WHAT IF UGANDA HAD DONE THINGS DIFFERENTLY AT INDEPENDENCE

Fifty years ago at independence the economic challenges of the founding fathers were clear – to accelerate and sustain economic growth and spread the benefits around equitably.

At current prices the GDP per capita of Uganda was $62 and the total economic output was $449m, according to World Bank figures. The economy was biased towards agriculture with just over half of all GDP coming from agriculture with services accounting for 36.18 percent, industry 12.61 percent and manufacturing 7.56 percent.

The structure of the economy has changed since. In 2016 services assumed pole position accounting for 55.8 percent of GDP, agriculture’s share plummeted to 24.4 percent, industry is up to 19.7 percent and manufacturing saw some growth to 8.8 percent.

During the same period the economy has grown to $25b from $449m in 1962. The population too has grown more than fivefold to 41.5 million from 7.2 million at Independence.

"Clearly one goal has been met with economy growing about 55-fold during the period or at about 7.7 percent growth per year on average. The argument can be made that the economy would have grown even faster were it not for the chaos of the 1970s and 1980s....

Kenya which has been relatively stable during the same period saw its economy grow more than 80-fold to $70.5b in 2016 from $868m in 1962. This makes for an average annual growth of about 8.4 percent.

A 0.7 percentage point difference between the growth averages may look insignificant but when you stretch over half a century it’s the difference between the size of the Kenyan economy doubling six times while ours only doubled five times.

So we not only started from a lower base but also because seeing as our economy fell below 1970 levels by 1986, new growth was only seen around the late 1990s, when the economy recovered to its previous heights.

The economic prescriptions in 1962 would still obtain today – increase agricultural production to not only raise rural household incomes but also to serve as a base from which to launch industrialisation; boost school enrollments to prepare the future workforce for industry; expand the infrastructure to support these ambitions among other things.

Even if Idi Amin had not upset the apple cart with his coup in 1971, we were already toying with centralising the economy – a disincentive for private initiative, and like other sub-saharan African countries would have taken us till the 1980s to liberalise the economy and attract private capital.

The motivation was purely political and not based on hard economics. The idea that the government should control the commanding heights of the economy in order to foster development for Ugandans rather than continue to feed the “imperialists” insatiable appetite for profit.

What ended up happening was mismanagement and corruption as government used state enterprises as avenue for patronage and looked the other way as their allies gutted them for personal gain.

Using the same method we put a halt to productivity gains in the agricultural sector to the point that the proportion of agriculture to GDP suggests not only that we are not producing very much more than we were per capita at independence but also indicates that we have failed to launch a credible agro-industry sector.

Kenya probably shows what would have happened to us had our momentum not been interrupted by the messy 1970s and 1980s.

But even better is the island nation of Mauritius, which had a smaller economy than either Uganda or Kenya at $213m. With no natural endowments except the weather and the soils, it has grown its economy to $12.2b in 2016. The World Bank’s figures for Mauritius GDP start in 1976 at $706m, so it safe to say that 14 years prior their economy may have been around the size of Uganda’s at Independence.

Given the figures the Mauritian economy grew by a factor of 17 in 40 years from 1976 to date, representing an annual average growth rate of 7.38 percent.

But while the size of their economy is nothing to write home about the per capita GDP of $9,627 – their population has grown to 1.2 million from 700,000 in 1962, set them apart from most on the continent.

How did they do it?

"The graduated from a monoculture economy that grew only sugar, went into textile manufacture —importing cotton from Madagascar and further afield, following the same principle became a hub from small industry by exploiting Export Promotion Zones, promoted themselves as a premium tourist destination – they have more than a 300 five-star hotels, and have set themselves up as an offshore financial hub – they have more deposits in the banks than the GDP of the country....

Maybe it helped that they were an island nation isolated from the madness of the continent, but clearly there was a clearness of purpose by its founding leaders in 1968, which allowed even encouraged  private industry and a democratic traditional that has ensured the sustainability of their economic model.

UNDERSTANDING A MAD SEPTEMBER

It might not be the wisest thing to try and analyse the events that occurred in parliament this week, seeing as emotions are still raw, but when is it ever a good time to have hard conversations?

This week we saw unprecedented scenes of rowdiness and outright violence in parliament, surrounding the proposed amendment of the constitution to lift the age limit, beyond which any one can contest for the highest office in the land.

First on Tuesday, when triggered by suspicion that junior minister Ronald Kibule had entered the house with a gun, a full blown fist fight broke out, the likes we have only seen on TV in Asian and Eastern European parliaments.

A black out on live coverage of the house should have warned us that worse was to come on Wednesday.

Security agents flooded the house to eject MPs who had been suspended from proceedings by speaker Rebecca Kadaga for their role in the previous day’s fracas. When the footage finally came through revolting MPs were seen trying to fend off security with microphone stands from atop tables and chairs.

"The theatrics were sad to watch easily understandable, but not justifiable, when seen against the political reality of our time...

In their seminal book “Marketing warfare”, Al Ries and Jack Trout likened marketing strategy to warfare.

But first they pointed out that the real battle in marketing was not about beautiful marketing campaigns or even selling more goods, than the competition but about dominating or at least carving a niche for oneself in the perception of the target market.

This is important because for people being creatures of emotion, when perception comes up against fact, perception wins. This has a lot to do with the way we make decisions, forever tempted by shortcut a tendency, which has its roots in our evolutionary struggles.

Back to Ries and Trout. The authors argue in the market’s perception there are four distinct positions to hold.

At the top of the pile is the market leader, whose main preoccupation is to fend off all comers using all the resources at their disposal --- capital and talent. Then come the challengers, whose obsession should be only to dislodge the market leader. Then there are those who don’t have the resources to challenge for the top, their mission is to occupy uncontested ground with the hope they can grow strong enough to launch a challenge on the summit too. And finally there are the guerrillas who carve out niches for themselves that neither of the aforementioned are really interested in and seek to dominate these niches.

These positions are not set in stone. A misstep from the leader can see him tumbling down the ranks or a sudden interest in an occupied niche may see a leader dislodge a guerrilla.

Seen in this context to understand this week we have to set aside moral judgements and see it as yet another step in the fight for the perception, hearts if you like, of the watching public.

On the one side is the ruling NRM, confident in its strength in numbers and ability to deploy the force of the state, has shown itself ready, and willing, to fend off any attacks on its dominant position. The ruling NRM cannot afford to show weakness but at the same time has to restrain itself. No one likes a bully.

"On the other hand are the opposition weak in number and organisational ability, have sought to project the perception that despite their disadvantages, they can threaten the status quo and that the fight they are in is worth throwing the rule book out of the window for. Their hope is to evoke public sympathy for themselves, force the government into disproportionate violence  and  eventually trigger a popular uprising a la the Arab spring....

I would like to think that the fighting in the house was not planned, especially on Tuesday, but as former heavyweight boxer Mike Tyson said, “Everyone has a plan till they get punched in the mouth”.

It is too soon to say whether there has been a shift in public perception away or to either party – it’s not one way traffic, but one can safely say that the repercussion of this one mad week in September, will reverberate through time. For better or for worse.

IMF FROWNS ON UGANDANS PILING INTO REAL ESTATE

The International Monetary Fund (IMF) reading from an analysis of Ugandan’s investing habits since 2008 point out that we are investing more and more money in the least productive assets in the economy, namely real estate.

The IMF says investment in real estate has grown about 70 percent last year from over 50 percent nine years prior.

The boom in real estate development has been one of the main drivers of economic growth over the last two decades or so.

This explosion has brought Mukono and Entebbe closer to Kampala and has also swallowed up the previously outlying areas of Luzira, Namugongo and Nansana.

In the city center it has turned the streets beyond Kampala road into a warren of high rise buildings that have changed the daylight hours.

"The sad thing though, is it seems that bubble has done its course. A lot of space goes begging – in the city and in the residential areas and the rise in land prices has slowed or reversed altogether. In its wake it has left a trail of tears within households and among lenders....

How do you know you are in the middle of a boom? When anyone and everyone can make money, when everyone looks like a financial genius, you know you are slap bang in the middle of a boom. You also know it when no one believes it will ever end, that the good times will keep on rolling on.

But what has made our real estate boom particularly nasty is that a lot, if not most of it, was fueled by hot money, money got from less than legitimate means. The signs are everywhere you look.

How do you have a five story building on prime land in the city unoccupied for going on three years now and it has not been attached by the banks? How do you build apartments in the middle of the slam and still quote top dollar? How do you buy a house at multiples of the going rate for comparable property not only in a Kampala but even in the region?

In an environment of high mortgage rates, high cost of amenities and low purchasing power, the genuine real estate developers have found themselves on the sidelines having to sing for their supper. 

It would be funny if it wasn’t sad.

However the market has a way of correcting itself. When there is little supply it creates an incentive to invest. The trick really is to be at the beginning of the trend before it catches on and everybody piles in, then you can sell for a handsome profit and then either move on or wait for the inevitable burst of the bubble and buy at the bottom of the cycle.

Easier said than done.

 A cursory look at the mathematics shows that even at the best of times the returns are not as dramatic as they are hyped to be.

If you built a two-bedroomed apartment for sh100m and depending on location, you may get up to a million shillings monthly or sh12m a year. But this is the top line or gross revenue, this before you have removed costs you have incurred over the period. And god forbid you have taken out a loan to finance the build.

Of course others have decided to build and sell, a higher level of complexity and risk than the rental market. A friend once who was in the build-to-sell business learnt that it doesn’t make sense to sell finished houses because the buyers will talk you down on any number of things – they don’t like the burglar proofing, they don’t like the tiles, the kitchen is too small, the ceiling is too low and on and on. And each complaint means you might have to climb down from your earlier price.

There is money to be made as a property developer, but it helps if you have access to cheap money and can manage scale.

But real estate has a place to play in our portfolios. Real estate can be a store of value, preserver of capital to the extent that if you had the money hanging around you might blow it and have nothing to show for it afterwards.

It can be the end of your wealth accumulation cycle. That you make your money in trade and commerce and finally lock it down in real estate.

"And that was what the IMF was getting at. There are better returns in trade or industry. The attraction of real estate is the myth that you will just build your units rent them out and see the money rolling in with little effort. While with setting up an enterprise of the other kinds will need day to day supervision and planning that sounds like too much work...

Clearly the sustainable solution is for all of us learn how to do business and not get seduced by the possibility of the quick and easy return.

LIFTING THE AGE LIMIT, ANOTHER CHAPTER IN THE NRM PROJECT

This week a section of NRM MPs convened a meeting in which they resolved to bring a private members’ bill to parliament that would lift the presidential age limit.

Under the constitution the age limit beyond which one cannot run for the presidency is 75 years.

President Yoweri Museveni sometime back worked out his date of birth to September 1944 and other the current law would be ineligible to stand again in 2021.

This subject has been the center of much controversy.

On the one hand are those who argue that the amendment is wrong as it is tailored to suit Museveni. That the constitution is supposed to be sacrosanct and not be tampered with willy-nilly.

Were the amendment to be successful Museveni will have a chance – assuming he wins the 2021 poll to rule beyond 35 years.

Supporters of the amendment argue that the limit contravenes the constitution by being discriminatory and that there is no valid reason for placing such restrictions, especially since other politicians are not subjected to the same restrictions.

"As in many arguments both sides are not entirely correct or wrong, which is why such issues remain contentious...

In US, one of the few western democracies with presidential term limits, it only became law after Franklin D Roosevelt, a Democrat, sought and won a fourth term. Prior to that there was gentleman’s understanding that no one serves more than two terms.

The amendment was sold as a push back by politicians averse to the perpetuation of a monarchy in the US, but others argue it was pushed by the Republican party, which at that time controlled both Congress and the Senate as an attack on FDR’s legacy.

The US is not the paragon of virtue when it comes to issues of democracy, but serves as a useful pointer as to how democracies, especially those with written constitutions may operate.

There have been 27 amendments to the American constitution in the 241 years of American independence.

That being said the spirit of democracy dictates that everything and anything can and should be discussed. Rather that than we reach for our machetes when there is an issue of contention. So the anti-age limit crusade, are wrong to want no discussion on the subject.

But it is understandable why they would rather the issue not be discussed.

The NRM, which it is thought would support such an amendment, with 293 of the 426 MPs in hand have the two-thirds majority needed to cause a constitutional amendment. And just in case easily half the 66 independents in the house lean towards the ruling party and can be counted upon to “vote wisely”.

Maybe a recap of how this dominance of the political landscape came to be would be useful.

When the NRA/M entered Kampala in 1986 their military strength could not be denied their political footprint howeve,r was not as iron cast. In order to redress this shortcoming they co-opted politicians from existing parties – whose activities were suspended, while grooming their own politicians through the LC system.

By the time of the 1996 election, Museveni’s first presidential election and with a tailor made constitution in place, the NRM had become politically confident and was in fact beginning to cement its dominance.

Twenty years down the road the project continues.

Some of the originals have fallen by the wayside but a more vibrant, even hysterical, younger group have taken their place. The old political parties are but a shadow of their former selves, serving as escorts at every election, unable to muster a credible threat.

"We have seen it before and so it should come as no surprise. The MPs resolution is intended to test the waters, gauge public opinion, even flush out the fence seaters...

A straw poll done during the week suggests that people -- 72 percent to 28 percent, are resigned to the fact that the NRM will get what it wants.

When history is written the lifting of the term and age limits will only be highlights in a narration of how the NRM came, saw and conquered. Questions will be asked about what the other political players were doing all along.  And it would be interesting to see how it goes without Museveni as its center of gravity.

KENYA SHOWING HOW TO BUILD A DEMOCRACY

It was the shot heard around the world.

Last week the Supreme Court of Kenya nullified the Uhuru Kenyatta’s August 8^th re-election causing jaw dropping shock and unbridled jubilation – depending on which side of the divide you were. The supreme court ruled by the narrowest of margins that the illegalities, irregularities whatever you may call them were enough

The court called for a repeat of the poll within 60 days and since then the Independent Electoral & Borders Commission (IEBC) has set an October 17^th date for the show down.

Kenyatta in his initial reaction said he disagreed with the decision but would respect it, but hours later in front of his adoring fans, with emotions running high, he used a few choice words to describe the Supreme Court justices and his political rivals, which had all the do-gooders out in force.

Commentators were split down the middle.

 On the one hand there those who said this set a dangerous precedent especially since no election is perfect and the irregularities were not significant as to overturn the end result. On the other hand there those who argued that the Kenyan judiciary was coming of age and taking its independence seriously, which was a good thing in and of itself....

Both sides were right and wrong.

The idea that we should look the other way because some indiscretions were committed but could not be proved to have affected the poll and therefore we should ignore is wrong. It allows for a constant readjustment of what is right and wrong, badly blurring the line between right and wrong. We do not live I a perfect world but we should aspire to some minimum standards of decency that should be shifted only at the cost of much pain.

True we do not live in Utopia. And true that in our everyday lives there is no clear black or white but rather many shades of gray between the two extremes.

Once you allow a certain moral relativism to be take route in judgement of your actions as sure as night follows day you can expect that our conduct will worsen rather than improve over time.

On the other hand I think the judges are not the real heroes of this outcome but the people who took their grievances to the court in the first place.

There is a lot of cynicism about the working of government institutions and whether they can deliver on their mandate. This negativity then becomes a self-fulfilling prophecy because then we don’t engage these institutions and they do nothing anyway. It is not for instance the courts’ job to go out looking for cases to try. If nothing is brought to them they will do nothing.

I like to use the example of our local police post. If people break into our homes and don’t report to the police because after all what will they do. When they draw up a budget it will be hard to justify it in your area because not much crime as reported. Therefore your police post will remain underfunded and undermanned.

"The pillars of democracy can only be built and confidence built in them if they are tested. You need to put them on the spot....

We hear only about the demonstrations and confrontation with security during the US civil rights movement of half a century ago. What gets less play is the amount of court action there was, where the movement forced the courts of the land to pronounce themselves on various issues that contradicted the spirit of the US constitution. And it’s not as if all the courts were populated with liberal judges willing to give them a fair hearing.

The demonstrations helped raise awareness but the court rulings helped uphold the law. The fight still goes on in the US but there has been major improvement in many parts.

So the lesson from Kenya is that we cannot give up on our institutions even if it’s convenient to do so, because in doing so when the final day of reckoning comes they will be without teeth due to our negligence.

TO IGNORE AGRICULTURE IS CRIMINAL

Last week the Economic Policy Research Center (EPRC) issued a report on the state of agriculture, which made for painful reading.

It said a lot of things we already knew – growth in the sector has been anaemic for the last two decades, poor extension services means we are still using Stone Age technologies in the sector and that most of research is donor funded and not necessarily tailored to our needs.

It also pointed out that our middle income nation status and goals to transform the economy away from a peasant based one to a modern one, will remain a pipe dream if we don’t go beyond paying lip service to agriculture as the back bone of the economy.

"EPRC reports a disjoint between the fact that while seven in every ten Ugandans derives a livelihood from Agriculture the sector has grown by only about two percent a year for the last 20 years. This despite the obvious potential of the sector which while neglected provides 40 percent of all our exports...

They put the low growth in the sector down to poor methods up and down the value chain but especially at the production stage.

Using Irish potato productivity the report showed yields on our farms could more than triple to 16.5 metric tons a hectare from the current 4.8 metric tons with the use of the quality seeds and fertiliser.

The issue of farm output and therefore production levels is an important one because to have a sustainable agroindustry we need to push up the volumes of everything we are producing multiple fold.

At current levels of production we can only manage cottage industries that have no real chance of breaking into export markets, regionally or internationally.

It is doubly important when one understands that our best chance of becoming an industrial nation in the shortest possible time is through agriculture not through dabbling in toilet paper making or steel production or even car assembly.

It really is a no brainer.

How far we have to go to really significantly improve farm productivity is shown up by the fact that only about seven in a 100 farmers use a combination of quality seeds and fertiliser on their crops and only one in a hundred employ irrigation systems. Imagine the gains in the sector if we just brought this figure to one in four farmers? It would be revolutionary.

And what is causing this abysmal state of affairs?

While Uganda has one of the highest outputs in agricultural research there is little transmission of these new findings to the farmer and secondly that because a significant part of the research is donor funded it may not be tailored to local needs.

The flip flopping around extension services has really hurt the sector. In recent times extension services was taken away from the ministry vested in the National Agriculture Advisory Services (NAADS) and then taken back to the parent ministry.

Partly as a result of this the gap between the required extension workers and the ones actually employed has been as high as 89 percent in the last three years. This has meant that the share of farmers who have come in contact with extension services have fallen from an already woeful 14 percent three years ago to an even more disastrous eight percent.

"It is no wonder that our farmers are being caught unawares by impending pest break outs or weather pattern changes or still using primordial farming methods...

To state the obvious, agriculture is important to this national and its development ambitions because we have a competitive advantage in it – we have about half the arable land in the region, amiable climate and 20 percent of our land mass is under water.

But secondly and even more important is that an improvement in agriculture output is the single biggest intervention needed to narrow national income inequalities.

A recent Uganda Bureau of Statistics report showed that while inequalities were reducing in central and western Uganda the opposite was the case in northern and eastern Uganda. The correlation between the increasingly urbanised regions – and probably improved farming methods due to exposure to information and finance, and reduction in inequality cannot be by mistake.

And EPRC suggests things may get worse before they get better, if ever.

Increasing land degradation and conflict suggests that the window for us to exploit our land optimally may be quickly closing.

In story “Acres of diamonds” the story is told of a man who sold his farm and went out into the world to seek his fortune. After years of wandering and trying this or that venture, he eventually returns home a broken man with nothing to show for his travails only to find that his farm is now a thriving diamond mine.

A better analogy for Uganda could not be found.

FIX THE HUMAN RESOURCE OR BE PISSING IN THE WIND

In the last week the members of the judiciary have been on strike for higher pay. We also learnt that despite our spanking new cancer center we have only 30 pathologists, specialists in diagnosis of disease. As a result the more than 4000 cancer patients treated annually have their treatment delayed.

Both speak to an important issue in regard to our development ambitions as a nation.

The troubles of the 1970s and 1980s meant that we fell behind in many aspects of national development. But during the same period, the population about doubled putting a strain on the existing, badly run down, infrastructure. As a result for the last 30 years the government has been playing catch up, especially as population growth did not wait for it to fix the existing infrastructure.

As a result we have deficits everywhere you look.

"In roads alone an average middle income nation like Kenya has about 88 km of paved road per 1000 square km. Assuming we have about 4000 km of paved road our equivalent figure comes to 16 km per 1000 square kilometers. That means despite our best efforts, we still have to build at least five times more road to be a passable middle income nation...

According to a PWC report earlier this year Uganda’s electricity consumption per capita is among the lowest in the world at 215 kwh compared to a sub-Saharan average of 552 kwh and a world average of 2,975 kwh.

According to the world Health Organisation we have one doctor for every 10,000 people, that is half Kenya’s number and way below South Africa’s seven doctors for a comparable number.

This last number is telling in many ways and has greater repercussions than our deficits in physical infrastructure. And it is more or less replicated in every human resource you may think of in our economy – teachers, lawyers, accountants, just name it.

And this is despite dramatic increases in enrollment at every level of education over the last three decades, where again we are playing catch up for the lost decades.

But also while we have churned out the numbers we don’t seem to be able to keep them engaged.

A few weeks officials at Mulago reported to parliament that the national referral hospital was severely under staffed with only about half the compliment of doctors employed for the at least 200,000 patients who come in through its doors annually.

The suggestion is not that the doctors are not there but that the public service pay for doctors in Uganda is about sh2m way below what they would get in the private sector – which is expected, but also way below other professionals in other fields.

But even worse is that our doctors trained in Uganda are leaving the country in droves to ply their trade abroad. In 2013 it was reported that at least 2,000 doctors or about half the roll at the Uganda Medical and Dental Practitioners Council had left the country. There is little indication that this haemorrhage has been stemmed.

And we are only using doctors to illustrate a point, its happening in all fields that are crucial for our advancement.

The point is this.

"You can build all the road, dams, schools and hospitals that money can buy but if you do not have the human resource to man them your effort will have accounted for nought....

Given a choice between world class infrastructure and world class human resource a country would rather have the latter than the former. A quality human resource will find ways around the challenges of the infrastructure shortfalls and could spark of innovation in funding, design and construction. The same cannot be said for the alternative scenario.

Of course one can understand that in trying to pull Uganda out of the abyss, there were synchronisation challenges --- what should we do first, infrastructure or human development? A veritable chicken and egg situation.

And it is very likely that there is a national human resource development strategy. Is the strategy being executed? Are we meeting its targets? Why then does the deficit persist?

Clearly beyond literacy and counting we need to invest in development of our human resource and once done, that we need to work hard to retain it in the service of Ugandans.

It seems obvious but the facts on the ground suggest otherwise.