NSSF A HOME GROWN CASE STUDY FOR FINANCIAL LITERACY

On Thursday National Social Security Fund (NSSF) released its financial results for the year that ended in June.

As a saver with the fund for more than 20 years, this is an event I look forward to every year.

NSSF has continued on its winning ways. The Fund continues to grow from strength to strength and once again seemed to shrug off the effects of the covid-19 pandemic to register more growth.

Comprehensive income jumped 25 percent to sh1.84trillion from sh1.47trillion the previous year. This improved performance came despite a drop in interest rate in fixed income products, which dominate NSSF’s portfolio. Income grew in all the asset classes, notably more than doubling in real estate portfolio to sh23.5b in 2020/21 from sh11.1b on the back of sales of housing units at their development in Mbuya where a three-bedroom unit were going for sh650m.

The seemingly contradiction is explained by the fact that member contributions grew eight percent to sh1.37trillion from sh1.27trillion in 2019/20.

All this and more adds up to the continued growth of the fund’s assets which now stand at sh15.5trillion a 17 percent increase from the previous year’s sh13.3trillion.

All these numbers are a bit intimidating if not mindboggling but NSSF’s history in growing the fund and ensuring good returns, holds powerful lessons for our own personal financial health.

Not in order of importance these are the lessons from NSSF

1.       Start where you are

As reported above the size of NSSF’s asset base is sh15.5trillion. interestingly about ten years ago this figure was sh1.6trillion, if you had said that time that the fund would have grown almost tenfold by this time people would have laughed you out of town. The lesson here is to start where we are with what we have. We should not be discouraged that our ambitions are big but our income is small, we should start. The trick is to be consistent, which consistency will generate a momentum that will even shock you.

2.       The two ways to spend money

There are only two ways to spend money – eating/consuming it and investing it. The richer among us have slanted their spending towards investment and away from consumption. Investing comes with the promise of more income in the future – you are making your money work for you, while consumption holds no promise of future income. NSSF continues to control its consumption, this year the cost of administration was recorded as a 1.06 percent of assets from 1.19 percent the previous year.  This figure has been falling annually for the last decade or so, which means NSSF spending is shifting consistently towards investment – 98.04 percent and away from consumption – salaries, stationary, fuel, rent etc.

 

3.       The eighth wonder of the world

Renown physicist Albert Einstein said that compound interest is the eighth wonder of the world. Compounding applies to anything that builds on previous progress, but in this case we are talking about the consistent profits the fund makes which it then reinvests. As mentioned earlier the fund has grown tenfold over the last decade which comes to an annual compounded growth of about 25 percent. Simply put if you took 10 shillings and grew it by 25 percent annually and retained the profit and grew the initial principal plus profit another 25 percent year after year for ten years it would become 100 shillings. Similarly, sh1,000 would become sh10,000; sh10,000 would become sh100,000; a million would be come sh10m and sh10m would become sh100m and so on and so forth. It helps that the savers are contributing about sh125b a month but most of the gains come from interest on interest.

For compound interest to work the key ingredient is time. Good returns are ideal but more importantly time.

Assuming NSSF only managed half the growth rate it has over the last ten years it would grow to about sh50trillion by 2031 which would be about half the GDP of Uganda at current prices.

 

4.       If you want to go far

They say if you want to travel fast go alone, but if you want to travel far go with someone. The biggest achievement of NSSF is it has created a vehicle for the aggregation of our savings. People’s contributions range from a few thousand shillings to a few millions of shillings on the higher end. Each of the members working individually would not be able to achieve what NSSF has achieved for them. By aggregating all our resources NSSF has leveraged the larger economies of scale to improve our bargaining power in the market. NSSF can get better rates and is privy to the juiciest deals.

In our own lives it would be a good idea to mirror this by saving and investing in groups to go far.

5.       We underestimate what we can achieve in ten years

Someone once said that we overestimate what we can achieve in a year and underestimate what we achieve in ten years. Thanks to the history of our country our default mode seems to be that we want improvements now, we are not wired to wait for a year or five, 10 or 20 to reap the fruits of our labour. As a result, we fail to take advantage of the exponential gains that come with long term endevour.

But there is another benefit of having a long term perspective. You do not get distracted by the squirrels that cross your path when you are on the hunt for the elephant.

NSSF in 2015 set themselves the goal to be a sh20trillion fund. Despite the covid pandemic they are set to hit, even exceed that target. Without a strategy NSSF emboldened by its mounting war chest would be seduced by every deal that crosses their part and very well killing their chance of good returns.

 

 

GETTING COVIDEX OUT TO THE MASSES

A fortnight ago the National Drug Authority (NDA) gave the greenlight for Covidex to be distributed as a supporting treatment for Covid-19.

While the public had already caught on to the usefulness of the drug, Jena Herbals Ltd the producer of the drug, still had to cross some Ts and dot some Is with the NDA.

In a an interview aired last week, Dr Patrick Ogwang said he is confident of the drug’s efficacy – it worked for him and several other people he tried it on, and was working to scale up production from the current 30,000  20 ml bottles daily.

"Going by Ogwang’s expertise and experience it is safe to say the science is proven, the trick now is to scale up production to get the medicine into as many hands as possible, which is where business management comes in....

The first order of business is for Jena Herbals to lock down the intellectual property that surrounds the formula for Covidex. 

Intellectual property is a real asset on a company’s books. Like any other property this can be sold, leased or mortgaged to generate income for the company. And like any other property needs to be protected from people who want to steal or abuse it.

"Given the real need around the pandemic – there are currently  at least 12 million active cases worldwide, the covidex intellectual property needs to be secured internationally....

 The enormity and cost of this task is such that the government needs to  be involved, if only as a way for creating global market access for the drug.

Already President Yoweri Museveni has pledged that his government will help with funds for expansion.

The business acumen surrounding Jena Herbals will determine whether they can – as their founder wishes, provide this good to the widest public.

It is safe to say that Jena Herbals was unknown to most people until now. The challenge of scaling up production to even a million doses a day will invariably require more resources – financial, human resource and even land and a dramatic improvement in management. It is one thing to run a 30,000 bottle a day production line and quite another to run multiple production lines in multiple locations around the world.

Of course if they secure the drug patents they can license bigger pharmaceutical concerns –CIPLA comes to mind, to help in the wider distribution of Covidex.

Beyond what government is willing to provide financially, which is a drop in the bucket, to tap into the trillions of dollars of funding sloshing around the world a restructuring of the company to reflect this new reality is imperative.

There are basically two kinds of financing that can take  Jena Herbals to the next level – debt and equity financing. Each has its pros and cons and its likely that Jena Herbals will need to use a combination of both to further its ambitions to get its treatment into every covid sufferer’s hand.

In the wider world there are people specialised in financing pharmaceutical developments and these maybe the best to help, not just any Tom, Dick and Harry with a few billions shillings.

In both cases, given the huge funding they will require they will need to convince funders that their ownership of the relevant intellectual properties are ironclad – would make no sense to put money in the business and then the next day the most valuable property is pulled out from under their feet, that they can indeed ramp production of the drug and finally that the investors will see a return on their investment.

On a national strategic level, government needs to secure supplies of the trees responsible for the active ingredient of Covidex. A statutory instrument banning the cutting down of the tree may a good start and incentivising tree farmers to start planting the valuable tree may be another. It was good to hear though that Jena Herbals is working on regenrating the active ingredient using tissue cultures, that would spare the widespread cutting down of these trees. While its only the bark that is required in some cases, don’t put it past us to hack down whole trees to harvest the bark.

"It also make sense to raise the secuirty status around the plant and the Dr Ogwang himself. Billions of dollars have been sunk into the Covid-19 fight, which money may go up in smoke if Covidex gets wider acceptance....

CASH BETTER THAN POSHO AND BEANS ANY DAY

Last week Prime Minister Robinah Nabanjja announced that this time around the government was going to give cash hand outs to the most vulnerable, unlike the last lock down when the government dished out posho and beans.

This was a welcome announcement in light of how shoddily the food distribution happened last time, but also because it makes good economic and dare I say, political sense.

Social security payments really kicked off after the second world war in Europe. A lot of Europe’s industrial base was flattened and needed to be revived quickly to give those economies half a chance of getting back on their feet.

Aid from America under the Marshall plan worked, helping to restore Europe’s industrial base. England only recently paid it off in full. However, the mass market that was needed to sustain these industries was not there as most were out of work or barely getting back on their feet.

Government’s then decided to design social safety nets, which catered for among other things unemployment benefits.

"With money in their pockets people went out to buy products, allowing industry to expand and employ more people. Despite greater affluence the social security nets have stayed largely in place to ensure “no one is left behind”...

During the pandemic cash handouts were seen in the US and Europe too.

The same logic should apply to support the cash hand outs to the most vulnerable during this lock down in Uganda.  

From the start one might be in need during the lockdown but it may not be for food. I might have access to my gardens or other sources of food and therefore my challenge is not feeding my family and I.

But also it has been shown that at the bottom of society’s pyramid, people are more likely to spend for consumption than to invest.

So the billions that would have been paid out to a handful of connected posho and beans hawkers, would better serve the economy if they were put in people’s hands. If a person got his sh25,000 handout he would run out to buy soap, charcoal, salt or even food from the nearby market, which money the shopkeeper will use to order more stock, pay his workers and utilities and on and on it would go. A real trickle down.

However, the big distributors who were paid last time were paid through the bank and probably kept their earning in the bank and since the banks were not lending that money got stuck there. Or even if they went out and made some purchases of a new car or a house or land, you can not compare the ripple effect to that of giving your tom, dick and harry hard cash.

In the former case a minute section of society benefits, while in the latter case you can have society wide benefits.

The prime minister also announced that they were contemplating paying the money by mobile money. Which came under a lot of criticism from the usual suspects. 

"It is actually a very efficient, transparent and traceable way of not only determining vulnerability, but also getting the money to those in most need...

Of course not everybody has a mobile phone, but with this one method you will have got to a significant number of people, for a fraction of the cost of sending trucks laden with beans out into the country side. For the others the LC networks can be employed as have other networks like the Social Assistance Grants for Empowerments (SAGE), a government program for aid to the elderly.

Most of the critics shook their heads at the suggestion because they know what happens when government technocrats come into contact with funds meant for the poor, or any funds for that matter. And they will not be wrong. But better to have a system which has a better chance of making real change than one, which does not but the funds will still be stolen anyway.

But staying on the subject of social safety nets, the high cost of intensive care has come into sharp focus in recent weeks. People who have never been admitted to hospital for anything worse than childbirth, are in shock at the millions of shillings they are being forced to fork out to settle their bills. Worse still if the patient dies.

Government has focussed on providing basic health care – and not very well, and done little to nothing in the way of providing  nationwide intensive care.

Government will protest that last part, but the proof is there for every body to see. There is no way the private hospitals would get away with the charges they have been asking, if government had enough capacity to counter these price gougers.

"It was all ok as long as the big shots in government could fly out at will and have their bills paid by the taxpayers – per diems and all, but now the chicken have come home to roost...

Hopefully now we will take a sharper look at our health system. It is not by accident that Cuba has a better health system than even the US, a decades long embargo of the small Caribbean island made it necessary.

As for those hospitals that have deliberately taken advantage of this crisis to fatten their margins unreasonably, the lightening that will strike you down is still doing press ups.

OF THE EURO 2020 AND COVIDEX

Ever since the World Cup in 1982 I have waited with bated breath for the soccer’s biggest bonanza’s brought to us live on TV.

First it was only the World Cup and Africa Cup of Nations then the Euros, the Olympics and now the Copa America.

With age of course my enthusiasm has waned. But this last week I found myself back in that mode with the European football championships, UEFA Euro 2020, because of the new lock down.

As a result of the Covid-19 pandemic this year’s Euro 2020 are not only unique for coming a year later than scheduled, but also because it is being played across 11 countries, unlike in the past when one country hosted the whole tournament.

The stadium crowds are back, depending on which country the match is being played in stadiums are nearly full or up to one third full. And horror of horrors in some of the stadiums there are people not wearing masks.

I kind of worked out that in those countries its possible most if not all their nationals are vaccinated.

"According to online statistics by earlier this week in the European Union at least 74 percent of its population has received one of two jabs of the Covid-19 vaccine. The UK alone has vaccinated all its population and then some, at 109 percent for the same measure....

The  equivalent figure for Africa was 3.47 percent and for Uganda an even more dismal 1.82 percent.

Which brings me nicely around to the controversy surrounding  Professor Patrick Ogwang’s Covidex “cure” for Covid-19.

Two weekends ago the word went around that the aforementioned drug was available in specific pharmacies around the Kampala. Serpentine lines, often reserved for certain churches, were suddenly seen outside some of the pharmacies, with stocks running out as soon as they hit the shelves.

The National Drug Authority (NDA), which is charged with regulating drugs in the country, came out days later to disown the drug arguing that it had not gone through the necessary authorizations to be made public, effectively banning it.

In the context of the desperation that had come with the spike in Covid-19 infections, the NDA can be forgiven for being behind the curve. It did not help their case in the public’s eye that Professor Ogwang is a respected researcher in herbal medicine, having developed several herbal remedies in the past that had been cleared by the NDA.

That brings us to a new term that has entered our language along with “social distancing” and “flattening the curve”, which is “vaccine nationalism”. Richer countries, which incidentally were worst hit by the pandemic last year, booked millions of doses of vaccines from several that were still in development. Their prescience paid off this year, hence allowing them to manage the massive roll out as described above within months of the vaccines going into production.

The challenge is that many of these countries – England for instance have the first right to purchase enough vaccine to cover their own populations many times over. This has the unhappy effect of leaving the poorer countries without chance of vaccinating their populations adequately soon –  the earliest by 2024 by certain accounts...

We have seen in Uganda that our initial one million doses are done and next week we start with the 175,000 doses that came in last week, with preference for those who already had their first shot.

In light of this, the case of professor Ogwang can not be treated as business as usual. While we may argue about why Professor Ogwang did not go through the stipulated procedure as he knows he should, there is a strong case for fast tracking his and any other drug under test. That does not mean allowing it through, but making sure it meets the minimum criteria to be rolled out to the population, especially since the claim is it has preventative qualities as well.

We will not be the only ones doing it. Western government fast tracked the production of vaccines against Covid-19 last year, while countries like China and Russia have developed their own vaccines, which while all not cleared by the World Health Organisation (WHO) seemed to have brought the pandemic under control there.

The reason the Covid-19 vaccines were rushed out is because the west was hit particularly badly by the pandemic. We have lived with malaria, TB and diarrheal diseases for ages because they do not command the same attention in the west.

This should be a lesson for us. We have to develop our own capacity to research and develop, not only drugs but other appropriate technologies for ourselves, because no one else will do it for us.

Mask up. Social distance. Wash your hands. And go get vaccinated.

IF I WAS RUNNING FOR PRESIDENT

The campaign season is now truly here. 

Last week the NRM’s Central Executive Committee filled its top positions. The election of older persons, people with disability and youth chairmen at village level were  concluded. In the constituencies far and wide its getting hot under the collar.

The main event – the presidential elections will be decided in February.

I got to wondering if I was a presidential candidate what would I propose as my action plan for the next five years.

Below are my first and ready thoughts for some of what candidate Paul Busharizi’s economic plans would be.

1. Introduce a Covid-19 bond

The challenge of the Covid-19 pandemic will be with us long after next year's polls. The major challenge is keeping businesses open and expanding.

As it is now with depressed economic activities people are out of work, making companies returning to full production difficult as there are no people to buy their goods.

We have two choices either to let every one for himself, God for us all and the devil take the hindmost. There will be a lot of pain – closed business and lost jobs, for a year or two but the ingenuity and resilience of our people will come through.

Or provide some government support to businesses and the most vulnerable, avert the worst effects of the economic slow down and provide a base for economic recovery.

This will cost money. 

I will propose the initiation of a Covid-19 bond, with a tenure of between 20 and 30 years, to raise about 10 percent of GDP, $3b or about sh10 trillion. The money can be raised in four tranches, one auction every half of the next two financial years.

This money will be focused on providing unemployment benefits, grants and soft loans for SMEs, facilitating the creation of alternative financial institutions and encourage/compell more big companies to sell there shares or debt on the capital markets.

2. Cash transfers for the most vulnerable

As I understand it government is reluctant to offer cash grants to the most vulnerable because they don’t have the money and are averse to going bowl in hand to the donor communities.

The big political upheavals from Zambia to Sudan have come as result of the removal of subsidies. To allow the donor community to finance this would be a recipe for disaster when we disagree, as we inevitably do on one policy move or the other. I sympathise.

Hence my going to the open market. 

It is estimated that there are at least eight million living below the poverty line. The covid-19 pandemic is expected to raise this number to 11 million.  Assuming an average of five people per household that would be 2.2 million families. Assuming a handout of sh100,000  per family monthly or sh220b a month. I would provide this for a year long enough for people to get back on their feet. That would cost about sh2.7trillion. 

To access the money  beneficiaries must have a national ID and even better, a mobile money account to which the money will be sent directly.

This I would be a direct benefit to the families and boost demand in their local economies. 

3. Support for SMEs

Support of SMEs will take two forms the smaller part of which would be grants to keep them in business and the second part, soft loans offered at least half the market lending rates for up to five years.

In addition I would fund business support services to ensure that not only do the businesses survive and thrive but can repay the money. This will be a seed of a revolving fund to benefit SMEs well into the future.

To benefit from this facility SMEs will have to be registered companies.

4. Encourage alternate financiers

As it is now our financial sector is dominated by commercial banks, who are well suited to funding going concerns but not start ups or providing long term capital.

The capitalisation of Uganda Development Bank will continue but at more determined pace, the target will be a $2b capital base by the end of my first term. Incentives will also be offered for other development banks to set up shop here.

On the other side of the pendulum we provide tax incentives and seed some  angel investors and venture capitalists, who in more advanced economies finance start up companies.

My government will also actively nurture the growth of a broader and deeper financial sector ecosystems that can support businesses from the smallest to the largest. 

5. Compel companies to list on the exchange

There will be no more pussyfooting around banks, telecommunications companies and big industry during my time. We will encourage, compel them to list on the Uganda Securities Exchange.

With one stroke we will be able to increase local ownership in these companies – we encourage SACCOs and investment clubs to invest and secondly, improve the capacity of our capital markets to raise capital. This will be crucial for the country to raise capitalf for its companies and development.

There are other development issues like infrastructure development, quality social services delivery but I believe resource mobilisation and  building a robust and dynamic private sector are key to building a self sustaining economy. The taxes from these will more than cater for everything else.

By the way a major objective all the above initiatives will be to widen the tax base, as all beneficiaries of the above actions will become tax paying members.

WHERE ARE WE ALL GOING

The relief was palpable when the lockdown was partially lifted last month, until we found ourselves in traffic jams, consistent and enduring like never before.

This came as a surprise, since the pesky boda bodas and their more nefarious cousins the taxis were off the road. We blame everything on those two, even our inability to keep time.

Explanations came fast and thick – people are being forced out of the city all at once (the dusk-to-dawn curfew was not lifted), people are using their cars since there are no taxis, people are so glad to be out and about they are just driving around and it went on an and on.

In September 1996 the city traders went on strike to protest the introduction of Value Added Tax (VAT). The tax which was introduced following the budget that year was too complicated to implement, they complained. Uganda Revenue Authority (URA) on their part believed people were complaining because was because VAT was much harder to evade than the ineffectual Sales Tax that it replaced.

But the immediate impact of the strike was that the roads were clear of traffic for the week that it happened. Suddenly we knew who drive the cars in Kampala....

This time around the arcades, which replaced the lockups that lined downtown Kampala are shut, but there is still traffic.

Schools and learning institutions another source of our snarl-ups too, are closed.

Many businesses and offices are not firing at full capacity – I can tell by how much easier it is to get parking in town.

So what then is causing all this traffic, I wonder.

It is obvious that

the rush to beat the curfew, coupled with our propensity to always do things last minute is fueling the evening traffic.

Observers say that we will be lucky this year if Uganda can manage half the 6 percent growth it showed last year.

And the evidence before our eyes – closed shops, silent factories and rotting matooke are proof enough.

The text books say that economic activity is the production, distribution and consumption of goods and services. In a vibrant economy people are on the move to do their part in that equation.

So you can see why our best economists are scratching their balding pates.

In these depressed economic times where is everybody going?

Maybe the key is in the arcades. Many of the traders locked out of their shops have found a way to start delivery services. Now without passing through the more established delivery services, with a call or whatsapp you can everything from charcoal to refrigerators and everything in between delivered to your house.

 This would make sense. These cars were previously parked outside the arcades or at home – for use only on the weekend maybe, but now are criss crossing the city delivering stuff...

I was told a story oncec of how a low level security informant went AWOL because his office planned to transfer him to Moroto.

“I make sh100,000 a day in Kampala by kuyiyaring, how much would I make in Moroto,” was the thought process that sealed his decision to abscond from duty.

Pressed against the wall with no job or lower pay,

people are investing in a few liters of fuel to come into town, hoping proximity to the economic machine that is Kampala – last I checked it accounted for seven in every ten shillings generated in this economy, could lead to a few crumbs falling over the steering wheel into their laps.... 

If the above is true, the unrelenting traffic through out the day suggests that we have a lot of cars that don’t make it to town during ordinary days. We are parking our cars at home in the hope of dodging Kampala’s growing traffic, but now with few public transport options we are pulling them out to join in the melee.

But I think the traffic is indicative of a  bigger issue.

In all the experts’ projections they have put a premium on closed shops, mothballed factories and the quiet at our airport as a measure of how badly the economy will be hit.

Clearly we did not factor in that in the face of hardship Ugandans are not going to just rollover and die. They are going to hustle. They are going to push. They are going to scrap and scratch....

There is hope for us. Clearly most Ugandans are not moaners and groaners.

HIGH LENDING RATES A SYMPTOM OF BIGGER PROBLEMS

Last week central bank governor Emmanuel Tumusiime Mutebile in sharpest remarks yet directed bankers to lower their lending rates further.

He complained that despite bring the Central Bank Rate(CBR) down to seven percent he has not seen a commiserate drop in lending rates by the bank.

CBR is the rate at which banks borrow money from the central bank.

Banks prime lending rates now range from 16.5% to 20-plus percent.

A study by the central bank pointed out that beyond the cost of money the high lending rates were high overhead costs that come with banking.

"If this is true then Mutebile’s admonishment will have little real effect on lending rates soon....

It has been reported severally that in conjunction with the Bank of Uganda the industry has been making some serious inroads into cutting those costs. 

Two years ago Central bank finally gave the greenlight for agency banking, which has saved banks the cost of opening more branches, while delivering their service for a fraction of their normal costs.

There are also moves to consolidate the transfer of money, with banks sharing bullion vans and collection centers, there are also plans to share ATMs  and other initiatives that will help lower industry overheads.

I am also aware that there are discussions to increase the minimum capital of banks and annual license fees. These two initiatives it is expected, will increase innovation in the industry – banks will look for more things to finance and lower lending rates. If the shareholders put up more money in order to show a return, managers would have to be more nimble and aggressive in the market to stay in a job.

"Key to note here is that lowering the cost of doing business is a collaborative effort between the government in making laws, the central bank in regulating and the industry in executing....

Basically banks take money from people who don’t need the money immediately and lend it to others who have a current need for it.

We charge them for keeping our money and they charge us to borrow the money, their cut is the difference between how much we pay to borrow minus how much they pay us to deposit with them.

Among other things the supply of money in their vaults determines how much they quote for their lending rates. If they have little money they will charge high interest and if they are awash with cash they will ask for lower interest.

"In the given circumstances where people are withdrawing more than depositing you can see how the cost of money goes up....

I think that while the industry is working to lower overhead costs, government should be planning and legislating on how to increase savings in the economy as a means to lowering lending rates.

In more advanced economies as much as 80% of the money in circulation is in the formal financial sector, in Uganda the reverse is true.

  

The net effect of this is that there are lower lending rates in those industries.

Increased financial literacy from its current dismal levels will go some way to increasing savings, but I favour a more direct approach, in addition.

National Social Security Fund (NSSF) was created by an act of parliament in 1985, in which government compelled workers to save five percent of t heir incomes and for their employers to save an additional 10% on behalf of their employees.

Were it not for that fact, most of Uganda’s workers would barely have two shillings to rub together.

The evidence is there for all to see. Easily nine in ten NSSF members have nothing but their NSSF savings to look forward to at retirement, despite the years they have worked.

Assuming pure rationality, one would expect that workers would have saved more of the 95% left over from their income to have at hand multiples of what they have  at NSSF.

"We could wait for savings to grow organically as the economy grows or government through the law can compel us to save more....

Say we increase mandatory savings by just two percentage points, the effect will be felt across the industry.

If the banks have more money to lend, by the laws of supply and demand, the lending rates will fall.

"I think appealing to the banks sense of fair play is a losing strategy, in as far as the rates will not come down as fast as we wish. But if by understanding their business and pushing the appropriate levers we can create a situation where they have no choice but to bring rates down, that would be a more sustainable formula....

There are other issues to consider, like governments huge appetite for borrowing to finance its budget, the relatively low revenue collections too, play a part.

The least of our worries is that the banking industry is dominated by foreign interests. If this was a major problem then the  government owned Housing Finance Bank, Post Office and Pride Microfinance, would be leading players with lower than industry average, lending rates.

 Japan and South Korea government owned banks are not the dominant players in those respective industries, if at all. But their government’s know how to leverage the banks there to support their development agendas, without disrupting the industry or markets.

"Mutebile walks a fine line between letting the banks do what is necessary to remain viable and pandering to populist short term interests....

Bringing lending rates down is not a job for  Mutebile alone but for the Uganda government as a whole. 

The sooner we appreciate that, the sooner that the central bank would not be forced into embarassing, even ineffectual.

LETS GO FOR EXPORTS RATHER THAN IMPORT SUBSTITUTION

One of the major challenges resulting from the three-month lock down is the collapse in consumer spending.

It’s a bit of a chicken and egg situation. Because businesses shut down workers have seen a cut in or a total loss of their wages, as a result the companies have no one to sell to.

Coming out of the lock down will require companies to jump start production on one hand but also for there to be enough spenders for the companies to sell their goods and services to.

The government has suggested some remedies to the challenge –postponing tax payments, encouraging banks to postpone loan repayments among other things.

In addition it has been suggested that import substitution, where we produce some of the things we import, can create jobs and help jumpstart the economy.

The import substitution call, first heard after independence, is an attractive one. It presupposes more jobs created locally and a reduction in expatriation of profits to foreign investors. 

The traditional way of supporting import substitution is by discouraging importation by raisinig import duties, so that local industries can grow and fill the gap. Governments can either jump in the fray themselves, start companies to import substitute or support local companies to do the same.

What the promoters fail to point out is that import substitution initiatives don’t stand up to scrutiny, often are a higher cost on local consumers, who pay for their inefficiencies and promote an entitled elite, disproportionate beneficiaries of the policy who will fight its reversal or liberalisation of markets regradless of its cost to the economy....

Import substitution has been tried out in the NRM era and some companies still enjoy protection from imports. But 30 years later consumers are willing to pay more for the imports nevertheless, because these favoured companies produce substandard goods.

Borrowing a leaf from countries like Japan, South Korea and more recently China, the more enlightened thing to do is to support companies that are targeting foreign markets.

Producing for foreign markets is a more objective measure of a company’s success. Producing for local markets, one can be successful because he is favoured by the ruling elite, while foreign markets will not be swayed by such considerations.

Secondly, because of the size of foreign markets, companies who service them will be forced to employ more and more workers and buy more and more from local suppliers, as they win more market share, which is a major intention of the authorities.

However, helping companies to produce for export will take more intelligence than is suggested by closing off our internal markets to foreign producers...

For starters government has to come up with and execute a more credible industrial policy than it currently has. The same for an export promotion policy.

The interesting story is told of our attempts to supply goats to Iran in the early 2000s. We have goats running around all over the place surely we can supply them, we thought. When the Iranians came up with their demands for the quantities – 14,000 goats a week and the quality – weight, slaughtered under Halal standards and transportation conditions, we couldn’t cut it and the deal went begging. And that was just goats.

It is clear that before we can plan for exports we need to muster sufficient volumes of whatever it is that we want to trade in. The local market will be a useful launching pad for this ambition, but supplying it will just be a means and not an end in itself...

As part of policy government would have to negotiate access to foreign markets and even give marketing support to companies intending to export to those markets. Especially as we intend to eventually export finished goods to those markets.

Also in order to export successfully we will be forced to determine what products do we have competitive advantage in, which products can we produce better than most other nations in the world. By determining this first, we will improve our chances of success in foreign markets and not support unnecessary ego trips.

As an aside too, producing for export will improve the standard of goods we consume in this country. Our lax standards regime or enforcement means we produce a lot of stuff that foreign markets would not touch with a ten foot pole, this is detrimental to our health and general standard of living.

The real Asian tigers – South Korea, Taiwan and China, have learnt this lesson and are executing it really well. They also tried import substitution too but realised it was a losing strategy and promptly ditched it.

We have products already that can be tweaked to enter foreign markets – our sugar, our alcohol (waragi), dairy products among others.

Producing for export is not easy and the respective companies cannot be left to go it alone, a coherent national strategy and  systematic government support are key.

Doing this through public enterprises would see the inititiave dead on arrival. The more sustainable way is to do it through the private sector, a whole science on its own.

If we want more jobs, more revenues to the treasury and more technological transfer, lets muster the strategic vision and implementation discipline  to produce for export over the less ambitious import substitution strategy....

IF YOU WANT TO MAKE GOD LAUGH

They say that if you want to make God laugh tell him your plans.

Never has this been more apparent than in 2020.

A little known virus, the corona virus,  at the end of last year found fertile ground in Wuhan, China to fester and incubate, then sped all around the global via the air routes of the world.

By February it had landed in Europe and in March exploded in Italy and Spain and threatened a dystopic landscape by year end.

Before Europe had it under control it crossed the Atlantic to the US, where if they don’t do it big they go home.

And only last week we heard that in Brazil they were exhuming graves to make way for new deaths.

Covid-19, the disease caused by the corona virus, is not a particularly lethal infection. On writing this the death toll  came to about 5.4% of total infections, this translated into 446,000 deaths.

Why the corona virus has broughtthe world to a stand still is its high infection rate. Scientists have determined that one covid-19 infects about2.5 others in five days, the similar stat for the common cold is 1.5. 

"Doesn’t look like much difference but by the tenth level of infection the one covid-19 patient will be responsible for infecting 78,000 as opposed to 3,800 for the common flu....

 Uganda has been spared the apocalptic scenarios in Europe by taking firm preventive measures – the lockdown, that ensured that the rate of infection was slowed to a minimum.

The lockdown, the restriction of movement and congregation, however, has brough the economy to standstill.

We never saw it coming, when we were drawing up our New Year resolutions. It has been so devastating that Chinese billionaire Jack Ma said, that if your business survives the year consider it a win. All profit, gowth and investment projections are out the window.

In times of crisis whether you, your business or country survive will depend on the foundations on which they are built.

But now spare a thought for political aspirants who have invested millions, even billions of shillings in readiness for next year’s elections.

The Electoral Commission (EC) has said there will be no mass rallies, an announcement that has unsurprisingly  thrown up a lot of criticism. 

The EC say the recommendation was made under the advisement of the health ministry, which insists and rightly so, that social distancing protocals should not be ignored.

I see two critics of this announcement. First, there are those who trying to break into politics fear that without mass rallies there is little chance of winning enough face recognition. 

"Their insistence that mass rallies should be allowed regardless of the health situation is based on them unwilling to wait another five years to shoot their shot...

The second group are those whose knee jerk reaction is to see conspiracy in every thing that is proposed by government or its agencies. That whatever government or its agencies decide is intended to perpetuate the NRM’s hold on to power. Many of these are opposition politicians, who wouldn’t be worth their salt if they didn’t view every thing government did with a jaundiced eye. That’s the hazard of their station.

The first group needs to take a chill pill. It would be irresponsible to the point of being criminal for government to put thousands of people’s health at risk for politics. The US is learning that lesson, as are the UK and Brazil.

"Covid-19 is real. Just because the government’s resolve in enforcing an unpopular lockdown, we have been spared the worst of it, does not mean it is a figment of the NRM’s imagination....

What would be fair criticism would be that if the health system was better, we would be able to afford a few thousand infections as our system would be able to cope better. Maybe that can be a campaign slogan for someone.

But this situation probaly makes the case for the opposition to focus more o n beefing up representation in parliament, rather than fixating on the presidency. In that way they would have been able ti muster the numbers to cause an amendment to the constitution to postpone the elections to a later date.

Okay you can shoot me now.

GOVERNMENT BETWEEN A ROCK AND A HARD PLACE

In last week’s state of the nation address President Yoweri Museveni announced a battery of things the government was planning to jump start the economy after more than two months of lock down.

The restriction of movement and congregation, meant to slow the rate of infection of covid-19 the diseases caused by the Cororna virus, has ground the economy to a halt not only Uganda but all over the world.

The corona crisis is a health crisis that has escalated fast into an economic crisis.

The expectation has been that there will be a wave of business collapses and the subsequent job losses that could potentially spill over into social unrest and political upheaval.

To stave off this last scenario, governments around the world have opened the taps of government spending, economic stimulus, to help support their respective economies.

Unlike another crisis since the second world war, the economic dislocation has been swift, massive and global in its reach. But it has been unique in the total collapse in demand, in a situation of over capacity.

To illustrate, while many people –

up to 80% in certain segments have lost their incomes, the capacity to produce, to feed or service all those people is still there. It has just been switched off..

.

The companies that have been shut down are facing the real possibility of closure, depending on the robustness of their balance sheets, but the most vulnerable members of our society are falling deeper into poverty and facing real existential questions.

The two are related. To the extent that people are unable to get back to spending money because of the uncertainties of the economy or because they have no money all together, is how long it will take for businesses to get back to full production and employment.

So the effectiveness of a government stimulus will depend on how well this reality is appreciated.

It is particularly important in Uganda where more than seven in ten dollars of economic output is attributed to the informal economy.

More formal economies in western Europe recognise this and their stimulus packages while shoring up big business, have emphasised support from Small and Medium size enterprises (SMEs) and individuals out of a job.

It is a lesson many learnt after the second world war. As they embarked on reconstruction they realised too that while industry was getting back on its feet they had to provide unemployment benefits. These monies provided the demand that helped spur industrial growth.

Many of them have maintained and even widened the nature of welfare benefits. While its critics have seen this as wasteful and prone to political manipulation, their criticism might be because they would rather those monies be used to support big business than disperse it among the masses.

The supporters of these “handouts” also argue that

if you give your everyday man sh50,000 he will buy from the local shops, seek treatment at the clinic and pay the boda boda....

These in turn will pay local suppliers and the local economies badly hit by this crisis will at worst not collapse all together.

If on the other hand you give a handful of suppliers sh80b, which is the sh50,000 distributed among the 1.6m families living in poverty, they will save it in his bank, import new furniture and vehicles, pay school fees for their children or seek treatment abroad and even invest abroad. True, they may also buy some land (keeping the money among the fellow rich) or build a new mansion, and even pay school fees for some village orphans.

It is hard to argue against a direct injection of cash into local communities, which incidentally, will still find its way into the pockets of big business, eventually. A trickle up effect. But

the connected don’t want these drip, drip returns, they want the money to be gushing hard and fast and to hell with the rest of us...

 

Beyond the pressure from the connected few, the idea of handing out cash to the vulnerable as part of package to jump start the economy is met with the argument that it will create dependency. We just sounds like a logical assumption to make but falls flat in the face of the evidence, which shows that most people who are beneficiaries find a way to wean themselves off the benefits to become more productive members of society.

The argument may mask the real reason. Many political disturbances have resulted when faced with worsening economic conditions, governments withdraw these benefits. 

To sustain a welfare system over generations, requires disciplined budgetary processes, so when the bad times come – as they inevitably do, you can still sustain welfare payments to your people....

The mixed Scandinavian economies could teach us a thing or two in this direction. 

In vulnerable economies like ours, financing even a minimal social benefits scheme would mean borrowing from abroad and there our fear – reasonably so, of donor interference rears its ugly head.

A running scale of benefits to small business and the poor, going from cash handouts or grants, to soft loans and all the way up would be a good idea.

WHY NSSF AS A PENSION FUND IS A GOOD IDEA

Just when we had forgotten about the National Social Security Fund (NSSF) than it is back in the news.

A few weeks ago, an opinion hazarded in parliament that the Fund should payout 20% of members savings to help them over the corona crisis, caused an uproar.

On one side of the argument the NSSF management argued that the proposal was impractical, would hamper and even jeopardise its operations and above all they couldn’t execute it if they wanted to under the current law. 

The supporters of the  proposal argued that it was their money and it should be released, fear their money may have been pilfered and they are seeing ghosts and conspiracies lurking around every corner.

An amendment of the NSSF law currently winding its way through parliament has served to stoke the flames of the debate.

In the original amendment bill mid term access was restricted to access to funds for mortgage, medical, education and unemployment. But the committee that is working on the amendment has proposed that in addition people above 45 years or who have saved for at  least 10 years should be allowed to withdraw some of their savings.

No sooner had the dust settled on that discussion than it was proposed that NSSF be turned into a pension fund from its current status as provident fund. 

The difference is to shift away from a lump sum payment to workers when they retire to a monthly pension for the remainder of their lives.

The shift to a pension fund is likely to be an unpopular one. 

"For most members the expected payout at retirement is the most money any of them have had at one time. The mentality is that when they get their money their money problems will be done for good....

Unfortunately the numbers don’t support this feeling. According to NSSF eight in ten of its members have nothing to show for their money after two years following retirement.

The horror! You retire at 55 and probably have twenty years of life ahead and you have gone through your savings in two years.

But that shouldn’t be surprising.

If you get your current savings with NSSF and divide it by your annual salary, it is unlikely it can last you five years at your current standard of living..

 

I was amused to hear one person say that the people who wipe out their savings are only those with small take outs. That those who withdraw sh100m and above are doing well.

I would put my money on it that it’s the other way around. It’s the ones with big cash outs that blow up their savings and are back on the street looking for a job within two years.

"We seem to think that to improve our financial literacy we need a lot of money and we will be fine. And that is the problem....

If you can not manage the little you have, a lot of money will only serve to magnify your indiscipline with money. Hence the reason why the people who get the most money blow their money faster than the smaller savers.

So

a shift to a pension fund would actually save us from ourselves....

The compromise would be for members to be allowed to withdraw between 30 and 50% of their savings in a lump sum with the remainder being paid out as pension over the remainder of their lives.

There are other reasons why the turning NSSF into a pension fund makes sense, not least of all the anticipated massive payout in 15 to 20 years from now, when the majority of the current members seek to cash out, but keeping members living in dignity for the remainder of their lives has to be at the top of the list.

In the new law there is a provision for voluntary savings. While this is targeted at the informal sector it would do wonders for those in the formal sector, who can save over and above the mandatory 5% stipulated  by law. This allows one to have a bigger pool of cash from which to draw at retirement.

I expect the conversion to a pension scheme will be an unpopular one, but it will be the right thing to do, just as government compelling workers to save with NSSF 35 years ago was the right thing to do.

I can bet that even then people argued against handing over their monies to NSSF, arguing that they should be allowed to save how and where they wish. 

The figures again show that easily for nine in ten savers their NSSF stash is the biggest asset after years of hard work and squandering the remaining 95% of their income.

NOW GIVE US MONEY NOT POSHO

In starts and fits, government has been distributing maize flour and beans to the vulnerable populations of Kampala and Wakiso.

The program that has been in motion since the beginning of April is still ongoing, despite earlier plans to complete in two weeks.

Apart from a few questions of quality, most recipients seem to have been grateful for the handout.

As the government slowly lifts the lock down, it will have to contend with the economic debris left behind.

The lock down, the restriction of movement and congregation, was intended to slow the rate of infection, which for all intents and purposes we have done very well.

At the time of writing this the number of recorded infections was shy of 300, about two months since we recorded our first case. Going by the rate of infection elsewhere we should have crossed the 1000-mark by now.

The lock down’s secondary reason was to allow government improve its capacity to test, track and treat eventual infections that will occur.

 " With the lifting of the lock down infections will rise and time will tell whether government was ready enough...

The lock down also brought economic activity to a near standstill, the net effect of this is that many businesses will shut down and jobs will be lost as we try to come to terms with the after effects of the lock down.

 

We are opening up to world where there is a lot of idle capacity but little demand to take this up.

So the New Vision for instance has seen its sales fall to below 20,000 copies a day, but the machinery and people to produce the paper are still largely in place.

Ideally what should happen is that as soon as people get back on the streets our sales jump back to pre-covid-19 levels immediately. That is unlikely to happen.

This scenario is being replicated across the economy, across all industries (except the telecommunications companies maybe).

During the global financial crisis that happened about a decade ago, western economies grappled with how to handle the situation.

The US sought to bail out its giant companies in industry and finance, the argument being they were too big to fail. That if they did fail, the ripple effect across the economy of lost productivity and job losses would be catastrophic.

Europe did a bit of that but emphasised more shoring up the social security net for its people.

The result,

while the US on paper came out of the slump faster, wealth inequalities widened and the most vulnerable people in that society were badly affected...

Europe was still in recovery mode by the time the Corona crisis came around, but recovery was more spread out among the population.

Given the experience of the western economies, it seems obvious that Uganda will have to thing deeper about social security if it is to come out of this crisis with some hope of future prosperity.

This week the US, through their USAID office here announced it will be handing out cash – sh92,000 a month for three months to a few thousand people around the country.

The money is supposed to help these vulnerable people get back on their feet during these hard times.

From a purely humanitarian standpoint it  is hard to argue against helping the least of our brothers.

However, plans to do this have come against two roadblocks. One, isn’t this a sure way to encourage dependency among our people. And secondly, how long can such programs be sustained.

Thankfully we need not go on guess work. The government has been running a pilot unconditional cash grant to the elderly, SAGE (Social Assistance Grants for Empowerment) for the last decade.

The government gave people over 65 were being given sh25,000 monthly in a program that expanded to 57 districts from less than 20.

A study done by UNICEF showed that these grants had had far reaching benefits not only to the recipients but their respective communities as well.

The benefits  included more employment, improved school enrollment and better feeding.

Its an expensive endevour to carry out all year around, that’s why government has raised the age requirement to 80 to spread the initiative across the country.

Beyond the feel good factor of helping the most vulnerable members of the society there is some hard economic sense for government to be making these handouts, especially now.   

"Most welfare programs in the western economies took off after the second world war. It was a way not only to aid the people but also to jump start industry, what is the point of manufacturing all those bicycles or shoes or plates if there is no one to buy them?....

So by helping the common man back on their feet they were creating a market for industry.  

The spillover into economic growth is quite obvious. There are studies which show such grants have a comparable return on investment as infrastructure.

Thankfully the tools to make direct payments have already been tested and explored under SAGE so delivery shouldn’t be a problem if we committed to the program tomorrow.

So instead of a handful of people benefitting from government relief aid more people will benefit.

You are giving me maize and beans,  thank you very much but I might need soap or charcoal or medicine more urgently now. If you give me money I will make those decisions for myself much more efficiently.

The question though, how is government going to afford it? Given the anaemic state of our coffers now there is no doubt that government would have to borrow to support such a program, but given that these monies will be used to support  local business it would have to be considered a good spending of tax payers money.

OF NSSF AND BEING THE ELEPHANT IN THE ROOM

As the lockdown has dragged on and cash become increasingly short it was inevitable that National Social Security Fund (NSSF) would come under attack.

NSSF is the single largest financial institution in the country, its muscle drawn from the savings of its two million members.

At last count the Fund has sh12trillion in assets.

According to the current law that governs NSSF, the Fund can only pass out money to its members under five circumstances, when they hit retirement age -- 55 years  old, if they hit 50 and are out of work for at least a year, if they are incapacitated and can’t work any more, leave the country or join public service, which has its own pension scheme and finally if they die, god forbid, their next of keen can claim their savings.

So under the current law there is no place for NSSF to dish out money to members as a result of the current crisis.

"That is not NSSF being mean with our money, that’s the law...

In August last year when an Amendment to the law that governs NSSF was tabled, the public was  more fixated on the proposal that benefits will be taxed at collection, at retirement or whenever, than at the point of contribution.

As it is now URA taxes your gross pay and then NSSF carves off its five percent, which in effect means your contribution has been taxed and hence you suffer no tax when you are collecting your savings.

In the amendment it was proposed that mid term access be allowed for members but under certain prescribed circumstances. The mid term access would be allowed to cater for medical, education, mortgage or unemployment.

"This amendment will better reflect NSSF’s role as provider of social security to its members....

Debate  on this bill has been going in parliament since September.

NSSF management were among the first to present to the relevant committee and were reported as being in support of the bill and the mid-term access provision in particular.

 What really got people’s knickers in a twist recently, is a leaked letter in which NSSF boss Richard Byarugaba was responding to a querry from the finance ministry about the feasibility of releasing 20 percent of member savings to help them get over this corona crisis.

The lockdown that started at the end of March restricted movement and congregation of people and has led to a collapse in economic activity. As a result jobs have been lost and it is expected there will be a lot of business collapse.

So the argument for relief for your everyday man is impossible to deny.

In his letter to the ministry Byarugaba pointed out that this release would cause an out flow of at least sh2.6trillion and an additional sh800b, which are the budgtted payouts to retirees and other claimants.

He argued that this would force NSSF to liquidate its assets at forced sale value, disrupt and even jeopardise the business irreparably.

"NSSF has assets of just under sh12trillion, but, this is not cash stashed away in the basement of Workers’ House...

Most of this money is held in treasury bills and bonds, company shares in and outside Uganda and real estate. To cash these out will take time and lead to a loss to the Fund and members. 

Byarugaba also argued that because they are biggest holders of government paper, issued to stabilise prices, the shilling and support the budget, the ripple effect of such an action may have a detrimental  effect on the wider economy.

In response to this analysis several people have come to refute the Fund’s advice to the minister. 

They argue among other things, that there are instruments available that can spare the Fund losses, that the Fund is abdicating its role to provide its members’ social security and that the Fund should stop investing abroad because it is developing other countries and not Uganda.

"There really is no contradiction between NSSF’s support for mid-term access as proposed in the amendment bill and it’s technical opposition to release within the next few weeks of a third of its assets to consume....

The key issue really is what can NSSF do within the law that governs it. Byarugaba may wish this, that or the other but is it legal or put another way what can he get away with, without doing a illegality, to help his members?

The finance minister has the right to cause a statutory instrument to effect some changes in the way NSSF works, but for him to make such a far reaching change he would need to consult widely. This is not Idi Amin’s1970s’ Uganda.

The people who feel so strongly about inserting such a clause can have their MPs make the proposals in parliament. Thankfully government is in the middle of amending the NSSF law.

Byarugaba’s experience has been in banking and it probably turns his stomach to hear the clamour to use long term savings to cover short term needs. That is the surest way to poverty.

No doubt that in coming weeks and months we are going to experience financial stress as only the generation that was here pre-1986 can relate to. Those who can appreciate this are less than 20% of the population.

But raiding the Fund is not the way to resolve the issue. What happens when they release the monies and they run out, will we blackmail NSSF to release more?

THE LOCK DOWN WILL END, WHAT TO DO?

It was an initiation ceremony. A rite of passage. Call it what you may.

It involved getting all the S1 boys to jump from the diving board into the pool about seven meters below.

For swimmers this would not be a problem, but for the senior boys lying in wait in the water, whose intention was to “dunk” the new entrants to the school when they hit the water.

I can not forget the feeling of running out of breath as they kept my head under water and the relief when I was tossed to the side of the pool sputtering, coughing and spitting.

Watching a video recently of covid-19 patient struggling for breath, reminded me of that time more than 30 years ago when I was fighting for breath underwater and yet there was none to be had.

Of course,

people with respiratory challenges know this reality all too well. I left mine behind in the school swimming pool.

I have no intention of repeating that experience in my life time, nor would I wish it on anyone else, except for … but that is a story for another day.

As we approach the lifting of the lock down that  memory is what keeps me in check. Social distancing will be key. Shaking hands, out. Hugs? How do you spell that? 

Knowing what we know now after more than two months of bombardment with corona virus messaging, we should not need anyone to tell us how to behave.

"President Yoweri Museveni when he does eventually lift the lockdown, most probably in phases for months to come, will be making a general prescription but we have an individual responsibility we can not abdicate to him....

While as a country we have been spared the health effects of contracting the disease – we have had 126 covid-19 cases at time of writing this, we have not been spared the economic downside.

A report released last week by the organisation Financial Sector Deepening, Uganda (fsd Uganda) showed that four in five of us could not maintain their normal lifestyle after just 15 days of lockdown.

I almost laughed the other day when someone said lifting the lockdown will mean we have survived the virus. As long as there are cases around the world a reopening of our borders and airports mean we will risk infection sometime in the future.

With the best estimates for the development of a viable vaccine seen late next year, it is clear we will live in fear of the disease for at least one more year.

A sharp spike in the infection rates may see the imposition of other lock downs in future.

"Unlike the other viral infection that sends chills down our spine, HIV/AIDS, if you contract Covid-19 you can spread it to your loved ones with not so much as a sneeze in their direction. Which makes personal responsibility even more urgent.

I fear that our low infection rate during this first wave has bred a complacency, which is setting us up for a higher infection rate during the second wave.

The Spanish flu of the early 20th century, which laid waste to western Europe, had a more fatal second wave because people came out jubilating in the streets after the lock down was lifted then.

We will have to restrain our relief and jubilation.

 

From a health perspective it is safe to say we have passed the first test, but that will count for nothing if infections increase rapidly and wipe out the gains of this first struggle.

The critics of the lockdown are loud but not overwhelming. As a society we have had to measure the risk of opening up versus the health risks.

Which brings me to another point. Madagascar has been helping all and sundry with their home made remedy for the disease, I hear they are going to start charging for it.

"The conventional health industry have threatened to laugh them out of town, as snake oil salesmen and worse. But the portion is in high demand on the continent, with countries as far afield as Guinea and  Mali signing up...

Given the circumstances a more appropriate reaction would be to study the drug’s efficacy in Madagscar and if found to have some promise, research its component parts to see what works or not.

But we know the huge investments made by the pharmaceutical companies can not allow for some home remedy to steal their thunder, unless it is promoted by themselves, of course.

I say give Madagascar’s concoction the benefit of doubt. This as I reach for my own concoction of honey, ginger, garlic, lemon and Mululusa all mixed in hot water.

FOR COMPANIES, TO GIVE OR HOW TO GIVE?

The current corona virus crisis has prompted a huge outpouring of corporate giving, a recognition that many will be hit very badly byt he slow down in the economy.

Initial giving was coordinated by New Vision CEO Robert Kabushenga and now being coordinated by the prime minister's office using the National Response Fund.
Billions of shillings in cash, goods and services.

Government's own initiative to provide some food -- maize flour and beans, to urban distressed kind of set the pace. One may argue about the procurement processes and amounts offered the recipients, butit was useful stimulus for others to start giving.

It was important that corporate Uganda decided to coordinate their actions in that way they would not suffer duplication and other uncoordinated troop movements.

According to the Income tax act companies can contibute up to five percent of their income to a charitable organisation that is set up to cause social advancement -- alleviate poverty, education, health among others.

So if a company makes a billion shillings in revenues it can contribute sh50m, which will count towards its expenses and therefore tax deductible.

Any amount beyond that threshold will not be tax deductible.

"Interestingly the US with its long philanthropic tradition allow individuals lee way to contribute up to 20% of their incomes and comanies 0.5% of annual sales. In Uganda individual donations are not tax deductible, which is a loss because in the US most donations -- seven in every ten dollars, are contributed by individuals...

The question of how much one company has contributed viz-a-viz another has been burning the wires. Reasonable concerns, if to those who much is given much will be expected.

The bigger question for me is the nature of the giving and whether it achieves the intended purpose of alleviating the affected persons suffering.

So telecom giant, MTN for instance have contributed about two billion shillings to the covid-19 effort. About half of it was in hard cash, the rest was in form of media space, help to National Water & Sewerage Corporation (NWSC) to provide water stands in water stressed areas of Kampala, support to the Uganda Red Cross and to fit and put a call center at the dispoal of the health ministry.

We shouldnt forget that MTN waived all fees sent on money transfers using its mobile money service, which must have run into a few hundred million shillings todate.

It Is an intersting breakdown because who is to say that the waiving of money transfer fees or the call center they set up of for the health ministry has not had a wider benefit than the water stands or the cash handed over to the effort?
It raises an interesting question of, beyond the photo opportunities, how effectiveis corporate social responsibility for the intended recipients?

Is it better to give in kind or in actual hard cash and allow recipients make the decision what to use the aid on?
This last question is an interesting one, take for instance the governmmnet food hand out, there are ways of thinking about its effectiveness, I list two.

The argument can be made that giving people food directly ensures that they will eat. And because the government is buying in such huge volumes the unit cost is so low that the shilling can be stretched much further.

So if as was planned governmnet is going to buy a few million kilograms of maize flour, the bargaining power that comes with  this makes it obvious they will not buy retail, at worst they will be buying ex-factory and even then can push for a discount.

To take the same amount and dish out to the recipients who will buy their maize flour retail, means fewer people will be impacted or at least each beneficiary will not get as much as if the flour was centrally bought.

"The other argument can be made that if you gave the recipients the cash equivalents they may not buy food, but attend to other needs that are more pressing....

Thankfully harvests were not bad last season and are expected to come in on target this season, so food shortages may not be people's more urgent need but health care or water or even transport maybe more urgent and the money can be spent accordingly.

This last part feeds nicely into the debate of how to raise demand so that businesses can get back on their feet quickly after the lockdown has been liftfed.

To lift the economy out of the last global financial crisis in 2008, the US government spent hundreds of billions of dollars propping up  companies. Their argument was that if the companies collapsed millions would find themselves out of a job and the economy as whole would come crashing down.

Critics say this was the biggest example of capitalist croniyism in world history. Jobs were still lost as company owners cut back on costs to repay government and get out from undedr its wings. The benefits of the bailout were concentrated among a very few poeple.

The alternative they argued would have been to give individual cash handouts, which would allow the beneficiaries to go shopping and shore up the companies anyway, with the benefits spread much wider.
The second is more populist and probably bettere economics anyway.

You dont look a gift horse in the mouth, but if corporate donation or governmmnet handouts are to go beyond making managers look and feel good they are serious questions that need to be considered.

And while we are still at it who is to say that police officer Maneno Ayikoru who donated her March salary of sh200,000 to the effort, isnt the most giving of us all?

HEALTH WILL BE THE “NEW” ASSET IN THE POST CORONA ERA

On an intellectual level we knew it all the time, the state of a nation’s health determines the productivity of the population.

The less incidents of illness, the less down time or absenteeism in the workforce. It follows therefore, looking at humans as units of production, more work will be done across a given time.

In a pre-corona era it was ok to tallk about dealing with illness after the fact. Treatment instead of prevention. In fact the global health system is geared towards treating rather than preventing illness.

That will have to change. The major line of defence against the corona virus, like almost any other virus, is a robust immune system. An emphasis on good nutrition, proper hygiene, sanitation and regular exercise are good preventative measures. And that even if the virus gets past ones best preventative measures the body will be able to fight back and, God willing, prevail.

On a global level how will this change the way government’s budget and companies view their balance sheets?

The Corona virus has exposed global health systems. The response time to the pandemic has been found wanting.

Health surveillance systems were caught flat footed and even when they woke up to the danger, they were slow to respond in  a coordinated and coherent manner.
And when the disease started tearing through the population our infrastructure – hard and soft, was found lacking.

There are video clips of Bill Gates that have gone viral, of him warning years ago that the next big challenege will be from microbes and we are not ready.

Around the world health systems response have swung from incompetence of poorly resourced public facilities to the mercenary indifference of private health care. Neither coud rise to the occassion when they were called upon and in future this will have to change.

On an individual level we have become addicted to processed, convenient foods that have pushed instances of obsessity to historically high levels, caused a pandemic of non-communicable diseases and generally made us all vulnerable to opportunistic infection.

It is clear that health has to become a bigger priority in national budgets, and not only about building health facilities but also investments in educating health workers, research and development and health cover for all have to be prioritised to fend off the next pandemic.

In companies, health will have to find a place on the balance sheets and health cover will assume greater importance. Exercise facilities will not be an expense item the bean counters scratch off the budget.

About 15 years ago I visted a bank’s headquarters and was shocked to find they had a world class health & fitness center, complete with gym, pool, indoor running track and squash cort. I asked how they justified the expense to the accountants and the human resource manager said they had enough evidence that members turned up to their desk earlier or stayed longer and could link that to higher productivity. They beat the traffic by coming in earlier or leaving later to use the gym, in the process pulling their own weight in the organisation. And that was before they showed that gym members were the least off on sick leave.
The losses to the world economy from the corona virus are going to run into trillions of dollars. That is the accounting description. In real terms it will mean lost jobs, diminished livelihoods and death.

You can place a nominal value on a person life if you count him as a unit or production of consumption. But that is not even half the picture of his economic output, not to mention his contribution to the economic out put  of the other people around him, if he keeps healthy.

How do you value the loss of a spouse who through holding up their part of running  the home allows the spouse to perform optimally at work? How do you value the contribution of  a well child to mummy’s output in the ofice? If a worker can still get work done despite illness how much more would they produce when in perfect health?
I think even on the most cosmetic of levels that accounting is, a case can be made that companies that pay attention to their staff’s health are more productive to those that don’t – even if you use the measure of profitability per staff member.

The bean counters may come around, but I think it is too soon to say.
Corona is not about to run its course, what with stories of reinfection emerging from China, it will be around for a while to come, at least until the end of next year if a vaccine is out in the next 12 months.
By that time i can guarantee you health, more than not being sick,  will occupy central position in  our consciosness.
It is not the first time in human history. The global improvements in hygeine and sanitation were a response to the  pandemics that  swept through Europe in the middle ages.

The rich thought they were insulated from the filth and squalor of the lower classes, before these  became epicenters of genocidal plagues and the rich realised they had to uplift everyone’s standards if they were to survive. And that is how public health budgets took on greater importance in western Europe.

Will corona do the same for us? Let us wait and see.

Wash your hands!

CORONA WILL REVEAL THE NAKED LEADERS

Billionaire investor Warren Buffett says that, “You will know who was swimming naked when the tide goes out.”

Buffett is usually referring to companies, which look solid in good times and when a crisis hits they are exposed as shells, riven with debt, no reserves and bloated with unnecessary costs.

But at the heart of it is a caution to “leaders’ of any sort at every level.

"As long as there is no crisis you can look good, but when all hell breaks loose the boys will be seperated from the men....

The corona epidemic is helping to sieve the grain from the chaff.

At the time of writing this, the US was fast reaching the 200,000 corona infections and had crossed the 5,000 death mark.

The US shouldn’t have been here but for lack of leadership.

Initially US President Donald Trump dismissed the impeding crisis as fear mongering by his political rivals, then he announced that chloroquin, the anti-malarial drug,  would sort it out and just last week promised that the pandemic will be handled in time for Easter.

The only reason he, unlike UK Premier Boris Johnson doesn’t have the Covid-19, the disease caused by the corona virus,  is that he has a particular aversion to shaking hands.

All the while his political base and the myriads who like to stick their heads in the sand, took him at face value and continued with life as usual, including throwing coming out spring parties on crowded beaches, just as the full extent of the pandemic was hitting western Europe.
Now the US’ infection rate is rising as if on steroids.

The challenge with the Corona virus is that full blow symptoms show after two weeks but a victim can have been spreading the virus for at least a week.

So the numbers we are seeing today are a the result of the past sins.

But back to the issue of leadership.
The district chairman of Bunyangabo this week showed us what our typical understanding of power is.

"Power, the ability to influence people and events, is a useful ingredient of leadership. But its most manifest sign in Uganda is in the people who have power’s ability to break the rules, to be above the law...

Forget the mealy mouthed self-help gurus who counsel “servant leadership”, our leaders measure their place on the ladder by how much they can get away with.

This includes powerful people breaking their loved ones out of quarantine, ignoring isolation procedures and the winner – seating in a hall with hundred others as parliament did last week, to complain that the governmnet is not taking their safety very seriously!

The Bunyagabu chairman would very well have got away with his crime, were it  not that he was recorded on video slapping the Resident District Commissioner (RDC) who was trying to enforce a presidential directive.

By the way the RDCis the president’s direct representative in the district, so to slap the RDC means …?

Country’s around the world are having to respond to the  pandemic, their ability to do so depends on how they have managed their affairs, how leadership has been exercised.

Western Europe’s economies are committing billions of dollars to keep people in work, offer some relief to those who are out of work and the most vulnerable members of their society.

They can afford to do this because they have built up credible reserves, kept their debt levels under co ntrol and built local resource mobilisation mechanisms to finance their ambitions.

"For a poor country like Uganda hopefully this pandemic will finally drive home the wisdom of a more determined drive to build tax revenues and mobilise savings....

Believe it or not we are not the worst. Some of our neighbours apart from being poor are burdened with huge open market debt, that apart frrom the grandstanding they will be hard pressed to live up to the pledges to their people.

The danger with the corona pandemic is that its not clear when it will come under control. As long as there is a corner of the globe that still has infected people, we will always be in danger of a re-emergence.
A vaccine may provide hope but realistic estimates are that this will not happen before the middle of next year.

"Stories of reinfection in China offers no solace. It was hoped that once contracted the virus some immunity may built up against a re-occurence but that does not seem to be true...

What this means is that the leaders who fall short will continue to be exposed, because to battle the corona pandemic will require consistent, unflinching and resolute leadership not flashes of brilliant grandstanding.