UGANDA AIRLINES? HOW CAN WE TRUST PUBLIC OFFICIALS

The recent spate of revelations about stolen government monies blew away the argument that government does not have enough money to improve education and health services or build roads or dams or any of those things we badly need.

But more importantly it cemented my belief that the best thing this government did for us in the 1990s was to privatize all our state owned enterprises.

Can you imagine what would happen if Uganda Posts & Telecommunications still had a monopoly or Uganda Commercial Bank still straddled the financial or UEB was in charge of our power sector or …. We would still be in the Stone Age.

This may or may not be an indictment on the managers who run those companies, but the truth is government agencies have little or no incentive to be efficient never mind what the politicians say.

A government’s main pre-occupation is to hold on to power. How a government does that depends on the peculiarities of that society but is often a combination of improving service delivery and doling out patronage.

The need to improve service delivery in itself is the stuff successful companies are made off but when you include rewarding political supporters, service delivery becomes badly compromised.

That’s how services are concentrated in certain places and denied others, certain people have their debts to the company waived or certain people get jobs in that company and not others. And when government’s change it is out with the old and in with the new. Not the ideal business model to ensure sustainable success.

Given the above it goes without saying, government is not the most efficient allocator of resources. That’s why the world over governments indulge in projects with questionable universal benefits, white elephants, diverting much needed resources from more important services to massage constituencies and personal egos.

Which brings me to the issue of the reviving Uganda Airlines. Some MPs were in Kigali recently and came back singing praises about the Rwanda Air, their national carrier. The airline which is 10 years old flies to all the EAC capitals as well as South Africa, Dubai, Nigeria, Gabon and Congo Brazaville.

This was the cue for other interested parties to offer their two cents on the matter.

That as Ugandans we are embarrassed because we don’t have a national airline. That a national airline would make it easier to develop Entebbe Airport into a hub.  That there is now enough traffic to make a national carrier viable.

Is American pride hurt by its lack of a national airline?

An airport becomes a hub because of its location, infrastructure and the traffic going through it. Do you need and a national airline to become a hub?

The airline does not make your airport a hub but people wanting to come to your country or transit through your airport is what makes it a hub.

If the government really wanted to develop Uganda into a hub they would have done it as part of a wider strategy to improve tourism numbers or promote high value exports.

The billions of dollars that will be required to set up the airline and baby seat it to profitability will be better spent expanding and revamping Entebbe airport, improving infrastructure generally and to the tourist sites in particular, financing and executing a well thought out marketing plan for the country. Those actions will get us the much desired hub.

The way I see it we have more pressing matters than opening up more avenues for a handful of elite to rip off our taxes.

Some people argue that an airline will make the government money. I manage to fall off my chair every time this one comes up. Government would benefit from an airline if it was profitable so they can collect corporation tax and earn a dividend. The operative word there is profitable.

To be profitable the airline will have to capture a sizeable share of the several hundreds of thousands of passengers flying through Entebbe airport. To do this it will have to offer a competitive service at a good price or government would have to institute some protectionist measures against other airlines. In the first instance government would be tempted to subsidise the company’s operations or make service in and out of Entebbe suffer in the case of the second course of action.

Returning to the issue of governments seeking to perpetuate itself in power – service delivery and patronage, connections out of Entebbe  are good so should we think that calls for a new airline are just a way to widen the surface area for “eating” in government?

TRADE THE KEY TO POVERTY ERADICATION

Our nations are at their most productive when they are discussion economic issues.

Last week Uganda hosted the 16^th Common market for East & Southern Africa (COMESA) summit.

COMESA came into existence in 1993, succeeding the Preferential Trade Area (PTA), as an attempt by member states to increase trade within the region that now stretches from Zimbabwe to Libya.

The region has a population of about 500 million and an economy of $700b a huge market by any measure.

However if the continent’s statistics are anything to go by – only a tenth of the continents trade is done with itself.

As most of the region’s exports are raw materials, this means that a lot of the value in processing, marketing, distribution and other intermediary services – as much as 90% of the value, is being captured off the continent.

As President Yoweri Museveni likes to say, we are donating jobs to the west.

The challenge is that the individual economies of the region are too small to sustain huge concerns, manufacturing or otherwise, while the barriers to trade between our own countries do not make it feasible to situate plants in one country and feed them from the region.

What a framework like COMESA can make happen is to create those exploitable economies of scale so that the huge investments needed to maximize the value of our natural resources can be situated on the continent.

Think about it if Uganda’s 100+ districts had border restrictions how difficult and therefore expensive it would be to move people, goods and services around the region.

The cattle keepers of the western Uganda can grow their herds to their hearts’ delight because they know that they can transport them to butchers in Mbarara on to Kampala and now to Southern Sudan, with little added expense beyond transport costs.

Now imagine how your costs would skyrocket to get our cow from Ntungamo to Kampala. The added costs, which would be loaded onto the final price, would not only depress consumer demand but would also discourage production. This would mean fewer cow herds, veterinary doctors, butchers, transporters and all along the value chain of the beef industry.

Similarly by retaining barriers to trade on the continent we are stifling production and the development of local industry.

The more immediate benefit is job creation but also associated industries will spring up and locally specific innovation will take root.

The analogy of the body and blood circulation maybe more apt.

Poor diet (policies) and inadequate exercise (poor implementation) causes the build up of cholesterol (artificial impediments) in our blood vessels. This restricts the flow of blood starving parts of the body of blood. When the buildup is too much then the engine of circulation the heart (producers) begins to overstrain and eventually gives up and the body dies.

To stick with the analogy, the whole body cannot be well if circulation is restricted to one part of the body.

But beyond administrative barriers there are such non-tariff barriers as poor infrastructure. It makes no sense for Kenya to have the finest four-lane highways crisscrossing it when Uganda’s roads are potholed and rutted.

At the beginning of this month African Development bank president Donald Kaberuka said it is estimated Africa needs to invest $100b a year on its roads to bring coverage to an acceptable level in the near future.

The scope of these projects are such that they can’t be done by individual states and a common market framework would make these investments much easier to make.

The point is that a large part of our poverty as nations and peoples is that we do not do enough trade among ourselves. We don’t trade among ourselves because we cling to artificial political boundaries imposed on us by historical accident. This inadequate trade also  provides little incentive for increased production, which means we continue to wallow in our poverty.

WE NEED McDONALD'S TO BRING PEACE TO THE REGION

In his book “The Lexus and the olive tree” author Thomas Friedman suggested “The Golden Arches Theory of Conflict Prevention” which stated that, "No two countries that both had McDonald's had fought a war against each other since each got its McDonald's."

That was in 1996 and the theory has held true except for Russia’s attack of Georgia in 2008, which maybe written off as the exception to the rule.

"The underlying logic is that by the time a country can sustain a McDonald’s restaurant, it has a critical mass of middle class. The middle class would rather resolve conflict by civil means than resort to violence. Violence is indiscriminate in its effect and for the middle class who own assets, this is not a good thing as one cannot guarantee the safety of property in a war....

It provides some explanation for why Africa, with more than half its population living on less than a dollar day, is so conflict prone.

Earlier this week rebel group M23 took over the eastern Congolese town of Goma. The M23 are part of a rebel group that was incorporated into the national army in 2009, but mutineed this year complaining that Kinshasa was not living up to the peace agreement.

The DRC counts as one of the poorest countries going by the classical measures of the GDP per capita and the Human Development Index (HDI).

Decades of mismanagement of the state and more recently the last  fifteen years of conflict after the departure of Cold War relic Mobutu Sese Seko, has meant that the infrastructure --  both physical and institutional, fell apart and with it the ability to effect welfare improvements for everyone.

As a result the hunter-gatherer is alive and kicking, with populations living off the land – snakes and monkey are delicacies, suggesting how far the country’s economy has regressed beyond subsistence.

The solution to the region and by extension the continents’ problems is improved incomes for all and a narrowing of the wealth gap.

Easier said than done.

But given how the lawlessness in eastern Congo has become a petridish for formenting rebellion not only in DRC, but also for its neighbours as well, the issues of development have to be tacked regionally. One nation cannot prosper alone and think it will be insulated from the chaos around it.

There are colonial legacies that the continent is finding hard to shake off. Communication between the old Francophone and Anglophone parts of the continent is very troublesome, with telecommunication and even flight connections in some instances still being routed through Europe. This has had the net effect of ensuring that regional trade is only a fraction of the trade the continent does with Europe.

Initiatives like the East African Community (EAC) and the Common Market for Eastern and Southern (COMESA) are attempts to reverse this pattern, helping to retain more and more of the continent’s wealth within its shores.

There is no getting away from it.

The troubles in the Congo are a symptom of a larger malaise.

"We may sign all the protocals we want, have enemies wear plastic smiles and indulge in limpid handshakes for the cameras, but as long as the fundamental problem of poverty on the continent is not tackled we shall continue to be the market of the developed world’s military industrial complex....

Peace would be better served if we had business delegations criss-crossing the region and inter-governmental infrastructural collaborations so that money can circulate, enriching all our societies and accentuating the mutual benefits of regional security.

UGANDA’S FORBES LIST SIGNALS PROGRESS BUT …

Two weeks ago Forbes Magazine highlighted five Ugandan businessmen -- Patrick Bitature, Amiral Karmali, Charles Mbire, Amos Nzeyi and Sudhir Ruparelia,

who they were able to make out were the richest men in the land.

None of the five however made it on Forbes’ list of 40 richest Africans, which should be cause for pause. More on that later.

The Forbes list is an annual list of the America’s wealthiest individuals that has been running for 30 years now.  The list was initiated by publisher Malcolm Forbes who believed that it represented the spirit of enterprise, whose inductees create the jobs, energy and ideas needed to propel economies for the benefit of all.

They say what is celebrated is repeated. In inaugural list in 1982 there were 13 billionaires on the list, for the last two years all the 400 members have been dollar billionaires.

From a purely mathematical standpoint for every $100 billion of GDP in the US there are about three billionaires. It’s a stretch I know, but given that our economy only amounts to $16b it comes as no surprise that we don’t have dollar billionaires here.

That being as it is, a mention by Forbes as a creator of wealth is not something to be laughed at.

The most marketable skill in the world, is the ability to make money. The more money one can make, the more money one can earn.

But to make more and more money entrepreneurs need larger doses of labour, capital, oftentimes land and entrepreneurial skills.

Our top five businessmen make more money than they consume. So why we mere mortals ask, do they need to make more and more money?

For mere mortals money is made to be eaten – to service lifestyle needs, for the rich money is for making more money.

There are only two ways to use money either you cosume it or you invest it. The wealthy invest more than they consume and that is why they are where they are.

So it therefore follows that while need a lot more consumers we need a lot more wealthy people in our midst to keep the economy ticking.

A friend of mine never ceases to say that the challenge for Uganda and many of our poor African countries is that we don’t have enough wealthy individuals.

And he is not talking about the corrupt officials who pilfer tax payers money for their own self-aggrandizement but the captains of industry and leaders of commerce who create genuine economic activity.

When wealth has been created it has to be protected. And by paying taxes they pay for the institutions that stabilize the nation and in so doing protect their property and their workers.

That is why the viability of a nation depends on the strength of its private sector.

So the challenge as a nation is to create an enabling environment so more like the Forbes-5 can emerge.

Fortunately for Uganda we are the one of the most entrepreneurial countries in the world. The desire to start businesses is not alien to us, a hangover from a time when one job was not enough to survive let alone thrive.

That is where the challenge is. In starting businesses we are often looking for more money to eat. Very few of us make the mental leap needed to see money as a tool for making more money and not just for eating, limiting the potential of our businesses.

A related reason for our businesses being stymied is our insistence on remaining informal – not registering, paying taxes and even not using bank accounts. You can make enough money to sustain yourself this way. But to think like this is to ignore the fact that in business you have to keep growing just to stay in the same place. IF you are not growing you are falling behind.

Growth comes with greater formalization of processes so you can not only benefit from bigger deals but can have access to more financing options.

There is no getting around it. It starts with a mental shift in how you view money. Once that shift is done formalization comes out of necessity.

To return to the issue of why they should be cause for pause that none of  our businessmen is in the top 40 wealthiest Africans.

The wealthiest Africans while opereatin out of larger economies are almost all more formalized than our own king pins allowing them the ability to take advantage of more opportunities and be more attractive to foreign partners.

The writing is on the wall – or is it Forbes magazine we need to step up our game to play at a higher level.

THE MEANING OF UGANDA'S CORRUPTION BILLIONS

In the last few weeks we have been inundated with reports of public officials caught with their hands in the till.

The two notable ones are the missing monies in the prime minister’s office and the public service ministry, which between them have seen about sh200b unaccounted for – a euphemism for stolen.

A billion shillings is a thousand million shillings. But in a country where the per capita GDP is slightly above a million shillings, the majority of us can’t wrap our minds around a sh10m leave alone a billion.

The appropriation of billions of shillings in tax payers money to enrich a handful of bureaucrats is made more nauseating when it means that thousands, no, millions of Ugandans will be deprived of life saving drugs, their potential stunted for lack of education or their business opportunities frustrated for lack of power and roads.

This year’s national budget stands at about sh9.1trillion.

The sh200b gone missing in these two ministries alone would more than cover the budgets of the lands, ICT, toursim, trade and social development ministries combined.

This money accounts for more than sh167b budgeted for parliament.

But that is on the macro-level. When you break it down further to what these sums can do for the everyday man it gets even more shocking.

The government has budgeted just under sh50b to treat the three million-odd patients – in and outpatients, who will visit its 15 referral hospitals around the nation. With the sums tucked way by the handful officials in the prime minister’s office and public service ministry we can treat the said patients for four years.

In addition the government had set aside sh600m for the recruitment of 1000 health workers. Also one billion shillings was budgeted for the DPT immunization of 1.3 million infants countrywide, so the said money stolen would have covered the immunisation needs for this country for the next two centuries.

A hundred billion shillings in ACTs & ARVs were budgeted for this year.

And the story goes on.

The government budgeted for 22 primary schools and the rehabilitation and construction of 67 classrooms for a total of sh20b.

And for all those with rural roads in need of repair the government  has earmarked sh181b  for routine and periodical maintenance of 32,000 km of road.

Put in their proper perspective the billions of shillings finding their way into the pockets of public officials have a much higher cost to them than the nominal figures that are reported in the press.