></o:p></p>
<p class="MsoNormal"><b><span style="font-size: x-large;">"The FATF, while it has been around for at about thirty years,
really got its teeth during the fight against terror, that kicked off at the
beginning of this century in the aftermath of the attack on the Twin Towers in
New York on 9<sup>th</sup> September, 2001...<o:p></o:p></span></b></p>
<p class="MsoNormal" style="tab-stops: 66.75pt;">Uganda along with Barbados, Gibraltar
and The United Arab Emirates were lifted out of the grey list last month, while
Kenya is still there. One of the major requirements that we have only just
complied with, is registering ultimate beneficial owners of businesses that was
completed at the end of last year.<o:p></o:p></p>
<p class="MsoNormal" style="tab-stops: 66.75pt;">Companies with unclear promoters
were being used to transfer illicit funds and by lifting the veil on these
interests, the hope is that it will be plugging one more conduit for transferring
ill-gotten wealth.<o:p></o:p></p>
<p class="MsoNormal" style="tab-stops: 66.75pt;">As mentioned above these moves
have gained impetus since the 9/11 attack on the twin towers, as investigations
have shown the people responsible used US financial services to fund and <span style="mso-spacerun: yes;"> </span>shift resources around.<o:p></o:p></p>
<p class="MsoNormal" style="tab-stops: 66.75pt;">A failure to comply with standards
and a fall into the FATF blacklist or high risk jurisdictions, would have had
far reaching implications for the economy.<o:p></o:p></p>
<p class="MsoNormal" style="tab-stops: 66.75pt;">North Korea, which is on the
blacklist, the FATF has advised other countries that deal with it to subject its
companies and banks to extra scrutiny and to close their bank branches and end
all correspondence relationships with North Korean Banks.<o:p></o:p></p>
<p class="MsoNormal" style="tab-stops: 66.75pt;">For country with aspirations to
ramp up exports, attract foreign direct investment and encourage its citizens
in the diaspora to send back more remittances, such action on Uganda would set
us back a few decades.<o:p></o:p></p>
<p class="MsoNormal" style="tab-stops: 66.75pt;">While western economies are targeting
bigger fish, our merchants of corruption, if they know what’s good for them
need to seat up and take notice.<o:p></o:p></p>
<p class="MsoNormal" style="tab-stops: 66.75pt;">There will be greater scrutiny by
financial institutions on the sources of income of funds and transferring
abroad to hide them from local busy bodies, has become that more difficult, not
least of all because of the sanctions on financial institutions if they are found to have abetted
transfers of illicit funds, means it will not be business as usual.<o:p></o:p></p>
<p class="MsoNormal" style="tab-stops: 66.75pt;">Which probably explains the
increased number of safes in people’s houses and the proliferation of the forex
bureau in the suburbs, because if you think about it, it is easier to handle
$100,000 than sh390m.<o:p></o:p></p>
<p class="MsoNormal" style="tab-stops: 66.75pt;">We can expect that in coming times
there is going to be an industry built around money laundering to beat not only
local anticorruption legislation but the FATF as well.<o:p></o:p></p>
<p class="MsoNormal" style="tab-stops: 66.75pt;">Expect a few to be caught in
coming days, those who think they can do-it-yourself the process and don’t need
the experts.<o:p></o:p></p>
<p class="MsoNormal" style="tab-stops: 66.75pt;"></p><blockquote><b><span style="font-size: x-large;">"Of course Uganda whose economy is
largely informal, up to 70 percent by some counts, there are still a lot of
avenues for people to launder their ill-gotten wealth. But we have to recognize
that these too are fast being sealed....</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal" style="tab-stops: 66.75pt;">In a previous life if you stole
your billion shillings you could go and buy land, start building. Nowadays you
have to justify the source of your income to URA and if it has not been taxed
URA would charge a hefty 40 percent of the sum. While if you had stolen the
money it would not be a bother to pay tax, but you enter a database, which are increasingly
becoming integrated and sometime in the future someone may very well pull this
fact up.<o:p></o:p></p>
<p class="MsoNormal" style="tab-stops: 66.75pt;">Or if you have the land already
and decided to spend you ill-gotten gains putting up apartments for sale or
rent, the issue of the income to build the apartments will come up.<o:p></o:p></p>
<p class="MsoNormal" style="tab-stops: 66.75pt;">All these means that that it is
that much harder to launder money than it was two decades ago.<o:p></o:p></p>
<p class="MsoNormal" style="tab-stops: 66.75pt;"><b><span style="font-size: x-large;">"It would be naïve to believe that
the coalition of the corrupt will see the writing on the wall and scale back on
their actions. More likely to happen is that they will go further underground,
employ expert money launderers, but at least the impunity will have been toned
down....<o:p></o:p></span></b></p>
<p class="MsoNormal" style="tab-stops: 66.75pt;"><a href="https://shillingscents.blogspot.com/2014/03/hot-money-and-distortions-to-our-economy.html">Ten years ago this columncelebrated the passing of the Anti-corruption law.</a> Even then the cynics dismissed
it as a tick box thing to appease western donors. There are a few score of
individuals who have gone through the court and are not laughing.<o:p></o:p></p>
<p class="MsoNormal" style="tab-stops: 66.75pt;">So let us check back in 2034 and
see how much the FATF has changed.<o:p></o:p></p>
<p class="MsoNormal" style="tab-stops: 66.75pt;"><o:p> </o:p></p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-9136187496347874472.post-79851260160774163162024-02-27T07:45:00.008+03:002024-03-10T11:30:26.676+03:00SPEEDING TOWARDS A CASHLESS SOCIETY<p>Two weeks ago the Bank of Uganda released the quarterly ”Financial Stability
Risk Assessment Report” for the last quarter of 2023.</p>
<p class="MsoNormal" style="line-height: normal;"><span lang="DA" style="mso-ansi-language: DA;">Long story short most risk in the banking industry is under control and the
sector is generally in good shape and has come some way from Covid-lockdown
crisis.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal;"><span lang="DA" style="mso-ansi-language: DA;">That<span style="mso-spacerun: yes;"> </span>should be a relief to any one
who has an interest in the economy. More interestingly for me is the rate at
which cashless payments are<span style="mso-spacerun: yes;"> </span>increasing
every quarter.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal;"><span lang="DA" style="mso-ansi-language: DA;"></span></p><blockquote><b><span style="font-size: x-large;">In the last three months of 2023 debit card payments rose to sh581.1b from
sh532.9b in the previous quarter a near ten percent jump. In the meantime
mobile money transactions<span style="mso-spacerun: yes;"> </span>increased in
value to sh62.2trillion from sh60.5trillion.</span></b> To further emphasise the point of
the shift away from cash mobile banking transfers increased to 2.4 million</blockquote><span style="mso-spacerun: yes;"> </span>from sh1.9 million transfers in the previous
quarter.<o:p></o:p><p></p>
<p class="MsoNormal" style="line-height: normal;"><span lang="DA" style="mso-ansi-language: DA;">Even more interesting is that over the year<span style="mso-spacerun: yes;">
</span>mobile money transactions crossed the sh200trillion mark up from the
2022 figure of sh190trillion transacted on all mobile money platforms.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal;"><span lang="DA" style="mso-ansi-language: DA;">This trend is a useful one because it means more and more of our cash is
being liberated from our pockets, socks, mattresses and other dark, dank places
we have been storing our money. This money is finding its way into the formal
financial system where it is not only beneficial to you but also<span style="mso-spacerun: yes;"> </span>is made available to others who have need for
resources when you don't. It would be interesting to track the uptake of mobile money
loans, despite their eye-gouging rates.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal;"><span lang="DA" style="mso-ansi-language: DA;">Basically the more of currency in circulation is in the formal financial
sector the better for an economy.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal;"><span lang="DA" style="mso-ansi-language: DA;">The mobile phone is accelerating this process in Uganda.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal;"><span lang="DA" style="mso-ansi-language: DA;">If you think about the sh200trillion-plus in mobile money transactions is
about $52b or bigger than the economy of Uganda. We can expect this trend to
continue as more people<span style="mso-spacerun: yes;"> </span>appreciate the
convenience and businessmen allow it as an option for payment.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal;"><span lang="DA" style="mso-ansi-language: DA;">Speaking for myself I save on a fintech app, which gives me seven percent on
savings, posting the<span style="mso-spacerun: yes;"> </span>interest daily. I
borrow the savings of other users from my mobile money provider and I virtually
walk around without money in my pockets, because I can pay for anything using
mobile money and if the worst comes to the worst reach into my bank account
using my phone to meet other needs.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal;"><span lang="DA" style="mso-ansi-language: DA;">This means I keep my money in the bank or on mobile phone longer. I
remember a time when eye watering qeueus used to form at the bank on Fridays to
withdraw money for the weekend. God help if you if you did not make it to the
bank on time, which used to be 1 pm, on Friday.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal;"><span lang="DA" style="mso-ansi-language: DA;">The counter intuitive thing is also that money is staying more in the
formal financial sector because of the ease of withdrawal.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal;"><span lang="DA" style="mso-ansi-language: DA;">And this trend has other far reaching implications for the economy. A major
reason for the high lending rates is the low savings rates in this economy. As a
result the banks charge higher rates.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal;"><span lang="DA" style="mso-ansi-language: DA;">Banks are often walking a tight liquidity tight rope. Lending out of their
capital and the few long term savings accounts. If more of us fixed our money
longterm the risk to the banks to get caught in a liquidity squeeze would reduce
and they would be able to lower lending rates.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal;"><span lang="DA" style="mso-ansi-language: DA;">This trend being pushed by mobile money is good place to start. <o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal;"><span lang="DA" style="mso-ansi-language: DA;">Of course the major reason lending rates are high is government borrowing
from the public and paying double digit interest<span style="mso-spacerun: yes;"> </span>rates. It is a no-brainer every money manager
will lend to government first and then think about his riskier customers and force them to pay a premium for the<span style="mso-spacerun: yes;">
</span>privilege.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal;"><span lang="DA" style="mso-ansi-language: DA;">But with oil revenues just over the horizon, one can expect government
appetite for debt to reduce and the with the trend of more money finding its
way into the formal financial sector and bank operational costs sliding, lower
lending rates is becoming more of a reality.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal;"><span lang="DA" style="mso-ansi-language: DA;"></span></p><blockquote><b><span style="font-size: x-large;">To speed up the process towards a cashless society, it would help if
government scrapped the larger denomination notes – sh50,000 and even sh20,000,
forcing more transactions into the financial sector and even serving a fatal
blow to corruption in Uganda.</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal" style="line-height: normal;"><span lang="DA" style="mso-ansi-language: DA;">It is very likely that in five to ten years the clamouring for more<span style="mso-spacerun: yes;"> </span>branch opening by banks will be a thing of
the past. The competition to reach clients will go online with the banks with
the most user friendly platforms taking the day.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: normal;"><span lang="DA" style="mso-ansi-language: DA;"><o:p> </o:p></span></p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-9136187496347874472.post-36975427224901842222024-02-20T08:17:00.007+03:002024-02-22T01:38:02.639+03:00HOW TO ENSURE “AFFORDABLE” SCHOOL FEES?<p>Last week parliament tasked the education
ministry with outlining punitive measures for schools that charge prohibitive
fees.</p>
<p class="MsoNormal"><span lang="EN-GB">This is <span style="font-size: x-large;"><b></b></span></span></p><blockquote><span style="font-size: x-large;"><b>a perennial lament that pops up around the first term, when parents coming out of the merry making
of the festive season, “suddenly” realise school fees are “too expensive”.</b></span></blockquote><o:p></o:p><p></p>
<p class="MsoNormal"><span lang="EN-GB">The representatives of the people jump on
the sentiment and criticise the government in general and the education
ministry, in particular for the high fees schools are charging.<o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-GB">This time they have gone a step further and
demanded that the education ministry punish schools, which charge exorbitant
fees.<o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-GB">You never know whether to laugh or cry in these
situations.<o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-GB">There are a number of issues here, not
least of all is how do you <span style="mso-spacerun: yes;"> </span>determine
what are exorbitant fees.<o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-GB">A man who was used to driving free of
charge on Entebbe road may think the sh5000 a trip on Entebbe expressway is
exorbitant; A man who is used to drinking a beer at his local Kafunda at sh3000
may scream bloody murder when he goes to one of our higher establishments and
they charge him sh10,000 for beer; A man used to paying sh1,000 in a taxi may
have some uncharitable words to say when the Uber driver charges him sh15,000
for the same trip into town. <o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-GB">Even more fundamentally, the MPs were not
calling for sanctions on government schools but on private schools, which
government ideally should have no business setting caps on what they charge as
fees.<o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-GB"></span></p><blockquote><b><span style="font-size: x-large;">"Putting a cap on fees will disincentivise
investment in the sector and lead to the very thing MPs are complaining about –
exorbitant fees...</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal"><span lang="EN-GB">About 10 million children are enrolled in
primary and secondary schools around the country. In Kampala 84 percent of them
are enrolled in private institutions. In the countryside this falls away considerably
depending on the earning power of the population.<o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-GB">If parliament wants to sustainably lower
school fees they need to take a long hard look at that ratio. That number
screams for more investment by government in the sector. <span style="mso-spacerun: yes;"> </span><o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-GB">With the power to appropriate budgets, MPs
should be talking about increasing the funding to the sector to build, man and
equip more schools as a way to bring fees down.<o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-GB">It’s a simple demand and supply equation. The
more government schools there are of credible quality the less the gap for the
private schools to fill in.<o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-GB">In Sweden where government provides free
education for every child of school going age,<span style="mso-spacerun: yes;">
</span>private schools account for less than a fifth of all enrolment. <span style="font-size: x-large;"><span></span></span></span></p><a name='more'></a><blockquote><span style="font-size: x-large;"><b>Sweden has not banned private schools, but the
businessmen themselves realise there is little space to make money in that
education system. That is how to keep fees low...</b></span></blockquote><o:p></o:p><p></p>
<p class="MsoNormal"><span lang="EN-GB">You can bet that those private schools in Sweden
would laugh at the fees our most exorbitant private schools charge. Because to make
a case for people choosing them to public schools, certain things like swimming
pools, computer labs, fullfledged sports<span style="mso-spacerun: yes;">
</span>programs <span style="mso-spacerun: yes;"> </span>among other things would
be standard in a Swedish private school, which is not the case here.<o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-GB">Going down their current path of righteous
indignation as earlier stated, will lead to the high fees they are trying to
fight, as businessmen opt out of the sector and with government unable to fill
the gap,<span style="mso-spacerun: yes;"> </span>demand will outstrip demand and
the MPs worst nightmare will come true.<o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-GB">In the early 2000s when inflation in
Zimbabwe was going through the roof – prices were doubling every day at one
point, then President Robert Mugabe decreed that prices should be held steady
by businessmen so people can afford at least food.<o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-GB">The businessmen’s reaction was to take goods
off the shelf and store them away in the back, giving rise to a black market
that sent inflation so high the Zimbabwe dollar is not worth the paper it is
printed on.<o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-GB">A similar thing would happen to our
education system. School owners would declare an official fees structure but
insist parents pay a lot more under the table to gain admission. <o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-GB">At least now the fees structure is there
for all to see, in the aforementioned scenario you could very well have different
fees for every kid in the school because there would be no way to know the fees
structure. <span style="mso-spacerun: yes;"> </span><o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN-GB"><b><span style="font-size: x-large;"></span></b></span></p><blockquote><b><span style="font-size: x-large;">"The MPs are right to call for more
reasonable fees. They have the power to lower fees across the sector but not in
the way they are going about it...</span></b></blockquote> They would lower school fees by upping the
education budget to build, equip and man more schools, ensure standards are
enforced, teachers are trained and remunerated properly in public schools.<o:p></o:p><p></p>
<p class="MsoNormal"><span lang="EN-GB"><o:p> </o:p></span></p>
<p class="MsoNormal"><br /></p>
<p class="MsoNormal"><span lang="EN-GB"><o:p> </o:p></span></p>
<p class="MsoNormal"><span lang="EN-GB"><o:p> </o:p></span></p>
<p class="MsoNormal"><span lang="EN-GB"><o:p> </o:p></span></p>
<!--EndFragment-->Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-9136187496347874472.post-31241937076214522442024-02-13T03:43:00.001+03:002024-02-13T03:43:05.787+03:00ERA: THE PATH OF LEAST RESISTANCE IS A CROOKED ONE<p>Last week Electricity Regulatory Authority (ERA) announced a
1.6 percent reduction in tarrifs for power consumers.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">They gleefully reported that this amounts to a sh40b saving
for consumers.<o:p></o:p></p>
<p class="MsoNormal">ERA can allow these reductions because the “cheaper” power
from Karuma dam was coming and would lower the average tariff price.<o:p></o:p></p>
<p class="MsoNormal">Everybody including me, is always happy for cheaper goods and
services, but not at the expense of the quality of the product or service.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote><span style="font-size: x-large;"><b>"There is a connection between the mechanical driving down of
tariffs and our ever increasing power outages...</b></span></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">Worked into the power tariff is the cost of operations and
maintenance for the power generators, transmitters and distributors. As a way
to keep tariffs down ERA has severally denied the industry players optimal
operations & maintenance budgets. <o:p></o:p></p>
<p class="MsoNormal">While this allows them to report a lower tariff it also
means that the industry players cut back on their operations and maintenance, a
major cause of the regular outages we are experiencing.<o:p></o:p></p>
<p class="MsoNormal">Imagine for instance that Umeme has outsourced its
troubleshooting function to a company X. Umeme wants to get the service at the
lowest possible price without compromising quality. But there is only so low the
contractor can go with his price, below which he will have to start cutting
back on staff, increasing response times and in some instances leading to longer
power outages. Gone are the days when Umeme “Kamyufus” responded in hours. God
forbid now you lose a pole or transformer you will be out for a week, as I
learnt painfully recently. God help you if you are upcountry.<o:p></o:p></p>
<p class="MsoNormal">Secondly, depreciation of assets is another charge to be
factored into the tariff. Depreciation allows asset owners to “save” money for
the replacement of the asset when it has outlived its natural life. <span style="mso-spacerun: yes;"> </span>If the industry players are not allowed
adequate depreciation allowances it becomes difficult to replace ailing assets.<o:p></o:p></p>
<p class="MsoNormal">Is it no wonder that when South African firm Eskom handed
over the Kira-Nalubale dams, there was need for $10m remedial works on the
complex..<o:p></o:p></p>
<p class="MsoNormal">When the question of replacement of assets was raised with
one official, he brushed it off by saying government will replace the assets
and they are not complaining.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote><span style="font-size: x-large;"><b>"Government priorities shift by the day and it is full hardy
to put replacement or development of new assets entirely at their feet....</b></span></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">The more sustainable position is to provide an adequate
depreciation charge so that the industry players can replace or develop new
infrastructure in line with growing demand not according to the whims of the
government.<o:p></o:p></p>
<p class="MsoNormal">Given the avoidable delays in development with Isimba and
Karuma dams this logic should not be hard to grasp.<o:p></o:p></p>
<p class="MsoNormal">ERA it can be assumed is looking to implement a Presidential
desire to see power tariff, at least for big industry, down to US5cents per unit.<o:p></o:p></p>
<p class="MsoNormal">President Yoweri Museveni’s desire for cheaper power to
drive industrialisation is hard to argue against. What the technocrats need to
grapple with is how to deliver on that desire in a way that will ensure the
continued sustainability of the sector well into the future.<o:p></o:p></p>
<p class="MsoNormal">While the contracts of the bosses of ERA are a few years, they owe it to posterity to ensure that when they have left we still have a power
sector to talk of.<o:p></o:p></p>
<p class="MsoNormal">On my first trip to South Africa in 1996 no one knew what
loadshedding was. In Uganda we were suffering daily loadshedding by then – if
you had power in the day today, you wouldn’t have power in the night tomorrow.
A recent return to the rainbow nation and loadshedding is now a permanent
fixture in their vocabulary. <o:p></o:p></p>
<p class="MsoNormal">If you look back into the roots of the current dire
situation, under investment in the sector is at the top of the list.<o:p></o:p></p>
<p class="MsoNormal">The way we are going we are heading there.<o:p></o:p></p>
<p class="MsoNormal">So you have reduced my tariff but for more times than I like,
I have to power up my generator to produce power. <span style="font-size: x-large;"><b>Even at our current tariff it
costs almost ten times more at US80cent per unit or about sh3000 per unit, to
use a diesel generator than use the<span style="mso-spacerun: yes;">
</span>power from the grid, so who is complaining about expensive power?</b></span><o:p></o:p></p>
<p class="MsoNormal">It is really a no-brainer. For any producer given the
choice between cheap but intermittent power and dearer but consistent power supply, they would opt for the latter over the former.<o:p></o:p></p>
<p class="MsoNormal">Don’t take my word for it, lets do a survey especially of
the big energy consumers and see what they say.<o:p></o:p></p>
<p class="MsoNormal">Lowering tariffs the way we are doing is good for the
technocrats but not for our industrialisation ambitions.<o:p></o:p></p>
<p class="MsoNormal"><br /></p>
<!--EndFragment-->Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-9136187496347874472.post-61422948633703391312024-02-06T13:48:00.003+03:002024-02-06T13:48:28.536+03:00UGANDA’S RECORD FDI AND THE MAN ON THE STREET<p>In November audit firm Ernst & Young (E&Y) released
a report on Africa’s economic prospects.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal"><span style="font-size: x-large;"><b></b></span></p><blockquote><span style="font-size: x-large;"><b>"In the report “Pivot to growth” E&Y reported that Uganda
attracted a record $10b in foreign direct investment in 2022 or seven in every
ten dollars of FDI that came into East Africa that year....</b></span></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">This was driven by projects in the oil & gas sector.<o:p></o:p></p>
<p class="MsoNormal">The news left the man on the street scratch his head at how
come he never saw this money.<o:p></o:p></p>
<p class="MsoNormal">The confusion comes from our not understanding how FDI is
reported and secondly, how such monies when they do come, trickle down to the
everyday man.<o:p></o:p></p>
<p class="MsoNormal">Reading the report one realises that when they talk of $10b
in FDI booked, they are reporting the monies committed for a project. So in our
case for example, our share of the $10b East African Crude Pipeline (EACOP)for
which final investment decision was reached in <span style="mso-spacerun: yes;"> </span>2022 would be included in this number.<o:p></o:p></p>
<p class="MsoNormal">The funds of course will not arrive in one lumpsum but will
mostly be parceled out over the duration of the project.<o:p></o:p></p>
<p class="MsoNormal">Why we did not see immediate improvement in the contents
of our pockets is largely a function of what the project will need or buy
locally. <o:p></o:p></p>
<p class="MsoNormal">The planning, design, plant and machinery will be<span style="mso-spacerun: yes;"> </span>bought abroad and paid for there but are
factored in as project costs. Foreign contractors may very well be paid in<span style="mso-spacerun: yes;"> </span>to their accounts at home.<o:p></o:p></p>
<p class="MsoNormal">Local contractors, suppliers, hospitality and service
providers are beginning to smell the money.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>But as we all know <span style="font-size: x-large;"><b>there is no one as quiet as a man who has
been paid. The loud ones are the one who are not in the slip stream of the
money...</b></span></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">In years after commercial viability of our oil finds was
determined in 2006, government has written into law what sectors of the
industries servicing the oil & gas sector can be ringfenced for Ugandans. These
were mostly food, hospitality, security, logistics and other low capital
intensive sectors.<o:p></o:p></p>
<p class="MsoNormal">So if you are a friend, relative or business partners of the
local businessmen who have already seen some contracts you are not complaining.<o:p></o:p></p>
<p class="MsoNormal">But also while the oil & gas sector may very well effect
some major changes in the greater scheme of things our 200,000 barrels per day
at full capacity, is really not much to write home about.<o:p></o:p></p>
<p class="MsoNormal">Nigeria last year averaged 1.35 million barrels per day,
Angola came in second at 1.1 million barrels per day and Algeria at 908,000
barrels per day.<o:p></o:p></p>
<p class="MsoNormal">That being said businessmen are reporting that they are
beginning to feel an uptick in demand, starting the middle of last year and one
may imagine some trickle down is beginning to show its head.<o:p></o:p></p>
<p class="MsoNormal">The relative stability of the Uganda shilling which traded
in a a narrow band of sh3750 – sh3850<span style="mso-spacerun: yes;">
</span>may also indicate that some of that oil money is already coming and
supporting the shilling.<o:p></o:p></p>
<p class="MsoNormal">Kenya across the border saw its currency cross the sh160 to
the dollar mark before Christmas, a trend that continued into January. Some of
the reasons were falling commodity prices and a flight for the exit on indications
our eastern neighbour is set to default on some key international loans.<o:p></o:p></p>
<p class="MsoNormal">Whether you will earn from the oil & gas sector or not
will depend on how you are positioned. As a worker the industry has stringent
accreditation standards that have to met before they can look your way, for
contractors and suppliers the same.<o:p></o:p></p>
<p class="MsoNormal"><b><span style="font-size: x-large;"></span></b></p><blockquote><b><span style="font-size: x-large;">"The expectation is that at least $20b will spent until first
oil in 2025 and so it may not be late to position oneself to draw from the oil
wells...</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">The money will not come dripping with oil and easily
recognisable as coming from the sector, but it will come.<o:p></o:p></p>
<p class="MsoNormal">Many have been called to partake<span style="mso-spacerun: yes;"> </span>but few will be chosen.<o:p></o:p></p>
<p class="MsoNormal"><br /></p>
<p class="MsoNormal"><br /></p>
<!--EndFragment-->Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-9136187496347874472.post-18540826761487897572024-01-30T07:11:00.005+03:002024-01-30T07:12:26.327+03:00PRESCRIPTIONS FOR UGANDA'S NEXT 38 YEARS<p>Last week we commemorated 38 years of the National
Resistance Movement (NRM).</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>There is a lot to be proud of. <b><span style="font-size: x-large;">No less a figure than
Singaporean former leader Lee Kuan Yew speaking in 1998 did not give Uganda a
chance in 100 years to get back up on its feet. At the time the NRM was two
years in power having inherited a country that was barely functional and an
economy that had regressed to pre-1970 levels...</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">To add salt to injury there were insurgencies in the north
and east, which were taking priority of the meagre national resources.<o:p></o:p></p>
<p class="MsoNormal">The rebellion mostly in the north, which lasted into this
century, served as a lodestone on economic progress, as almost one in five of
the country’s population was not producing or consuming meaningfully.<o:p></o:p></p>
<p class="MsoNormal">The end of the war on Ugandan soil from around 2002, meant
northern Uganda could reenter the productive economy and the results have been
telling.<o:p></o:p></p>
<p class="MsoNormal">Uganda’s per capita GDP has jumped almost four-fold to $934
at the end of 2022 according to the World Bank, from $241 in 2002. Interestingly
per capita GDP fell back to 2002 levels from $253 in 1986.<o:p></o:p></p>
<p class="MsoNormal">One can argue that by 2002 a growth momentum had set in,
from earlier reforms that liberalized the economy, but it is hard to discount
the effect of the reentry into the economy of northern Uganda and West Nile.<o:p></o:p></p>
<p class="MsoNormal">However, an argument can be made that we have underperformed
given the human capital we have, the natural endowments and the peace the rest
of the nation has enjoyed.<o:p></o:p></p>
<p class="MsoNormal">That being as it is I would like to look to the next 38 years to see
how we accelerate the development trajectory.<o:p></o:p></p>
<p class="MsoListParagraph" style="mso-list: l0 level1 lfo1; text-indent: -.25in;"><!--[if !supportLists]--><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">1.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><b>Root out corruption</b><o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>The recent Auditor General’s report reports a continued
trend towards more and more waste in government. <b><span style="font-size: x-large;">Its not that our officials are
clumsy and letting valuable shillings disappear into thin air, more that they are
keeping more and more of our tax shillings for themselves</span></b>. This is affecting
service delivery, concentrating resources in a few connected people’s hands and
even worse, distorting markets by overinflating asset prices and underpricing
genuine businessmen. Not only is this trend grinding the economy to a halt but
also poses a serious threat to national stability and security.</blockquote><o:p></o:p><p></p>
<p class="MsoListParagraph" style="mso-list: l0 level1 lfo1; text-indent: -.25in;"><!--[if !supportLists]--><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">2.<span style="font-family: "Times New Roman"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-variation-settings: normal; line-height: normal;"><b>
</b></span></span></span><!--[endif]--><b>Leaner government</b><o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>Relatedly we need to cut back on the cost of public
administration, especially because the bloated public sector has increased the
surface area for corruption with little attendant improvement in production.
Leaner government would allow government to focus on what its supposed to do
which is facilitate the private sector to produce and equitably distribute the
ensuing growth. <b><span style="font-size: x-large;">Leaner government also means government not succumbing to the temptation
to go back into business...</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoListParagraph" style="mso-list: l0 level1 lfo1; text-indent: -.25in;"><!--[if !supportLists]--><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">3.<span style="font: 7.0pt "Times New Roman";"> </span><span style="font-family: "Times New Roman"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-variation-settings: normal; line-height: normal;"><b>
</b></span></span></span><!--[endif]--><b>Greater emphasis on human capacity development</b><o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>A few years ago an argument was made in the The Economist
magazine that given a choice between human capital and infrastructure
development, the smart money is on improving the quality of the population. The
argument was that once the people are better educated and healthy they will
find a way around the infrastructure deficits. However, if the quality of the
people is wanting all the infrastructure in the world will count for little as
they will not be able to exploit it to improve their living standards. School
enrollement has to continue to rise but more importantly we need to reduce the
drop out rate, about 1.4 million a year the last number I saw. We must increase
access to quality health services. <b><span style="font-size: x-large;">We must increase opportunities by improving
the business environment to absorb all these quality Ugandans entering the job
market.</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoListParagraph" style="mso-list: l0 level1 lfo1; text-indent: -.25in;"><!--[if !supportLists]--><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">4.<span style="font: 7.0pt "Times New Roman";"> </span><span style="font-family: "Times New Roman"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-variation-settings: normal; line-height: normal;"><b>
</b></span></span></span><!--[endif]--><b>Continued infrastructure development</b><o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>While we have made significant strides in infrastructure development
– except rail transport, we are far behind what our ambitions require in road,
energy and social infrastructure. <b><span style="font-size: x-large;">Using roads as an example we have about 16 km
of paved road per square km, which is well below what an average middle income
country which is around 80 km per sq km</span></b>. We have all seen in our various suburbs
how much new economic activity is generated when a tarmac road is laid. The same
deficiencies are seen in everything from electricity generation and consumption,
to health center and school facilities to housing. Infrastructure is what
unlocks the latent economy.</blockquote><p><b>Invest in agriculture extension</b> </p><p></p><blockquote>A recent study showed that for sub-Saharna africa to make its biggest gains in agriculture investing in agricultural extension services and irrigation are your best bet. we have been seating on our laurels for too long, to thepoint that our agriculture is still using means of pre-agricultural revolution times. Extension workers who will improve the productivity of our small holder farmers is critical. I<b><span style="font-size: x-large;">t is a scandal that while agriculture provides the livelihood of seven in 10 Ugandans it acocunts for less than 30 percent of GDP and has not enjoyed double digit growth in any one year in the last 40 years, hence the prevalence of poverty in Uganda.</span></b></blockquote><p> </p><p></p><o:p></o:p><p></p>
<p class="MsoListParagraph" style="mso-list: l0 level1 lfo1; text-indent: -.25in;"><!--[if !supportLists]--><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">5.<span style="font: 7.0pt "Times New Roman";"> </span><span style="font-family: "Times New Roman"; font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-variation-settings: normal; line-height: normal;"><b>
</b></span></span></span><!--[endif]--><b><span style="mso-spacerun: yes;"> </span>Export led
growth</b><o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>And finally, we need to focus on producing for export rather
than import substitution. As the Asian tigers showed focusing on export led
growth improves the quality of products and creates more jobs. <b><span style="font-size: x-large;">Import
substitution benefits a few connected people, does not improve quality
standards and generally lowers livings standards by condemning the population
to endure substandard goods.</span></b> The evidence is all around us the export targeted Lato
has better quality products, in adequate quantities and changing the socio-economic
status of farmers in Ntungamo than their local competitors who are content to
serve the Ugandan market.</blockquote><o:p></o:p><p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">This is by no means a comprehensive nor original list, the
challenge for the next 38 years is the execution of these ideas. Hopefully we
will look back in 38 years and we would have far exceeded our expectations.<o:p></o:p></p>
<p class="MsoNormal">FOR GOD AND MY COUNTRY!<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-9136187496347874472.post-81827451158679364792024-01-23T06:41:00.004+03:002024-01-23T06:41:20.212+03:00 A RETURN TO SAPS IS A REAL POSSIBILITY<p>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.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">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.<o:p></o:p></p>
<p class="MsoNormal">“Some accounting offices are concealing domestic arrears and
paying for arrears which previously were not disclosed nor budgeted for,”
Muwanga reported.<o:p></o:p></p>
<p class="MsoNormal">“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.”<o:p></o:p></p>
<p class="MsoNormal">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.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>The net effect of this, is that <b><span style="font-size: x-large;">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</span></b>.</blockquote><o:p></o:p><p></p>
<p class="MsoNormal">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.<o:p></o:p></p>
<p class="MsoNormal">This is a scary situation than is being acknowledged by the government.<o:p></o:p></p>
<p class="MsoNormal">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.<o:p></o:p></p>
<p class="MsoNormal">It does not take a rocket scientist to see what will happen
if his methods are replicated across hundreds or even thousands of companies.<o:p></o:p></p>
<p class="MsoNormal">URA will huff and puff but will find little love in the
private sector. That is not a threat but a promise.<o:p></o:p></p>
<p class="MsoNormal">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.<o:p></o:p></p>
<p class="MsoNormal">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.<o:p></o:p></p>
<p class="MsoNormal">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?<o:p></o:p></p>
<p class="MsoNormal"><b><span style="font-size: x-large;">"There is even a scarier scenario.<span style="mso-spacerun: yes;"> </span>That these interest groups that are a law
unto themselves, have actually captured the state...<o:p></o:p></span></b></p>
<p class="MsoNormal">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.<o:p></o:p></p>
<p class="MsoNormal">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.<o:p></o:p></p>
<p class="MsoNormal">This cannot end well, especially if good people decide to
join in the plunder.<o:p></o:p></p>
<p class="MsoNormal">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.<o:p></o:p></p>
<p class="MsoNormal">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.<o:p></o:p></p>
<p class="MsoNormal">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.<o:p></o:p></p>
<p class="MsoNormal">God forbid that we find ourselves back in SAPs because of
our indiscipline. But how improbable is that given what we know?<o:p></o:p></p>
<p class="MsoNormal"><br /></p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-9136187496347874472.post-57373842004458419152024-01-16T06:58:00.001+03:002024-01-16T10:02:32.806+03:00THE ATIAK SUGAR DEAL LEAVES A BITTER TASTE IN THE MOUTH<p>We all know someone like this. You come together as group to
contribute to a business venture, but they despite their initial enthusiasm for
the project, are reluctant to contribute to the endevour. The rest of you get it
off the ground with the little you have managed to put together and what in
patient hope for the coming of their contribution.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">It doesn’t come and there is always an excuse why. It is
beginning to get on your nerves because the defaulting member is benefitting
from the project disproportionately to his contribution. You could have let
them freeload – after all we are all friends, but the sheer injustice of the
situation is beginning to poison the friendship. And the freeloader seems
totally unbothered by the situation he has put you people in, oblivious to the
risk of jeopardizing the project all together.<o:p></o:p></p>
<p class="MsoNormal">Last week the Auditor General released his report for the
year that ended in June2023. Wading through the inane stuff that included air
supply in local governments, our ballooning public debt, ghost works in
government I happened upon a report about our interest in Atiak Sugar Company.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote><b><span style="font-size: x-large;">"If lack of capital is a reason for most business failures in Uganda
there is no way, absolutely no way, Atiak Sugar Company will collapse...</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">The project is located in Amuru district, northern Uganda
and has the potential to process 1650 tonnes of cane daily for a production of
66,000 tonnes of sugar annually on the 7,900-acre plantation.<o:p></o:p></p>
<p class="MsoNormal"><span style="mso-spacerun: yes;"> </span>They have struggled
to get off the ground, with production being pushed back from 2016 before
limited production begun in 2020, but had to be shut down in 2022 for lack of
cane to run the plant following a burning of 3000 acres of their fields.
Observers think it won’t be until 2025 when they resume operations.<o:p></o:p></p>
<p class="MsoNormal">Industry players in private are not surprised by the
teething problems the project is suffering as the promoters thought they would
circumvent certain key processes in setting up an operation as they had
envisaged.<o:p></o:p></p>
<p class="MsoNormal">For a project of this magnitude to take almost a decade
after its initial commencement to take off is mind boggling.<o:p></o:p></p>
<p class="MsoNormal">But maybe not.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">Over the last six years government has pumped sh459b into
the project in equity and loans through Uganda Development Corporation (UDC).
But also an additional sh69b has been received from NAADS (National
Agricultural Advisory Services) for such things as slashing, weeding and
planting.<o:p></o:p></p><p class="MsoNormal"></p><blockquote>But to break it down even further <b><span style="font-size: x-large;">these monies at sh14m a classroom, build about 40,000 classrooms or almost 6,000 primary schools. This would put a dent in our horrific number of more than 1.4 million kids dropping out of school annually....</span></b></blockquote><o:p></o:p><p></p><div>These funds, which are more than were allocated to the
manufacturing and tourism sector – sh491b, in the last budget, is five times more
than government’s commitment to the project. Government is a 40 percent shareholder
in the project for which they were supposed to contribute sh80b.</div><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">But it gets better.<o:p></o:p></p>
<p class="MsoNormal">John Muwanga the Auditor General reported on government’s
partners in the project, Horyal Investment Holding Company (HIHC), “There was
no evidence to confirm that the private shareholders had provided their capital
contribution to the company.”<o:p></o:p></p>
<p class="MsoNormal">All I could say was, Wow!<o:p></o:p></p>
<p class="MsoNormal">But not only has government given HIHC a blank check to set
up this financial black hole, but also was not adequately represented on the
board. Government has only one instead of two board members. This kind of
negligence is criminal.<o:p></o:p></p>
<p class="MsoNormal">To simplify several of us got together raised money and then
handed over the money to the one among us who has not contributed to the
business and we are not bothered what he is doing.<o:p></o:p></p>
<p class="MsoNormal">Where is the incentive for Atiak to work?<span style="mso-spacerun: yes;"> </span>The promoters are already being paid hand
over fist before the project starts, why suffer with staffing and operations,
when we can just be paid for twiddling our thumbs?<o:p></o:p></p>
<p class="MsoNormal">I would love to be wrong but it is not rocket science to see
what is going to happen. <o:p></o:p></p>
<p class="MsoNormal"><b><span style="font-size: x-large;">"The promoters will throw their hands up in the air in
defeat, walk away, government will take over the project to make a show of
trying to recoup their investment and eventually give up as well, let the bush
grow back and let the machines rust away....<o:p></o:p></span></b></p>
<p class="MsoNormal">It goes without saying that this country cannot afford this
kind of waste on such an industrial scale.<o:p></o:p></p>
<p class="MsoNormal">Government actions in this project make one wonder whether
they really wanted the project to succeed. If they really wanted it to succeed,
the obvious thing to do would be to contract someone who has experience in this
business, pay them probably a tenth of what they have already shoveled into
this doomed project and just maybe we would have sugar from northern Uganda
within a finite time.<o:p></o:p></p>
<p class="MsoNormal">And now its on to the next scandal.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal"><br /></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-9136187496347874472.post-32555644567044220482024-01-11T06:42:00.005+03:002024-01-12T08:08:04.882+03:00THE USE, UGANDA’S OPEN SECRET<p>If you are to get a quick idea of a person’s financial
health, look at how they spend their money.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">There are only two ways to spend your money, either you
consume/eat it or you invest it. Consumption needs no definition, but investing
means committing money with the hope of a return in the future. The returns on
investment can come as cash-on-cash returns – you earn cash from the investment
or as capital gains – you invest in something and its price rises after you
have invested.<o:p></o:p></p>
<p class="MsoNormal">Going by this, your financial health is dictated by the
balance of how you spend your money. If you consume more than you invest you
are not very healthy financially and the opposite is true. Essentially <b></b></p><blockquote><b><span style="font-size: x-large;">your
financial health is determined by how much of how much you earn you keep.</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">Shifting the balance is a process done over time and often
begins with a shift in mindset, unless you are forced to save like many workers
do with the National Social Security Fund (NSSF) in Uganda.<o:p></o:p></p>
<p class="MsoNormal">But many of us are at loss on what to invest in. As a result
of this confusion, we follow the bandwagon into farming, real estate or
business. For those who can not muster the monies to go into the above, they
fall back on eating their kamoney, until they get a “big deal”. <o:p></o:p></p>
<p class="MsoNormal">Is it any wonder that corruption is in our DNA?<span style="mso-spacerun: yes;"> </span>In our endevour to hasten the big deal we end
up dipping our fingers in the till.<o:p></o:p></p>
<p class="MsoNormal">For the everyday man there is a way to sock away small sums,
which over time can grow into huge investments.<o:p></o:p></p>
<p class="MsoNormal">The answer is the Uganda Securities Exchange (USE). <o:p></o:p></p>
<p class="MsoNormal">At the USE for as little as sh10,000 – National Insurance
Corporation (NIC) shares are selling for sh6.5, one can begin on their
investment journey, while they wait for the big deal.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>They say <b><span style="font-size: x-large;">the best time to start investing was 20 years ago
and the next best time is now...</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">But don’t take my word for it.<o:p></o:p></p>
<p class="MsoNormal">If you invested sh10,000 in each of the 11 locally listed
shares on 2 January last year, by year end you would have registered a return
of sh4,400 according to share monitoring firm Simply Wallstreet. This was in
dividends – a share of company profits, <span style="mso-spacerun: yes;"> </span>and share price increases (capital gains).<o:p></o:p></p>
<p class="MsoNormal">While that may not be enough to whet your appetite, the
devil is in the detail. <o:p></o:p></p>
<p class="MsoNormal">Of the 11 companies listed on the USE, all but three showed
a positive return last year.<o:p></o:p></p>
<p class="MsoNormal">Of the eight winners, five of them showed double digit
returns, with the lowest being Bank of Baroda at about 19 percent by the end of
November and the highest being Stanbic Bank at about 73 percent, according to
investment bankers Crested Capital. And among these winners, three of them their
dividends accounted for between 25 and 50 percent of the gains.<o:p></o:p></p>
<p class="MsoNormal">Interestingly for two counters – MTN and Uganda Clays
despite a slide in prices, the dividend payouts more than compensated for that
to show a positive total return at year end.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>Basically, that <b><span style="font-size: x-large;">you can still win on the exchange even if
the share prices dip, if the company is fundamentally sound and can afford a
dividend payout...</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">In an ideal world if a company is doing well – revenues,
profits and net asset value are growing, the share prices should follow suit.
It doesn’t always work that way especially on the USE where trading is very
thin – up to November turnover was only sh61b, with one counter Umeme
accounting for almost half of this volume.<o:p></o:p></p>
<p class="MsoNormal">Trading is thin because most shares are held by
institutional investors, who often buy to hold rather than trade. As a result
price movements across the market are subdued.<o:p></o:p></p>
<p class="MsoNormal">So, while you can get some credible dividend yields – how
much dividend you get compared to what you paid, the history of the USE is that
it is rather sleepy in terms of price movements.<o:p></o:p></p>
<p class="MsoNormal">But there in lies a huge opportunity for long term players.
If company profitability continues to grow while prices are indifferent, it
means the shares are becoming increasingly good value for money.<o:p></o:p></p>
<p class="MsoNormal">Imagine you bought your house at sh100m ten years ago and
were initially charging one million shillings a month in rent but ten years
later rent has doubled to sh2m, the value of your house has gone up, at least
twice, beyond the initial sh100m you bought it at. Even if no one knows until
you decide to sell.<o:p></o:p></p>
<p class="MsoNormal">Before telecom company Airtel started trading at the end of
the year, while profitability of the listed companies was up 24 percent, prices
on average had only moved up <span style="mso-spacerun: yes;"> </span>6 percent.
Meaning prices had some way to catch up to earnings.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>It is a no brainer. <b><span style="font-size: x-large;">As long as companies’ earnings continue
to outstrip price movements, it’s a mathematical certainty that somewhere down
the line prices will begin to rise to reflect this reality.</span></b> Next week? Next
month? Nest year? Who knows but it will. </blockquote><o:p></o:p><p></p>
<p class="MsoNormal">Historically the best returns for your money come from
owning businesses. The USE is offering pieces of some of the best run companies
in Uganda and the region – there are seven Kenyan companies selling shares on
the USE, for a few shillings.<o:p></o:p></p>
<p class="MsoNormal">And we have not even talked about the treasury bonds and
bills trading on the exchange with double digit returns.<o:p></o:p></p>
<p class="MsoNormal">So why isn’t the above not widely known? Wealth is silent.<o:p></o:p></p>
<p class="MsoNormal"><br /></p>Unknownnoreply@blogger.com4tag:blogger.com,1999:blog-9136187496347874472.post-3128927247456869812024-01-02T07:04:00.007+03:002024-01-02T07:04:54.590+03:00KENYA’S CAUTIONARY TALE FOR UGANDA<p>My driver Stephen reflected the attitude of many Kenyans to
the current rise in the cost of living in our eastern neighbour. He thought it had
long gotten out of hand and could cause instability in the region’s biggest
economy.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal"></p><blockquote><b><span style="font-size: x-large;">"In 2023 since the ascendance to the top job by President
William Ruto, Kenyans have seen their cost of living soaring with the removal
of fuel subsidies, increases in consumption taxes and fall of the Kenyan
shilling to historical lows....</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">The Kenya shilling crossed the sh150 mark against the US
dollar in October and peaked at kShs156 before Christmas.<o:p></o:p></p>
<p class="MsoNormal">But these are just the symptoms of even more fundamental weakness
in the economy. <o:p></o:p></p>
<p class="MsoNormal">For example, that the export receipts were down in the 12
months up to October despite the shilling depreciating 19 percent during the period.
A weaker shilling should see higher export earnings in Kenya shillings even if
they just exported the same amount of goods as a comparable period in the past.
The fact that export earnings suggests that the economies productivity is also
falling.<o:p></o:p></p>
<p class="MsoNormal">It could not have come at a worse time. Next year the $2b
Eurobond principle comes due at the end of June and they need all the hard
currency they can lay their hands on.<o:p></o:p></p>
<p class="MsoNormal">So, it makes sense that the government is scrambling every which
way it can to raise these funds, including overtures to the International
Monetary Fund (IMF) to ease the pain.<o:p></o:p></p>
<p class="MsoNormal">The weakening shilling of course not helping matters as the shillings
weakening added Ksh810b (sh19trillion) in interest payments in the year to
October according to the Central Bank of Kenya (CBK).<o:p></o:p></p>
<p class="MsoNormal">How did they come to this? An ambitious infrastructure
expansion first during the Mwai Kibaki presidency, which paved way for a
questionable expansion drive during the time of Uhuru Kenyatta era, mostly funded by debt, is coming back to bite.<o:p></o:p></p>
<p class="MsoNormal">There are questions whether the $2b Eurobond, contracted in
2014, was actually used for its intended purpose, with reports that the
proceeds found their way into private pockets. <o:p></o:p></p>
<p class="MsoNormal">Few can argue with paying for infrastructure development
with debt. Infrastructure should ease doing business in an economy, leading to
more taxes making it affordable to pay off the debt. But if the infrastructure developed
does not come with an attendant increase in economic activity, then trouble
begins.<o:p></o:p></p>
<p class="MsoNormal">The ambitious Standard Gauge Railway (SGR) which cost $3.6b
and whose loan grace period expired in 2021 is putting great strain on the
Kenya treasury, especially since revenues from the SGR operations have not yet caught
up with costs.<o:p></o:p></p>
<p class="MsoNormal">Industry watchers have said the only way the project can
have a chance of viability is if it is linked to Kampala and its rich
hinterland. That has not happened as the project is in limbo, having stopped in
Naivasha.<o:p></o:p></p>
<p class="MsoNormal">There are other things that are conspiring to stress the
Kenyan economy – corruption being at the top, and now the bitter pill of
economic restructuring has become inevitable.<o:p></o:p></p>
<p class="MsoNormal"><b><span style="font-size: x-large;">"We were there in the 1980s and 1990s when revenues were anemic
and loans were falling due left right and center. Increased taxes and liberalization
of the economy helped us pull out, but the pain still traumatizes a generation....<o:p></o:p></span></b></p>
<p class="MsoNormal">We hear similar noises in Kenya from what was here then,
with the arm chair commentators complaining that the economic moves the government
is taking – raising taxes and restructuring the economy, were a sell out to the
west. <o:p></o:p></p>
<p class="MsoNormal">The net sum of this contrary view, is that the Kenya government
should continue with business as usual and somehow things will sort themselves
out.<o:p></o:p></p>
<p class="MsoNormal">This kicking the tin down the road prescription was tried by
the Uhuru government and means the pain of restructuring will be that more
painful.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>Kenya unlike us in the 1990s have a robust commercial sector
and even if there are reports of massive capital flight, one should expect they
will come through eventually. <b><span style="font-size: x-large;">The key is the government, does it have the
cojones to do what is needed to do or will it only tweak around the edges and hope
for the best?</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">Do the necessary maybe politically expensive, but if they
get down to it now maybe by the time of the next election in 2028, the economic
pressures will have eased with the greater efficiencies created and the William
Ruto adminstration may very well have been forgiven by then.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>The current Uganda government cash squeeze, a result of a
growing debt servicing bill – it jumped 50 percent to $722m in 2022 from $480m
in 2021 and growing, is cause for concern. Thankfully our revenues continue to
grow as do our export receipts. <b><span style="font-size: x-large;">The hope is these will continue to grow despite
the strain on the private sector, which government owes sh8trillion and shows little
willingness to settle – in this budget sh200b was provided towards retiring
this debt, but maybe a case of us burying our heads in the sand. </span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">With our politics in transition, it is unlikely that the
government can take the hard decisions, like it did in the 1990s to get the
economy back on track. The trick is to not to dig ourselves into that hole or take
the initiative in cutting down the cost of our public administration before
someone comes along and forces us to do it.<o:p></o:p></p>
<p class="MsoNormal">Happy New Year!<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal"><br /></p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-9136187496347874472.post-51433982042455340532023-12-19T06:32:00.001+03:002023-12-19T06:32:05.296+03:00MONEY THOUGHT FOR 2024<p>No better time than the end of the year to assess your money
situation. If you are ambitious your money situation is not satisfying at all.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">Myron Golden, one of those money motivational speakers, said
something in the last few days that struck a code.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote><b><span style="font-size: x-large;">“If you desire to fix your money problem, don’t try to fix
the money problem, fix your money mindset …. Or your money problems will never
go away,”</span></b> he said.</blockquote><o:p></o:p><p></p>
<p class="MsoNormal">Do you want to know if you have a money problem? <o:p></o:p></p>
<p class="MsoNormal">Add up all the income you made in the year and then determine
the value of all the assets you own, things like cash, shares, bonds,
businesses, real estate please don’t include your car, cloths and phones.<o:p></o:p></p>
<p class="MsoNormal">If you are in a good place your assets should be equal to or
more than your age multiplied by your annual income, all divided by ten.<span style="mso-spacerun: yes;"> </span>So, if your annual income is sh10m and you
are 30 years old you should have at least sh30m in assets. If you have more
than your number you are doing well, if not you need to pause and think about
your life.<o:p></o:p></p>
<p class="MsoNormal">The formula was proposed by Thomas Stanley author of “The
Millionaire next door”. It is based on a US reality so may not be directly
applicable to us, but it is a good place to start. <o:p></o:p></p>
<p class="MsoNormal">There are more brutal formulas, like the income from your
assets, passive income, should be equal to or more than your annual expenses to
be able to begin to rest on your laurels.<o:p></o:p></p>
<p class="MsoNormal">So, if you are doing badly by the above formulae Myron
Golden says the money is not the problem but your mindset.<o:p></o:p></p>
<p class="MsoNormal">For many of us when thinking about getting money we are
like, just show me what to do and I get the money. We will be shocked to learn
that it does not work like that.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>To explain<b><span style="font-size: x-large;">. There are two ways of spending money. Only two.
Either you eat it or you invest it...</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">If you look at your finances, the balance of these spending
decisions would tell an on looker immediately whether you have money problems
or not.<o:p></o:p></p>
<p class="MsoNormal">So, if I said I will give you a sh100,000 right now, what
would be your first thought on how to spend it?<span style="mso-spacerun: yes;">
</span>For most of us we will think of food, cloths, drinks or some transient
experience. There is a small minority – less than two percent of most
populations, who would think first of how to invest the money. <o:p></o:p></p>
<p class="MsoNormal">The word invest needs to be demystified. For many of us, we
equate investors with those men who are always waiting outside State House
looking to get incentives and tax holidays to put up multi-million-dollar
operations.<o:p></o:p></p>
<p class="MsoNormal">So, when asked how would we spend sh100,000, we think it is
too little to invest.<o:p></o:p></p>
<p class="MsoNormal">This is the direct opposite of my friend Jack, when money
crosses his path his first thought is how to deploy it. However, small little
it is. As a result, after more than a decade of this discipline, he has built
himself an asset base that is more than a billion shillings and which pays him
about sh500,000 daily or sh180m a year or sh15m a month and he is not yet 50
years old yet.<o:p></o:p></p>
<p class="MsoNormal">Ok so he might have come upon a windfall in the last year or
so, but because of his mindset, which is now wired away from eating his money, he
invested it rather than blew it on fast food, fast cars, even faster women and
high living.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote><b><span style="font-size: x-large;">"Mindset is key. Thoughts lead to actions, actions lead to
behaviour, behaviour leads to character and character leads to destiny.</span></b> But it
starts with a thought.</blockquote><o:p></o:p><p></p>
<p class="MsoNormal">Kampala businessman Sudhir Ruparelia in answering the
Financial Times, way back in the 1990s, how he became wealthy replied, “It is
an old Indian trick, earn ten shillings, eat one shilling reinvest nine
shillings. Repeat until rich.”<o:p></o:p></p>
<p class="MsoNormal">Our knee jerk reaction is to rubbish such stories. Us we
know the man has done some funny things along the way and that is why he is
rich.<o:p></o:p></p>
<p class="MsoNormal">That may very well be, but for us it absolves us of the
responsibility to try and get rich, we are convinced the rich are crooks and since
we are bible slapping, church going Chiristians, we have left the wealth
building for the crooks. Don’t get me going why it is convenient for some
people that the gullible flock persist in this fallacy.<o:p></o:p></p>
<p class="MsoNormal">Crooks will be separated from the rest with the passing of
time, don’t worry about that. The point is when money cross our paths the truly
wealthy look at it differently from the rest of us mere mortals and that makes
the difference in our fortunes or lack of thereof.<o:p></o:p></p>
<p class="MsoNormal">And the opportunities are all around us. <o:p></o:p></p>
<p class="MsoNormal">Last week investment bankers Crested Capital held a “2023
Market Round up” webinar to see what our capital markets have been doing throughout
the year.<o:p></o:p></p>
<p class="MsoNormal">While the overall performance of our Uganda Securities
Exchange (USE) was dismal, it is down 26 percent this year, the devil is in the
detail.<o:p></o:p></p>
<p class="MsoNormal">If in January you had bought Stanbic bank shares, at the
time going for sh21 each, you would make sh11.50 a share by year end. The share
closed last week at sh32.50. But in addition to that Stanbic paid sh6 in
dividends per share during the year.<o:p></o:p></p>
<p class="MsoNormal">If you had bought 1,000 shares of Stanbic at the beginning
of the year for sh21,000, your interest in the bank world now be up to
sh32,500. In addition, you would have earned an additional sh6,000. <o:p></o:p></p>
<p class="MsoNormal">You just have to extrapolate the figures to see that if you
had bought 10,000 or 100,000 or a million shares you would have bagged sh60,000
or sh600,000 or sh6m respectively in dividends alone.<o:p></o:p></p>
<p class="MsoNormal">Looking at your annual income surely you could have
committed a few shillings to buy the Stanbic share and make some money, during
the year. What stopped you from doing that? Ignorance could be an allowable
defence, but I am willing to bet you ate the money.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal"><br /></p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-9136187496347874472.post-78135062922891993072023-12-12T07:35:00.002+03:002023-12-12T07:35:53.451+03:00THE CURIOUS CASE OF GREENLAND BANK, LUGOGO AND FAKE ARTIST IMPRESSIONS<p><span style="font-family: Calibri; font-size: 11pt;">It will 25 years next year on 1</span><sup><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes'; vertical-align: super;">st</span></sup><span style="font-family: Calibri; font-size: 11pt;"> April since Greenland Bank was shut down.</span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">The news announced in the last few weeks of Turkish contractor Suuma taking over Lugogo sports complex to redevelop it, more like under develop it, brought back memories of Greenland Bank.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">Greenland Bank opened its doors for business in 1990. By 1994 they had a swanky new headquarters building on Kampala road, opposite the central bank.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">But its biggest contribution to the industry was its abandoning of the strict banking hours other high street banks kept.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">In those days banks would open for business at 9 am and were done by 2 pm. And did not open on weekends. There were no ATMs so if you had not got your money by Friday lunch time, you were in for a long weekend.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">Greenland bank not only remained open until 7 pm, it also opened on weekends. And they did not have the onerous opening and minimum account balances that other banks demanded.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri;"></span></p><blockquote><b><span style="font-size: x-large;">"It did a better job of being the people’s bank than the government owned Uganda Commercial Bank (UCB) or its cousin The Cooperative Bank....</span></b></blockquote><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span><p></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">The quicker adoption of computers must have helped. It helped too that one of the main promoters of the bank was former Bank of Uganda governor Dr Suleiman Kigundu.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">During much of the 1990s UCB was being readied for privatisation, and had suffered several failed attempts, among other things, government’s insistence that who ever was to take UCB off its hands should commit to maintaining the full branch network, which by that had been scaled back to 85 from a historic high of just under 200 branches. </span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">International banks including South African bank Nedbank.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">Eventually little known Westmont Bank from Malaysia, stepped up, agreed to all government conditions, took control of the bank but suddenly struggled to raise the money.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">It was then revealed that Greenland Bank had tried to buy UCB through the back door, the central bank took control of UCB and soon after sold it to Standard Bank of South Africa and it then became Stanbic Bank.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">Meanwhile, Greenland’s over ambitious expansion regionally, into hotels and grain trading soon caught up with it. Its bad loan portfolio ballooned putting depositor’s money at risk and the Bank of Uganda moved in to shut it down.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">Greenland Bank’s promoters have always complained their shut down was politically motivated and that they were still a viable bank by the time of shut down.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">In 2019 parliament instituted a probe into the closure of several banks between 1993 and 2016, among which was Greenland Bank.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">They say if the rat lives long enough it may eat the skin of the cat. </span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">During their testimony before the Committee on Statutory Authorities & State Enterprises (CASASE) the former Greenland Bank directors listed as one of their assets the Westmont Land (Bhd) Asia of Malaysia.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri;"></span></p><blockquote><span style="font-size: 11pt;">And suddenly, at least for me, it all begun to come together. </span><b><span style="font-size: x-large;">Greenland bank had created a front company in Malaysia to come and bid for UCB. When the fraud was unearthed, not least of all because Greenland bank was infiltrated, than the Government pulled the rag from under Greenland bank’s feet....</span></b></blockquote><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span><p></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">In hindsight Greenland’s problems must have been a result of trying to chew more than they could swallow, causing a liquidity crunch and leading to it falling foul of banking regulations. Never mind too, that they committed the ultimate folly of banking, committing short term liabilities – people’s deposits, to invest in long term projects --- real estate development.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">Because of the underhand method that had been used to control UCB, Greenland could therefore not openly get back what it had poured into UCB bank and that was that. Not to mention they never got around to raising the balance of the price they had pledged to pay for the bank.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">So when Lugogo sports complex was handed over to the a foreign contractor to develop, I couldn’t help remembering the UCB saga.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">According to artistic images supposedly issued by the new developers, the cricket oval and the tennis courts are not part of the development plan. Instead of these there will be a huge indoor arena and a small hotel .</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri;"></span></p><blockquote><b><span style="font-size: x-large;">"More recently the Naguru Estate was taken over by some Irish-led developers, OpecPrime properties, whose artistic impression of a satellite city on the site has remained a pipe dream...</span></b></blockquote><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span><p></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">Meanwhile hundreds of residents were evicted and promised they would have first call on the residences that would emerge from the plan. They are still waiting, if they are alive. The land is now overgrown and some local people have been stealthily apportioning themselves plots from it.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">I am hanging on to the copy of the Lugogo complex’s artist impression to compare it with the final product.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"> </span></p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-9136187496347874472.post-18877340802361366522023-12-05T07:07:00.003+03:002023-12-05T07:07:26.178+03:00KENYA PRIVATISATION, BETTER LATE THAN NEVER<p><span style="font-family: Calibri; font-size: 11pt;">Last week Kenya’s President William Ruto announced his government would be privatising 35 state owned companies.</span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">To that end, a new law been enacted that brings into force an agency to carry out the exercise without bureaucratic interference.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">The naysayers of course are up in arms, seeing this as an International Monetary Fund (IMF) plot to take Kenyan assets on the cheap.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">Even if that is true no one is asking how Kenya came into a situation that the IMF would dictate to it.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri;"></span></p><blockquote><b><span style="font-size: x-large;">"The IMF is like the lender of last resort. When no one else will touch you with a 100-foot poll the IMF is the one you go to. But they are not a charitable organisation,</span></b><span style="font-size: 11pt;"> their money has a cost.</span></blockquote><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span><p></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">Normally others will not lend to you, because the probability is high you will not be able to repay them.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">So the IMF may insist on more efficiency in the economy and the easiest thing is to flog all the deadweight companies that are sucking more out of the government than they are paying back in taxes and dividends.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">Greater efficiency in the economy will make the IMF redundant, as the country will be able to go to the open market to borrow funds.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">Privatisation can take many forms, selling the company as a going concern or liquidating it all together – selling the assets and paying off the liabilities.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">In the last incidence the company maybe beyond salvage – up to its eyeballs in debt, in need of major recapitalisation and in a dying industry, in which case it may not make business sense to try and keep it going.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">But if the company is to be sold as a going concern one can expect that the labour force will be cut (tribalism and nepotism are never an efficient recruiting mechanism), minimum efficiencies achieved, while replacing obsolete machinery before they may think about beefing up staff numbers again.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">The Uganda experience shows that the labour force eventually surpasses the original numbers before privatisation. The only thing is that it is not all those who are retrenched that regain their old jobs.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri;"></span></p><blockquote><b><span style="font-size: x-large;">"The main aim is not to raise money but to create greater efficiency in the economy...</span></b></blockquote><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span><p></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">Kenya has a fairly robust stock exchange on which some of these companies can be offloaded – if they have sound management and strong balance sheets, but chances are they will be sold to investors directly.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">The critics will say that since many of these companies will be snapped up by foreign investors it amounts to colonialism via the back door.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">It would be ideal that local businessmen buy the companies. But often what happens is that it is cronies of the political elite who “buy” these companies, who often can not raise capital to revamp them and end up selling them anyway, to foreign investors at multiples of the price they bought it at. </span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">The ordinary citizen is often conned into thinking it is better to sell to our own, not knowing they are facilitating crony capitalism with they being the eventual loser. They lose because efficiencies are not created that would see a wide supply of goods or services.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">Kenyan indigenous capital would have a better chance of participating in the up coming privatisation, because not only are they wealthier but also because they know how to mobilise resources in groups. They have longer experience in SACCOS and investment groups than we do or did in the 1990s, when our privatisation process was taking off.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">In the final analysis the man on the street wants better goods and services at a fair price, they really don’t care who owns the company.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">In theb 1990s Russia, still hung up on their socialist dogma, privatised many of their companies by giving shares to the workers. The workers ended yup selling their shares to a few connected Russians who are today’s oligarchs, fabulously wealthy people (all men) and the workers’ plight is worse off than it was under communism, especially since expected efficiencies did not turn up in the economy. And also because they took the money from these companies to buy assets abroad, like Chelsea FC.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">But if ownership is such a big deal, the Kenya government should make listing on the Nairobi Stock Exchange (NSE) within a certain time frame as a condition of sale. No gentleman’s agreement as happened here, with the eventual owners not acting as gentlemen eventually.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri;"></span></p><blockquote><b><span style="font-size: x-large;">"The powerful interest groups in Kenya that have resisted the privatisation of companies have finally run out of runway.</span></b><span style="font-size: 11pt;"> These companies should have been privatised 20 years or so ago. But the economic realities have dictated that they have to go now. </span></blockquote><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span><p></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">Dictated because the short term suffering from privatisation can be politically costly. Ruto did not come to this decision with out the economic reality staring in the face. He needs to offload as much excess baggage on the national purse strings, if he is to have ha lf a chance of getting the Kenya economy back on track.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">Again we bring such hard decisions on ourselves. If these companies were well run and making contributions to the treasury the case for their sale would be hard to sustain.</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';">But no, people are not asking the major question, who put us in this position?</span><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"><o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Calibri; font-size: 11.0000pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 等线; mso-font-kerning: 1.0000pt; mso-spacerun: 'yes';"> </span></p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-9136187496347874472.post-83286374959740597862023-11-28T06:59:00.002+03:002023-11-28T06:59:27.334+03:00THE IMPORTANCE OF THE VISION THING<p>During the recent “Uganda Entrepreneurship Congress 2023” at
Makerere University in an interaction with the students the question came up, “How
do we ensure the durability of our businesses?”</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">The statistics have been parroted over and over again that
90 percent of businesses do not get to their fifth birthdays. I suggested to
the students that this is not as bad as it sounds, because the business people
who run those failed businesses, did not lie down and die but went out and
started new businesses. And the lessons of their failure helped make their next
business better, hopefully.<o:p></o:p></p>
<p class="MsoNormal">But yes the question, “How do we prevent from failure?” Business
lady Sharon Tumusime, co-founder of carpentry shop Palit, advised first off the
that budding business people should not fear failure because failure is part of
success. <o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>Easier said than done and I could have sworn I saw a few
kids rolling their eyes. You cannot blame them. <b><span style="font-size: x-large;">In school we are taught the
lesson and then we seat for the tests, in the business world you seat for the
test first and then you learn the lesson.</span></b> A mental adjustment is important, for
all of us who want to go into business.</blockquote><o:p></o:p><p></p>
<p class="MsoNormal">“Rich Dad, Poor Dad’ author Robert Kiyosaki advises that you
need to fail faster, so you can learn quicker. That failure will happen is a
given.<o:p></o:p></p>
<p class="MsoNormal">In my mind I was thinking that one way to ensure these
failures are not final is to cover your downside, factor in the risks. I learnt
this the hard way in my forex trading days. However sure the trading set up is
it minimized your losses by determining before hand how much you are willing to
lose if the “sure deal” did not go as planned.<o:p></o:p></p>
<p class="MsoNormal">In the real world of business this may take the form of
starting small. We now enjoy the hospitality of Café Javas multiple restaurants,
but who remembers that it started out as a small, cramped operation on Bombo
Road in 2005? That was probably the business owner testing his concept,
checking whether it works or not and once he was convinced, he rolled out seven
other outlets and four others in Nairobi.<o:p></o:p></p>
<p class="MsoNormal">Also you can minimize the cost of failure by spreading the
risk, bringing in partners to shoulder the burden. That is the basis of the limited
liability company. No matter how sure the deal is, it can fail and to prevent
it from wiping you out entirely, making it difficult for you to heroically pick
yourself up, dust yourself up and start all over again, spread the risk so if
it fails you only hurt a little.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote><b><span style="font-size: x-large;">"We, who went to school, have the mistaken idea that money
will solve all problems. So when we get a windfall and go into business big are
wiped out and start complaining about the economy...</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">Though over the years reporting business and dabbling in this
or that, I have become convinced that the founder’s vision is a critical
ingredient to whether a business succeeds or not over the long haul. I saw a
few more eyerolls in the room when I suggested this.<o:p></o:p></p>
<p class="MsoNormal">It is part of the human condition that we think you just
tell us what to do, we do it and voila! Success will follow. I think it also comes
from our classroom upbringing.<o:p></o:p></p>
<p class="MsoNormal">We don’t pay attention to the intangibles. To our detriment.
Because before anything happens there is first a thought. If you want to make a
chair, build a house or plant a tree, first a thought.<o:p></o:p></p>
<p class="MsoNormal">While its romantic to go out and start your business, a
pause to think about your vision for whatever it is you want to build may make
the difference between collapsing after year one or enduring for years.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>The trick with the Vision is to won it. You should be able
to see it with your mind’s eye and feel the emotion that will come with achieving
it. This last part <b><span style="font-size: x-large;">emotionalizing it, is important because it will provide the
grit needed to hang in there through the debilitating lows and temporary highs
that come with doing business....</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">Just as important is that with a vision you will be forced
to be strategic, where strategy is the series of actions you will need to take
to achieve the vision.<o:p></o:p></p>
<p class="MsoNormal">Many of us are not strategic, we are hardworkers, ready to
roll up our sleeves, jump in and start making money. Inevitably when we are hit,
we crumble like a pack of cards because our actions are not driven by a vision
and guided by strategy.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote><b><span style="font-size: x-large;">"Strategy is important more for what it prevents you from
doing than what it dictates you do...</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">Many years ago, when we founded the New Vision Staff SACCO, we
closed the first year with sh33m in the bank. we were jumping around with glee,
success had come quickly. The question then became how to utilize the surplus and
also sorts of ideas saw the light of day – car washes, tent and chair hire. <o:p></o:p></p>
<p class="MsoNormal">But our vision was to be a financial institution that
creates financial freedom for our members. Rather than divert from this and go
into all sorts of general trade, we stayed true to the Vision and invested the
money in treasury bills and bonds. The net effect of this was that 16 years
later at the height of the Covid pandemic in 2020, we closed the year with
sh900m in the bank. That figure would have never happened had we run around
like headless chicken, spreading our energies all over the place.<o:p></o:p></p>
<p class="MsoNormal">Things like having a vision and mission statement that drive
strategy sounds like text book stuff, “too much English” but when you
appreciate that whatever is manifested in physical form is only as good as where
it came from the intangibles, you will not be quick to dismiss the Vision thing.<o:p></o:p></p>
<p class="MsoNormal">And finally, your business or even you, as a human being can
only grow as big as your vision. Small vision small company. Big vision, big
company. There are no miracles.<o:p></o:p></p>
<p class="MsoNormal">In the 1980s Bill Gates dreamt of putting a PC on every table
and became the richest man in the world in pursuit of this vision. But someone had
a bigger dream, to put a computer in every hand and today Apple is a bigger
company than Gates’ Microsoft.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-9136187496347874472.post-66781555137219420422023-11-21T07:09:00.003+03:002023-11-21T07:09:40.296+03:00IN BUSINESS DON’T LOOK FOR A CUSTOMER …<p>Last week during the “Uganda Entrepreneurship congress 2023”
at Makerere University business coach Robert Semkula counselled the young,
eager students that when they go into business, “Don’t look for a customer look
for a friend”.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">That was interesting because we all know nothing happens
until you sell, sell to a customer.<o:p></o:p></p>
<p class="MsoNormal">It was a clever way of saying you need to focus on building
relationships with your customers, because again we all know if they like you,
you are half way to selling.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>We have argued severally in this column that <b><span style="font-size: x-large;">businessmen before
they claim the economy is doing badly, should first do an audit of their
customer care processes...</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">As customers we are tired of the bored sales executive whose
body language suggests she would rather be elsewhere than be selling to you or
the gum chewing, rolling of the eyes, front desk officer who would rather you
did not come in their door or the technician who returns your TV or car in such
a state that you will be calling him no sooner has he turned the corner.<o:p></o:p></p>
<p class="MsoNormal">Our businessmen, we call them that because they are selling
something but, in all honesty, have as much luck at success as the sighting of
nsenene this season; our businessmen, seem intent on chasing us away from their
shops so they can watch Tiktok.<o:p></o:p></p>
<p class="MsoNormal">So, imagine if we have some sort of universal epiphany – as I
did listening to Semakula, that why when the customer walks in our door, don’t we
try to make him our friend by looking beyond the current sale to building a
long term relationship? After all the business theorists tell us it is cheaper
to sell more to an existing customer than cultivate a new one.<o:p></o:p></p>
<p class="MsoNormal">We may suffer a culture shock, but what would this brave new
world look like?<o:p></o:p></p>
<p class="MsoNormal">It would be that when my car breaks down and I call the
mechanic to come check it out, he would be focused on getting to me or one of
his people, identifying the problem and taking it off my hands. Once that
happens he would give me regular updates – in writing, on what was needed and
the progress on the job. To stretch the fantasy, they may have even have loaned
me a car to use as they work. The beauty of the loaned car is that they would have
skin in the game, they would not forget to work on my car and at the bare
minimum would look to get the job done quickly so they can get their car back –
before I damage it.<o:p></o:p></p>
<p class="MsoNormal">This could work for appliances out of order, the plumbing
that needs repairing (in this case they would stay onsite until it was fixed)
or even a bad hair job.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>Our businessmen see this tender loving care as an added
expense they can not afford or worse, that it would be keeping them from
serving other customers. But if you think about it,<b><span style="font-size: x-large;"> I will remember the service
especially if it is replicated routinely and would not hesitate to recommend
him to my friends and family. They say people never forget how you made them
feel...</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">As it is now many times we are scared to recommend our
handymen because we know their ways of not quite finishing the job and
overcharging for it (if you don’t finish the job, whatever you charge will be
overcharging). It maybe the difference between when we are asked who is our
mechanic, our response not being a sigh and waive of the hand but an eager sharing
of his contact over WhatsApp.<o:p></o:p></p>
<p class="MsoNormal">Unfortunately, there are enough of us who are bad mannered and
ingrates, dissuading our businessmen from being nice and hence the vicious
cycle and hence the complaints about the economy being bad.<o:p></o:p></p>
<p class="MsoNormal">Talking about a bad economy, it amazes me every day to
realise how many people are doing well are quiet about it. The noisy ones are
the complainers, while the guys getting paid everyday are seated quietly in the
corner smiling inwardly to themselves.<o:p></o:p></p>
<p class="MsoNormal">How would you serve your friend if they came to your shop,
may be the way to start thinking to reengineer your business.<o:p></o:p></p>
<p class="MsoNormal">I remember many years ago when I was looking for a size 14
dress on Johnstone Street. The shop I went into only had size 12. I made as if to
leave the shop and go to the next shop, but the shop attendant beat me to the
door, urged me to take a seat he would bring the same dress. After a few
minutes, which seemed like forever – we didn’t have smart phones, he came back
with not one but two dresses a size 14 and a size 16, just in case. <o:p></o:p></p>
<p class="MsoNormal">I was getting ready to fork out a little bit more for
his effort but he insisted the price was as quoted before. He became my go to
guy for clothing and referred him far and wide. <o:p></o:p></p>
<p class="MsoNormal">Now his more tech savvy son is the one I meet, since I no
longer can be bothered to go to town anymore. They now have several “shop
windows” online and the son and his friends seemingly drop whatever they are
doing to deliver.<o:p></o:p></p>
<p class="MsoNormal">And whenever I ask how business is going the son is quick
with a thumbs up, “Mzuri.” Surprise! Surprise!<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal"><br /></p>
<p class="MsoNormal"><o:p> </o:p></p>Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-9136187496347874472.post-2008425446444844082023-11-20T07:43:00.003+03:002023-11-20T07:43:40.477+03:00LETTING AGOA SLIP OUT OF OUR HANDS<p>Liechtenstein is a small country in the middle of Europe. It
covers an area of 160 square km or smaller than the size of greater Kampala;
has population of about 40,000 a tenth of Kampala’s population.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">Nothing to write home about, that is until you discover it
has the highest per capita GDP in the world of $180,000 by some accounts. The
World Bank places it behind only Monaco at $234,317.<o:p></o:p></p>
<p class="MsoNormal">For the purposes of this article, we will use Liechtenstein.
The net sum of the Liechtenstein economy is to service the bigger EU $17trillion
market. They are a tax haven, offering low tax rates for individuals and
companies and are a tourism destination. Their central location means people
can live in Liechtenstein and commute to work all over the EU. Or better still
register their companies in Liechtenstein and operate all over the EU.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote><p class="MsoNormal">The moral issues of providing tax haven services aside,
<b><span style="font-size: x-large;">Liechtenstein’s people would not be as affluent as they were if they were
situated where the Central African Republic (CAR) is.<o:p></o:p></span></b></p>
<p class="MsoNormal"><b><span style="font-size: x-large;">The point is you need to attach yourself to big markets</span></b> like
Liechtenstein or Mexico or Hong Kong if you want progress.</p></blockquote><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">A few weeks ago the US announced it was suspending Uganda
from the Africa Growth Opportunities Act (AGOA), which allowed free access of
our goods to the largest economy in the world duty free. They said they were
kicking us out along with Central Africa republic, Gabon and Niger over human
rights issues. In our case the passing of the Anti-Homosexuality bill earlier
in the year.<o:p></o:p></p>
<p class="MsoNormal">The irony of it is that the law was passed through a
democratic process, which they are always encouraging us to do, and therefore
by their action they want us to subvert the will of the people. <o:p></o:p></p>
<p class="MsoNormal">We are damned if we do, and we are damned if we don’t.<o:p></o:p></p>
<p class="MsoNormal">The bigger story though is that while we do not neighbour
the US, this access to the biggest economy in the world, has been open to us since
2000 and in that time period we have grossed exports of about $200m or about
$9m, with the biggest export receipts coming in last year.<o:p></o:p></p>
<p class="MsoNormal">Kenya on the other hand grew exports under AGOA to $525m in
2020 from $29m in 2001. If they suspended Kenya there would be a greater impact
on their economy than us.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote><b><span style="font-size: x-large;">"The bigger story is then is how we failed to take advantage
of this giant market when we could and probably explains why we struggle to
take advantage of other markets in the region and beyond...</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">A friend of mine thought he could supply coffee to South Africa.
When he got in touch with a major supermarket chain after looking over his business,
they offered him space on the shelves of the 14 stores in Cape Town. They
wanted him to supply 45 tons of his coffee every two weeks, but in addition
have 45 tons constantly on hand in their stores, to maintain continuity of
supply.<o:p></o:p></p>
<p class="MsoNormal">The logistical and financial demands were such that he had to
go tail between legs back to them and give up the offer. To just meet those
basic requirements would require he scale up his operations at least fourfold,
something he did not have the capacity to do on his own. You can argue that
with a bit more sophistication he would have got partners to come in with him
on the deal and who knows.<o:p></o:p></p>
<p class="MsoNormal">To exploit AGOA we needed to do much more than we saw
happening around us. But maybe we are not to blame for criminally squandering
the AGOA opportunity when we had it?<o:p></o:p></p>
<p class="MsoNormal">Let us not deceive ourselves that we will develop, that is
manage a reasonable standard of living for all Ugandans on our own steam. We
will have to trade. The formula has worked for the east Asians, Europeans and
even the US, so who are we to think we can be any different.<o:p></o:p></p>
<p class="MsoNormal">Our technocrats and politicians need to be burning the
midnight oil, plotting and scheming on how to break into rich markets. We have to
look up and down the value chain to see how we can produce multiples of
whatever we are producing now; investments in research will be critical, how we
can improve our communications and transport infrastructure –the development of
rail and water transport must be treated with greater urgency and all the supporting
services in trade negotiations, finance, marketing we will need.<o:p></o:p></p>
<p class="MsoNormal">We have worked very hard to get our East African Community
up and running. There is still a lot to do, but it can give us a taste of the
work we have to do. <o:p></o:p></p>
<p class="MsoNormal">The Kenyans, Tanzanians and Rwandans refusing us to prosper
by putting non-tariff barriers in our way is standard for any markets and
require a certain kind of skill in government we seem to be missing.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>So <b><span style="font-size: x-large;">beyond just producing stuff we need to be able to
process, distribute, grow and protect those markets...</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">If we can only take a break from trying to steal public
resources we might be able to get this done.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal"><br /></p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-9136187496347874472.post-41297051051141710492023-11-15T11:43:00.005+03:002023-11-15T11:43:40.778+03:00 A WELCOME ANALYSIS OF UGANDA’S CHANGING ECONOMIC FORTUNES<p>BOOK REVIEW: TRANSFORMATIVE ECONOMICS; UNDERSTANDING THE
PATHWAY TO ECONOMIC TRANSFORMATION</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">AUTHOR: PROF AUGUSTUS NUWAGABA<o:p></o:p></p>
<p class="MsoNormal">PP: 356 pages<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">The challenge for Uganda is to lift the economy from a
pre-industrial to a modern one. To lift the majority of citizens out of poverty,
though increasing their productivity and therefore earning power. <span style="mso-spacerun: yes;"> </span>A modern state would be characterized by higher
productivity in every sector, better living standards for all, trade in processed/manufactured
goods, industrialization towards a more ICT driven economy among others.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>To do this <b><span style="font-size: x-large;">one has to understand where you are in the continuum of development and how you got there before you can fashion a route
to development.</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">Professor August Nuwagaba does this simply enough for anyone
to understand.<o:p></o:p></p>
<p class="MsoNormal">He identifies that land tenure system as designed in the Buganda
Land agreement as a major impediment to our economic advancement, shows that
the expulsion of the Asians in 1972 was a disaster and that by liberalizing markets,
privatization of state enterprises and introduction of tax reforms the current government
did the right things to resuscitate the economy.<o:p></o:p></p>
<p class="MsoNormal">The neo-liberal policies that have got us to this point,
with its emphasis on fixing the macroeconomic environment and hope for a
trickle down of the benefits, has taken us as far as it can, with a small elite
benefitting disproportionately to the larger public.<o:p></o:p></p>
<p class="MsoNormal">So in his book—as the title suggests, he tries to chart a
way for lifting the Uganda economy from its current state to an industrial and
post-industrial economy.<o:p></o:p></p>
<p class="MsoNormal">Nuwagaba has strong opinions on how the drivers of the
economic recovery of the last four decades can be retooled to drive
transformation. Economic policy, monetary policy, debt management and aid among
other things but he is clear that it first begins with the individual.<span style="mso-spacerun: yes;"> </span><o:p></o:p></p>
<p class="MsoNormal"><b><span style="font-size: x-large;">"Each individual has a responsibility to raise their income,
save and invest more and remain healthy and it is on this that all other
drivers can be built....<o:p></o:p></span></b></p>
<p class="MsoNormal">We will not be reinventing the wheel and Nuwagaba has some
interest case studies from the Asian tigers and Europe that light the path for
us. The retooling of education away from producing learned graduates to
churning out individuals with the relevant skills for the various stages of their
development path is key and plays on the notion that all progress starts with the
individual.<o:p></o:p></p>
<p class="MsoNormal">It is clear through the book that while we deserve a pat on
the back for resuscitating the economy over the last 40 or so, this has only
served to create a foundation for the real heavy lifting that is to come. Another
mind shift is required and disciplined execution of a well thought out strategy
is imperative.<o:p></o:p></p>
<p class="MsoNormal">A major omission that is hard to ignore however, is the role
of corruption in slowing or subverting progress. While no country is corruption
free, for a developing country like ours corruption concentrates resources in a
few hands, denies the majority the services required for them to lift themselves
out of poverty, distorts markets and threatens social and national security.<o:p></o:p></p>
<p class="MsoNormal">While it is a whole subject on its own, ignoring it misses a
major piece of our context and why the best laid plans can still go awry.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote><b><span style="font-size: x-large;">"Development is not a natural progression. It can be subverted
by human beings ignorance, ideological disorientation and putting their wants
above those of the greater public.</span></b> Our history is littered with how damaging a
lack of strategic focus can lead to misguided actions however popular that can
derail progress for generations.</blockquote><o:p></o:p><p></p>
<p class="MsoNormal">As mentioned earlier, the book does not require any high appreciation
of economics to follow the logical thread Nuwagaba has woven through space and
time, where we came from and what we need to do to deliver a better future for
our country. The book would do with a lot more contemporary case studies especially
of how policies like liberalization and privatization have got us to where we
are.<o:p></o:p></p>
<p class="MsoNormal">This book is a useful reference for anyone wanting to
understand why we are where we are as an economy and what needs to be done for
us to get to the next level. This book should be required reading for Ugandan
economists and planners. It is a useful addition to the study of the economic
history of this country.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal"><br /></p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-9136187496347874472.post-21663572112037148022023-11-14T06:53:00.003+03:002023-11-14T06:53:46.542+03:00THE FOREIGN INVESTOR BOGEY MAN<p>If you look down a list of the top tax payers in this
country, nine out of ten of them are foreign owned companies.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">The Asian community may take exception to their
classification as foreigners, but for purposes of this commentary, why that is
so will become apparent.<o:p></o:p></p>
<p class="MsoNormal">There are people who are not happy with this state of affairs,
if they had their wish, most tax payers would be local businessmen. Which is
not a bad aspiration in itself. These people however get it a bit twisted when
it comes to explaining how we can go about overturning the current state of affairs.<o:p></o:p></p>
<p class="MsoNormal">The prescriptions go from the knee jerk recommendation that government
nationalize all the companies. People who think like this, believe that if government
takes over the companies local Ugandans will somehow be better for it. They dream
of lower prices, more jobs and more uptake of local supplies.<o:p></o:p></p>
<p class="MsoNormal">Then there are those who think foreign companies should sell
shares to government and then along the same lines of the above, we locals will
be better off.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>And finally, <b><span style="font-size: x-large;">there is the group that thinks government should
slant policy towards local investors – lower taxes, cheap credit and a waiver
on governance restrictions as a way to allow our local businessmen to catch up
with their foreign rivals....</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">I never know whether to laugh or cry. With age and wisdom, I
now resort to silence.<o:p></o:p></p>
<p class="MsoNormal">Let us start from the beginning. Why is foreign capital here?
It is here because there is opportunity, opportunity not least of all because
our local businessmen can not take that opportunity up. Foreign capital can
take advantage of the opportunity for number of reasons among which are quality
management, advanced technology and access to capital. And also, because they
come from more developed economies, they can see some opportunities we cannot.<o:p></o:p></p>
<p class="MsoNormal">I will never forget in the 1990s when a water bottling
company set up shop in Uganda and I was guilty of thinking “Under what
circumstances would I buy water?” But the investor knew people would need water
that was certifiably good to drink, packaged conveniently and widely available.
He had seen it elsewhere and knew it would work here.<o:p></o:p></p>
<p class="MsoNormal">A few years ago, I was in France. In my room there was no
sign of the complimentary water. The next morning, I mentioned this to the
receptionist and without blinking an eye he told me to drink the tap water. My initial
reaction was shock. But when he kept a straight face and I thought about it, I nodded
and walked off. Bottled water is successful in France where you can drink out
of the tap, what would happen in Uganda, where a former boss at National Water
& Sewerage Corporation (NWSC) could not vouch for the quality of the water
from his taps.<o:p></o:p></p>
<p class="MsoNormal">And if you think about it that opportunity had been lying
there begging to be taken advantage of, for at least 20 years prior to our
first bottled water.<o:p></o:p></p>
<p class="MsoNormal">Everywhere I look, people complain that our businessmen don’t
have access to capital. But the mobile telephone companies have shown us that, that
too is a fallacy. Last year more than sh190trillion flowed though all mobile
money apps in Uganda. That is the GDP of the country. Meanwhile transactions on
mobile money are growing at more than 20 percent a year. That means that in
four years double the money or about sh400trillion will be coursing through the
mobile money networks.<o:p></o:p></p>
<p class="MsoNormal">Where has all that money come from? Most of it came from our
pockets, under our mattresses, in our socks and bras. The money can now not
only be useful to those who need it, but also to the owners of the money who
now earn an interest, which they were not before.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>The point is,<b><span style="font-size: x-large;"> all the capital we need is among us, we just
need to build mechanisms that will liberate it from its current dark, dank
abode...</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">One can argue that we would eventually come around to it by
our own devices, but that is to ignore the time wasted reinventing the wheel
when we can just cut and paste or better still get those with the relevant experience
to bring it here.<o:p></o:p></p>
<p class="MsoNormal">But then again ask why we have to wait for someone else to
show us the way. <o:p></o:p></p>
<p class="MsoNormal">In 1972 president Idi Amin had a brain wave, that if he
expelled the Asian community, the back bone of commercial class, Ugandans would
take over the businesses and the economy would be truly in local hands. His
thinking process did not go further than distributing shops on Kampala Road to
his cronies. We are still paying for that moment of madness.<o:p></o:p></p>
<p class="MsoNormal">Across the border from us Kenya with a bigger Asian
community did not follow suit.<span style="mso-spacerun: yes;"> </span>The result
is there for all to see. <span style="mso-spacerun: yes;"> </span>While the Asian
community continue to be major players in Kenya’s economy, the indigenous Kenyans
are much better businessmen from the mentorship that has come with this
interaction, unlike our own who were given businesses on a silver platter and
have nothing to show for it 50 years later.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote><b><span style="font-size: x-large;">"If we really want to dislodge foreign capital, in a
sustainable way, we need to mobilise our resources – capital, labour and land,
manipulate and manage them in a way that will ensure continued value creation
and voila! We will “take” back our economy.</span></b> Has anyone tried to do this in any
meaningful way? Yes.</blockquote><o:p></o:p><p></p>
<p class="MsoNormal">A drive through the Kampala’s city center a few weeks ago,
for the first time in months, and I was surprised to see how many high rise
buildings have gone up where there were once smaller buildings.<o:p></o:p></p>
<p class="MsoNormal">While you can question the business sense of building high
rise commercial space, when higher floors are gathering dust, going unoccupied,
it is a demonstration that we can mobilise resources locally.<o:p></o:p></p>
<p class="MsoNormal">We are still in the rudimentary stages of capital mobilization,
we either pay for our developments in cash (believe it or not) or we borrow
from the bank. But it is a start.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote><p class="MsoNormal"><b><span style="font-size: x-large;">"Our attitude towards foreign capital should be what can we
learn from them so we can go off and do the same or even better. However seductive
Amin’s method was, going by the results, it should be furthest from our mind.<o:p></o:p></span></b></p>
<p class="MsoNormal"><o:p><b><span style="font-size: x-large;"> </span></b></o:p></p></blockquote><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal"><br /></p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-9136187496347874472.post-673863669981224532023-11-07T06:39:00.001+03:002023-11-07T06:39:13.225+03:00CHICKEN COMING HOME TO ROOST ON CORRUPTION<p>My jaw hit the floor last week when it was revealed that the
Uganda National Oil Company (UNOC) was “sold” to a Chinese businessman.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">While the “buyer” had documents to prove he had paid for
UNOC, he did not or declined to reveal, who he dealt with and how much he had
paid. He was blissfully unaware the company was a government entity, or so he
said.<o:p></o:p></p>
<p class="MsoNormal">This came hot on the heals of another con perpetuated in the
energy ministry where some Serbian ”Investors” were relieved of more than a
billion shillings and the con artists had set them up for another $50m payout.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote><b><span style="font-size: x-large;">"If this is your only country; if this is where you intend to
while away your years; if this is the country you hope to raise your children and
your children’s children in, you should not laugh off these incidents in between
sips of your beer...</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">Both scams show a level of preparation and sophistication
that can not be learnt from a text book, but have come from practice and long
experience. The scammers have been honing their skills on us, getting away with
fleecing Ugandans because they have cover from higher officials, who can
command the justice and law system to look the other way.<o:p></o:p></p>
<p class="MsoNormal">How did we get to this point?<o:p></o:p></p>
<p class="MsoNormal">There is a backhanded complement in there somewhere. In years
gone by the big scams were of reams of paper going missing or bicycle procured,
which never landed or other instances of pilferage.<o:p></o:p></p>
<p class="MsoNormal">But as the economy has grown and the budget with it --- in
2013 the national budget was sh12trillion compared to this years sh52trillion
budget, the corrupt and their schemes have grown as well.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote><b><span style="font-size: x-large;">"As a result Uganda’s reputation now rivals a certain west African
nation, which is the buzz word for everything corrupt....</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">Attracted by our growing reputation for corruption, unsavory
types (the kind who carry $20m in bags around Kampala) have flocked to our
shores.<o:p></o:p></p>
<p class="MsoNormal">While it is understandable that the Fortune 500 are not
falling over themselves to come to Uganda – our market is too small, we are
clearly not getting the next best thing, as the cost of doing business, with
corruption added on is too prohibitive for them.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>It cannot be emphasized enough that corruption is a terrible
thing. The theories about <b><span style="font-size: x-large;">allowing our elite to crudely accumulate wealth as a
way to build an indigenous capital base is a fallacy and does not hold up to the
most cursory study....</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">If this held true, in the three decades since 1986 we would
see some of these crude accumulators, legitimize their business and turn up as
some of the biggest tax payers or employers or would have developed a national
presence. It has not happened and it will not happen.<o:p></o:p></p>
<p class="MsoNormal"><span style="mso-spacerun: yes;"> </span>They have squandered
hundreds of billions of shillings on questionable initiatives, hairbrained
projects, white elephants – all private, and have nothing meaningful to show
for their access to the state coffers. So let us bury that idea once and for
all.<o:p></o:p></p>
<p class="MsoNormal">Beyond concentrating public resources in a few hands, it
also denies us quality public goods in education, health, infrastructure and
even security, the ingredients needed to climb the social ladder for the
least of our brothers.<o:p></o:p></p>
<p class="MsoNormal">As a result of their dubious ways, thousands if not millions
of citizens are not getting a fair chance at improving their standard of
living.<o:p></o:p></p>
<p class="MsoNormal">Corruption is a terrible monster that feeds off itself,
growing, squeezing out honest endeavour, leading to frustration and despondency
of the general population.<o:p></o:p></p>
<p class="MsoNormal">Our corrupt do not stay in their cocoon for long, especially
if they are not caught. They soon link up with regional and international
networks to extract more and more. <span style="mso-spacerun: yes;"> </span>They
are not very discriminating about the networks they fraternize with and very
soon we will have organized criminals not only roaming our streets but getting
photo opportunities with and bending the ear of the high and mighty.<o:p></o:p></p>
<p class="MsoNormal">The problem with these criminals is that when you give them
an inch, they will want a mile. <o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>They will not stop at just emptying state coffers but will
want to protect their enterprise by compromising politicians and security. So <b><span style="font-size: x-large;">very soon, if it is not already happening, they will be smuggling drugs, guns,
wild life trophies and vulnerable people right in front of our eyes, with full
cover of the law....</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">They will turn the country in to a hub of illicit trade,
benefitting a few elites while impoverishing the rest of us. These actions will
see us ostracized from the international community.<o:p></o:p></p>
<p class="MsoNormal">It has happened before.<o:p></o:p></p>
<p class="MsoNormal">In Montenegro, a country in eastern Europe, in attempt to circumvent
sanctions imposed on the former Yugoslavia, the leased their ports and airports
to cigarette smugglers. With afoot in the door these gangs stayed on long after
sanctions had been lifted on Yugoslavia and Montenegro had broken away.<o:p></o:p></p>
<p class="MsoNormal">The gangs so entwined themselves in the country’s running
that the Italy once had w arrant out on the head of former Prime Minister Milo
Djukanovic for his role in smuggling cigarettes.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>Essentially <b><span style="font-size: x-large;">the corrupt and their cronies can hold the state
hostage, to a point where it becomes impossible to move on them—except for few sacrificial
lambs. Inevitably this leads to major dysfunction....</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">Believe it or not we are not the most corrupt country in the
world or even in our region, but that is a competition we should not be aiming
to win.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-9136187496347874472.post-8304389386063702402023-10-31T07:43:00.001+03:002023-10-31T07:45:27.966+03:00MORE MONEY TRANSACTED ON MOBILE MONEY THAN UGANDA GDP IN 2022<p>A few weeks ago Bank of Uganda reported that the value of
mobile money transactions in 2022/23 jumped 22.6 percent to sh191trillion from
sh156tillion in the previous year.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">This was driven by more people signing on to mobile money, up
11.4 percent to 42.9 million from 38.5 million in 2021/22.<o:p></o:p></p>
<p class="MsoNormal">The value of transactions at sh191triliion or $51.5b is the
first year that transactions on mobile platforms overtook the national GDP and
is expected to remain above, as more people take up mobile money and the
transaction values overtake that of money transfers. This trend was already
registered itself in neighbouring Kenya with Safaricom’s Mpesa years ago.<o:p></o:p></p>
<p class="MsoNormal"><b><span style="font-size: x-large;">At the current rate of growth of mobile money transaction values,
these will be doubling every four years. Its just amazing to think about it.<o:p></o:p></span></b></p>
<p class="MsoNormal">In my mind this is an exciting trend when viewed against the
fact that more than 90 percent of transactions are “low value” transactions of
less than sh50,000.<o:p></o:p></p>
<p class="MsoNormal">The way to think about this, is that if mobile money
platforms were not there these are monies that would have been in our pockets,
not being helpful to us or to the general economy.<o:p></o:p></p>
<p class="MsoNormal">But also, that there are millions of people who were not in
the formal financial sector who are now in and set to reap the benefits that
come with this that have been denied them for generations.<o:p></o:p></p>
<p class="MsoNormal">Since this money is in the formal financial sector, we are
earning interest from it and its being lent out to those in need. <o:p></o:p></p>
<p class="MsoNormal">On the surface of it, it is not difficult to deduce that
this has an effect on the wider economy.<o:p></o:p></p>
<p class="MsoNormal">Earlier this month GSMA, an international organization unifying
the mobile ecosystem, released the results of their research on the effect of mobile money on economies. <o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>The researched showed that<b><span style="font-size: x-large;"> in Sub Saharan Africa total contribution of mobile money to GDP was almost $150b, accounting for 3.7 percent growth. In eastern Africa a comparable figure is
$60b, 5.9 percent increase in the region’s GDP.</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">The research had four major findings.<o:p></o:p></p>
<p class="MsoNormal">One, it showed what was widely known that mobile money is
biggest in Sub-Saharan Africa, But they went further to show that a 10 percentage
point increase in mobile money adoption can translate in up to one percent in a
year.<o:p></o:p></p>
<p class="MsoNormal">Their research went further and showed that increased
adoption was leading to increased usage with average annual transaction values
rising to $800 in 2022 from $500 in 2013.<o:p></o:p></p>
<p class="MsoNormal">Thirdly that increased ecosystem transactions -- buying goods
and services, rather than cash-ins and cash-outs had a greater impact on GDP growth.<o:p></o:p></p>
<p class="MsoNormal">And finally, that effect of mobile money adoption on GDP
increases with more users.<o:p></o:p></p>
<p class="MsoNormal">It makes sense. By getting more and more money in
circulation into the formal financial it activates the value of that money –
money in your pocket is no good to you or anyone else. Probably more important
is the inclusivity of all those people who have been unable to engage with the
formal financial system as it was previously constructed.<o:p></o:p></p>
<p class="MsoNormal">Prior to mobile money about 80 percent of money in
circulation was outside the formal financial system one would think this
position has improved dramatically in the last decade.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>So, <b><span style="font-size: x-large;">improvements in the GDP would follow as a result of more
money in the formal sector but also the improved efficiencies in the flow of
money around the economy...</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">We take these efficiencies for granted. But there was a
time, while western economies had long adopted “plastic” – credit cards, we
were still doing everything with cash.<o:p></o:p></p>
<p class="MsoNormal">Most people kept their money with themselves, doing nothing
for themselves or the general economy. The few who held bank accounts had to
transact at the banks’ convenience. Opening hours were from 9am to 1 pm and only
on weekdays.<o:p></o:p></p>
<p class="MsoNormal">ON a weekend and in need of cashflow as in the bank you were
in trouble. Hence people keeping on themselves more money than was necessary.<o:p></o:p></p>
<p class="MsoNormal">When the now defunct Greenland Bank, leveraging on
technology started opening later into the evening and on weekends, it was no surprise
that people flocked there. The high street banks responded by unleashing ATMs,
but even their best efforts meant just fraction of the population was involved.<o:p></o:p></p>
<p class="MsoNormal">And it is scary to think with increased uptake of mobile money
and innovations in the industry, what the financial landscape will look like in
10 years. Our biggest financial institutions will have been born of mobile
companies, everybody with a mobile account, services extending beyond money
transfer, commercial transactions, to making physical cash irrelevant.<o:p></o:p></p>
<p class="MsoNormal">The dream of a cashless society I used to report about in
the 1990s is coming to life in the least expected ways, with a speed that is positively
breath taking.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-9136187496347874472.post-49568305448111212062023-10-24T08:41:00.006+03:002023-10-24T08:41:41.678+03:00PERSONAL FINANCE FROM FIRST PRINCIPLES<p>I got around to thinking the other day how would I give a
talk on personal finance and do a good job of it if my talk was restricted to
20 minutes.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">After much huffing and puffing I came up with a talk that
would pass.<o:p></o:p></p>
<p class="MsoNormal">Ladies and Gentlemen your personal financial situation is
determined by how you spend your money. There are only two ways to spend money,
either you consume it or you invest it. Which of the two you did more of in the
past explains why your finances are the way they are today. <o:p></o:p></p>
<p class="MsoNormal"><b><span style="font-size: x-large;">"If your spending was biased towards consumption and away
from investment, you are barely making ends meet, regardless of your salary. If
on the other hand your spending was biased towards investment and away from
spending, you probably are better off than the average person around you....<o:p></o:p></span></b></p>
<p class="MsoNormal">My talk should really end here but let me expound. <o:p></o:p></p>
<p class="MsoNormal">If you had sh10,000 on you spending it maybe going and buying
two beers or three or one, depending on the bar you patronize, which beers you
may very well leave in the bar’s toilet before you leave. Investing the same
sh10,000 may look like buying data on your phone – my provider can get you
2.6GB with that, which you proceed to use on improving your knowledge, that may
result in higher income in future. I saw a saying the other day, “Income does
not far exceed personal development”<o:p></o:p></p>
<p class="MsoNormal">If you has sh100,000, spending it may look like you buying
data on your phone with sh10,000 wining and dining at a higher end restaurant than
you are used to and posting your frolicking on social media for all to see and
admire. The sh100,000 could be used to buy a 20-year bond which would give you
15 percent interest a year for 20 years. The difference between the two is that
in the first instance everyone in your social media universe will know you had
a blast at such and such a restaurant or bar – maybe even envy you and want to
be you, while in the second instance no one will know that you are going to
earn sh300,000 over and above the sh100,000 you invested – unless you go on
social media and announce your bond purchase. You are unlikely to get more
likes than there are fingers on your right hand.<o:p></o:p></p>
<p class="MsoNormal">If you had sh1,000,000 you could spend it by hiring a four-wheel
car for a day, bundling your friends in it and heading out to jinja and have a
few drinks by the river Nile – all documented for your social media fans. Or you
get those one million shillings and by a bond or a few thousand shares on any
number of shares on the Uganda Securities Exchange (USE) and benefit from
future dividends and capital gains. Umeme shares for example have doubles in
value since last year.<o:p></o:p></p>
<p class="MsoNormal">Let’s take it abit further and you have sh10,000,000 you
could spend it by getting on a plane, export your frolicking to the beaches of
Mombasa or Zanzibar and again document it on social media. Or you could take that
same money and buy a 20-year bond and make sh1.5million annually.<o:p></o:p></p>
<p class="MsoNormal">It is easy to see why we would rather eat than invest our
money. <o:p></o:p></p>
<p class="MsoNormal"></p><blockquote><b><span style="font-size: x-large;">"Eating our money provides instant gratification and also has
the added bonus of making us “look” rich. While investing our money, not only
will the benefits come sometime down the road but also chances are people will
not know about it and therefore will not know that we are rich....</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">Eating our money is not unique to Ugandans, it is a human
condition, at least for the majority or 99 percent of the population who are
struggling financially.<o:p></o:p></p>
<p class="MsoNormal">The remaining one percent of the population bias their
spending towards investment and when the join the blasters, years or even
decades later at the source of the Nile or Zanzibar, the spenders will say they
are lucky, which deal did they do to get money to start partying.<o:p></o:p></p>
<p class="MsoNormal">Many years ago, in the 1990s an interview with the Financial
Times our own Sudir Ruparelia was asked how he has amassed his fortune and he
joked that it is an old Indian trick, where you earn 100 shillings invest 90
shillings and 10 shillings. Repeat until rich.<o:p></o:p></p>
<p class="MsoNormal">I also saw a quite the other day that goes “Money does not
like noise”. I understood this on an intellectual level but came face to face
with it during the NSSF release of the mid-term access funds last year. People complained
that NSSF was delaying to release their monies but as soon as they were in the
bank, it all went silent.<o:p></o:p></p>
<p class="MsoNormal">And finally, if there is one other lesson to be learnt from
this talk or kept in mind when we decide how to spend our money is that in all
we do with our money, the goal should be to get rich not to look rich.<o:p></o:p></p>
<p class="MsoNormal">Thank me for your time.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-9136187496347874472.post-56299363797573920372023-10-17T07:02:00.001+03:002023-10-17T07:02:31.307+03:00IS IT POSSIBLE FOR SMOKE WITHOUT FIRE?<p>MPs are up in arms at what they see as an unfair bailout of thermal
power generator Electromaxx, controlled by businessman Patrick Bitature.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">They claim government has paid $13m (sh48b) for the Tororo 90MW
thermal power plant, particularly annoying prospect when government is in the
throes of a cash squeeze.<o:p></o:p></p>
<p class="MsoNormal">Such stories serve to score cheap points against the government
to the detriment of economic players, until they are put under a microscope.<o:p></o:p></p>
<p class="MsoNormal">While the politicians will not let the facts get in the way
of a good story, the truth will set us free.<o:p></o:p></p>
<p class="MsoNormal">Electromaxx has a Power Purchase Agreement (PPA) to produce
power at the thermal power plant.<span style="mso-spacerun: yes;"> </span>The
plant uses Heavy Fuel Oil (HFO) to generate power which is fed into the grid
via the substation in Tororo.<o:p></o:p></p>
<p class="MsoNormal">The PPA stipulates the generators obligations and government’s
as well, which among other things outlines how they will pay for power. We will
not get bogged down in the details of the PPA but let us just say that government
owes Electromaxx millions of dollars in back payments under the agreement.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>To back track a bit. <b><span style="font-size: x-large;">To build a plant of that magnitude – it
was reported to have cost $60m (sh200b) to set up, no one, fishes in their
pocket to pay for the massive civil works, the generators and the installation.
You borrow the money from the bank.</span></b> The loan it is envisaged will be paid
serviced using the money you will get from generating power according to the
contract.</blockquote><o:p></o:p><p></p>
<p class="MsoNormal">So, when government does not pay you as planned, inevitably
you are going to come under the gun, especially from your creditors – not only
the banks but your suppliers as well.<o:p></o:p></p>
<p class="MsoNormal">As a way to extricate themselves from<a href="https://shillingscents.blogspot.com/2022/06/when-govt-doesnt-love-you-back.html"> this unfortunate situation,</a>
it was agreed that government takes the plant off Electromaxx hands.<o:p></o:p></p>
<p class="MsoNormal">The politicians argue that why should such a deal be done
when we have hydropower surplus. Thermal power plants are often used as back up
capacity, if you have them and don’t need them now you keep them available for
the time when they are needed.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>While we enjoy relatively consistent power now, most of our
power comes from hydro power, which can be affected by the vagaries of nature
and climate change. <b><span style="font-size: x-large;">A drop in water levels or damage to one plant or the other –
all events we have witnessed in the last few years, can cause the grid to trip
and throw us into darkness. Also in the recent past vandalism of transmission
lines have cut off parts of Uganda off the grid.</span></b> It was envisaged that the
Tororo plant will serve a s a stop gap measure to sustain power in the Tororo
industrial area, eastern Uganda and for power exports to Kenya.</blockquote><o:p></o:p><p></p>
<p class="MsoNormal">There is an Energy Policy, drawn up in 2018 that recognizes this
risk. In the policy it is required that the energy generation mix includes 10
percent thermal power, among more than one plant.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p>So, it makes sense for government to control the Tororo
plant as it does the Namanve plant which it took over after operator Jakobsen
Elektromaxx concession came to a close last year.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">I would imagine the Electromaxx owners would have been loved
to paid a nice bulk figure, but government’s cash situation is that that is not
possible.<o:p></o:p></p>
<p class="MsoNormal">So, the tow parties have agreed that government will take
over the Tororo plant, but maintain Electromaxx as the operators for the next
five years, allowing them to get paid over that time.<o:p></o:p></p>
<p class="MsoNormal">Essentially, they have changed the agreement from Build
Operate & Own (BOO) to a Build Operate & Transfer (BOT) arrangement,
which is a fundamental change in the agreement which would change the nature of
the PPA.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>Meanwhile <b><span style="font-size: x-large;">the millions of dollars government owes to Electromaxx
remain outstanding,</span></b> which negotiations remain ongoing.</blockquote><o:p></o:p><p></p>
<p class="MsoNormal">Two things stand out for me in this whole sorry saga. It is
prudent for a country, which has aspirations for industrialization to have a
steady supply of power. Contracts especially export contracts, can not go
begging because you had power outages. The penalties for such can bring down
whole industries. So inbuilt redundancy in the network is prudent. Ofcourse one
can argue that right now we are running surplus generation capacity but when
more than 90 percent of your generation capacity is hydropower, even that
surplus is at risk.<o:p></o:p></p>
<p class="MsoNormal">Secondly, the backstory to this is that it is extremely difficult
do business with government. As at the last budget reading government had domestic
arrears of sh8trillion, for which they have provided sh200b, isn’t it any
surprise that the gains of the last 30 years are not being felt equitably around
the population?<o:p></o:p></p>
<p class="MsoNormal"><br /></p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-9136187496347874472.post-18653298044049886162023-10-10T07:21:00.007+03:002023-10-10T07:22:25.476+03:00DO NOT MESS WITH THE LAWS OF SUPPLY AND DEMAND<p>It was interesting how the problems surrounding Kenya’s fuel
pump prices have gone largely uncovered in the Uganda press.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">Ahead of the last election the government of Uhuru Kenyatta,
in a populist move to win votes for Raila Odinga, decided to hold the fuel
prices at a certain level. Pump prices were rising very fast.<o:p></o:p></p>
<p class="MsoNormal">At the time the war in Ukraine and the hangover from the
Covid lockdown, which had disrupted global supply chains, was pushing up pump
prices all around the world.<o:p></o:p></p>
<p class="MsoNormal">Nairobi decided that they would pay the oil companies for
any cost incurred above the price they had fixed. <o:p></o:p></p>
<p class="MsoNormal">There were snide remarks from our side of the border, with
people saying that that is how real governments work to cushion their people
from bad things. I was not one of them and in fact predicted in this column
that it would end in tears.<span style="mso-spacerun: yes;"> </span><o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>It is a common saying in the market that <b><span style="font-size: x-large;">the market will
remain irrational longer than you can be liquid...</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">It was not long before government was reneging on the deal
or rather, they run out of money to pay the oil companies to hold the price
stable.<span style="mso-spacerun: yes;"> </span>The oil companies responded by
turning off the taps, until their bill was met. <o:p></o:p></p>
<p class="MsoNormal">Soon there were fuel lines in Nairobi – but not in Kampala, where
government had wisely let the pump prices find their level.<o:p></o:p></p>
<p class="MsoNormal">A few weeks ago the Kenya government issued the fuel
companies a bond in lieu of cash payment. The bond would ensure a regular
payment from government and could be used as collateral for alternative
financing, that is if the market trust the Kenya government.<o:p></o:p></p>
<p class="MsoNormal">And finally last week it was reported that Kenyans have
decided to leave their cars at home as in September fuel consumption had fallen
to its lowest level in five years.<o:p></o:p></p>
<p class="MsoNormal">There is a famous experiment of about boiling a frog. That
if you threw a frog in a pan of boiling water it would jump out immediately,
unable to stand the heat. On the other hand if you put the frog in a pan of
cold water and continued to heat the pan slowly, it will take longer to feel
the heat and jump out.<o:p></o:p></p>
<p class="MsoNormal">When you try to hold prices artificially, its like boiling
the water before throwing the frog in. When you can no longer hold the subsidy
(read the frog has to be put in the pan) the price will jump or fall
dramatically, making adjustment all the more painful. Kenyans were shocked when
the prices jumped to the real level earlier this year and have responded by
parking their cars.<o:p></o:p></p>
<p class="MsoNormal">Ugandans on the other hand, while they complained about fuel
prices crossing the sh5000 liter mark last year, adjusted to the price
adjustments the best way they could, and for a brief moment earlier this year
prices dipped below sh5000 again. Of course, no one reported that. Now that
they are climbing back up above sh5000 the chattering masses have gone into
overdrive.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>The naysayers will say that <b><span style="font-size: x-large;">even the more developed
economies provide subsidies for certain essential goods and services. Two
wrongs don’t make a right and no one talks about the cost of these subsidies...</span></b></blockquote><o:p></o:p><p></p>
<p class="MsoNormal">The trillions of shillings the Kenya government owes the oil
companies will come the expense of health and education services,
infrastructure development and other public goods, denying the majority of
Kenyans the chance to climb the social ladder by improving their living
standards.<o:p></o:p></p>
<p class="MsoNormal">Interestingly at the heart of every subsidy there are a few
connected people who make disproportionate profits from them. So the biggest
beneficiaries are not the little man as the politicians would like us to
believe.<o:p></o:p></p>
<p class="MsoNormal">Our politicians are not stupid. They know the way to tackle
market imbalances is by addressing the supply-demand equation. If prices are
too high, look to increase supply. If prices are too low, look to increase
demand.<o:p></o:p></p>
<p class="MsoNormal"></p><blockquote>The problem of course is that these interventions could take
time and not convenient for the politicians. Even when subsidies are used to
boost production instead of consumption, <b><span style="font-size: x-large;">they distort the market – pushing
legitimate businessmen out and developing interest groups which will fight to
sustain the subsidy, regardless of the economic case against it.</span></b> And the day of
reckoning will eventually come around.</blockquote><o:p></o:p><p></p>
<p class="MsoNormal">We get around this by keeping in my that adhering to the law
of supply and demand is least painful remedy. And in the event that we choose
to flaunt or ignore it that we will pay the price. But what do the politicians
care they will have moved onto the next flavour of the month.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal"><br /></p>Unknownnoreply@blogger.com0