TAKING A LEAF FROM MAURITIUS

Tucked off the east coast of Madagascar is the sunny little island nation of Mauritius.

Insulated from the continent’s chaos by a 4 hour flight from Johannesburg, Mauritius has achieved the transformation of their economy that African nations can only dream about starting with much less natural endowment than most countries on the continent.

From a standing start in 1968 the country has managed to not only grow its economy almost 20-fold to its current $12.2b in 2016 according to the World Bank. In 1976 – the earliest year for which the World Bank has numbers, the country’s economy was listed at about $700m.

This may be half of Uganda’s economy but it caters for a population of 1.3m or about 30 times smaller than our own. This is why the per capita GDP of the island nation is at $9,627. In 1976 Mauritius per capita GDP stood at $779 about where we are currently at $779.

During a recent study tour sponsored by UNDP, to investigate how Mauritius has made it work. 

Following meetings with officials at government agencies and the private sector this mission came with a few ideas about how they have achieved this under-reported miracle. Below are few but n ot all the findings.

1.      The independence constitution is not a copy and paste of the Westminster model.

Mauritius was colonised by first the Dutch and then the French and eventually the British. At the time of Independence while the island population was divided mainly between the landowners and the labourers, they negotiated a constitution over 23 years which took into account the country’s unique immigrant population and a desire to equitably share the future spoils of development.

"As a result while they retained the parliamentary system with an executive prime minister and titular head of state and have provisions for coalition governments they also included seats for underrepresented minorities who are nominated through A Best Loser System. They have also retained clear separation of powers between the executive and the arms of government...

The net result of this is while they have had 11 elections and seven changes of governments since 1968 they have not suffered the upheavals that characterised mainland Africa’s population over the last half century.

2.     There is strong partnership between the public and private sectors

But Mauritius development could not have been underpinned by the good nature of its key players over the years. Pragmatism and real politick are more to blame.

The economy is dominated by handful of families who have lived on the island for decades. These however are the minority, mostly of French origin. The majority population are those of Indian descent who then drive the politics. They have a symbiotic relationship with each providing a counterweight to the other’s power.

"As a result the diversification and transformation of the economy from initially a mono-crop economy, where sugar accounted for easily 70 percent of the GDP to the current situation where they have diversified into textiles, light industry, tourism and financial services, and where sugar now accounts for less than one percent of GDP...

The development has been driven through negotiation between the private and the public sector, the public sector’s interest being to create jobs for its people and the business community’s desire to continue to remain viable.

This partnership was important because with a population that has remained steady around a million, a population that cannot support huge industry, support was needed to break into foreign markets and attract investment to the island.

More investment meant more jobs for the islanders – officials claimed there was virtually full employment in Mauritius today, but just as important the revenues from increased economic activity could be used to finance an ambitious welfare system like no other on the continent. Education and health services are free, and in addition the state provides a host of social benefits that range from basic pension, unemployment benefits and benefits for single parents.

3.     

  The welfare state is sacrosanct

Despite the huge cost the country’s welfare system places on government revenues, it is now recognised as a right so much so that when Mauritius needed to undergo some World Bank/IMF sponsored structural adjustment in the 1980s the continuation of the system was non-negotiable.

"The island’s elite recognise the system is necessary to help smooth inequalities in income that may exist and also to forestall social instability that may result from these. Of course the welfare system is also a way for government to support industry by ensuring continuous demand for their products...

It is clear that the partnership between business and public sectors is critical. If your bureaucrats look on the private sector with suspicion or worse as a source of bribes. And if the private sector just the technocrats as leeches and out of step with times and a happy middle ground is not found, its near impossible for development to happen, even if a country shows improving growth every year.

And it is this continuous give and take between the business and government and politicians that can lead to improved welfare for the general population.

However if the power relationship is lopsided as it is in most Africa, with the government lording it over the business community and they in turn looking to subvert government initiatives at every turn then the result is the chaos, stagnation and even regression of the African continent over the last half century.

THE FDC EXPERIENCE AS PART OF UGANDA'S DEMOCRATIC EVOLUTION

In what came as a shock to outsiders former parliamentarian Patrick Amuriat beat General Mugisha Muntu in last week’s poll, to become the new head of the opposition Forum for Democratic Change (FDC).

Muntu’s concession speech suggested that all was not well in the party. During a heated campaign accusations and counter accusations were flying in the air like confetti the net effect being the ejection of the general.

"Thankfully Muntu did not play to the sulkers and announce his departure from the party in a much anticipated press conference on Wednesday....

While insisting that there were “significant undeniable issues and differences” that exist in the party he recommitted himself to continued mobilisation for the party in its ambition to one day run this country.

The challenge in politics – as in any human endeavour, is that while people might come together for a common agenda, there not only are there differences of opinion about how the collective goal can be achieved but there are also personal ambitions that maybe as divergent as the number of people in the group.

So subsequent to the Namboole poll commentators have talked about the divide between “The defiance” wing, whose most prominent face is former FDC boss DR Kizza Besigye and “the compliance” which Muntu is supposed to represent.

"The former tendency seeks to mobilise the disenchantment with the government felt by the largely unemployed youth and the latter tendency are seeking to build party structures, not hope for a spontaneous mass uprising,  but use the established institutions – parliament and the judiciary to effect change...

One can see the attraction of the defiance struggle, it seduces with the promise of a quick and dramatic change, its proponents too impatient to go through the processes needed to build institutions and processes that will outlive them.

The victory and defeat for either tendency last week is but only a moment in the democratic evolution of this country.

We forget but democracy took centuries to evolve in Europe. Of course with the benefit of better technologies we can expect that, if democracy is the natural end, it will take us a shorter time to get there.

For democracy to happen in Europe they first had to break away from the grip of the church. Once they had done that they then had to expand the right to determine how society was run away  from the royal houses of Europe, a process that was often violent, messy and seemed like a regression into lawlessness. And then in a process that is still going on, they have been working on expanding individual freedoms.

But often in this journey, to those who were in the middle of it, it often looked like an exercise in futility.

Imagine the intelligentsia who took advantage of the peasants’ grievances and directed the French revolution, only for them to be executed themselves after the French nobility had all been guillotined. It must have looked like democracy had failed before it had even started.

"Similar seeming reversals happened across Europe. While the cost was high they all informed the patchwork of democracy that Europe is today, with no two countries having a mirror image of another’s democracy...

The event’s in FDC today will make for a sentence in the history books. They will serve as the building block of our future democracy. A block in a wall is easily dismissed but its removal may render the whole wall useless.

FDC seems to have chosen the path of “least resistance” and they may be validated by one day ascending to power, however boring as it seems there is a place for those who want to build the party and its institutions.

Time will tell. But for now the hardliners took the day, we shall judge their effectiveness in coming years.

LESSONS FROM ZIMBABWE

On Tuesday President Robert Mugabe threw in the towel and resigned as Zimbabwe’s leader, forced in to this decision by a military takeover that was not a military takeover.

Last week the military put the aging president under house arrest following an unprecedented warning just hours before, that the army would not allow the purging of the Independence veterans to go on unabated. The latest victim was former vice president Emmerson Mnangagwa whose dismissal at the beginning of the month, it was suspected,  paved the way for first lady Grace Mugabe to take over and be first in line in the event that Mugabe stepped down or worse.

Grace, who is at least 40 years younger than her husband, is not popular with the “comrades” and they saw her as a real threat to their cozy living if ever she assumed power.

"It doesn’t help too, that Grace's  conspicuous consumption and ostentatious living has continued in recent years, despite the collapse of the economy and the widespread suffering of Zimbabweans...

The seeds of Mugabe’s downfall were planted in colonial times.

The takeover of more than half the arable land of Zimbabwe by the colonial government and the settlers, relegated millions of Zimbabweans to marginal land that they struggled to eke a living from.

In hindsight on attainment of black majority rule in 1980, a robust land distribution process which walked a tight rope between getting more farmland to the blacks and maintaining the productivity of the agricultural sector should have been embarked on with a sense of urgency.

What happened of course, is that Mugabe and his cronies parcelled out the land from initial land redistribution efforts to themselves, leaving a lot of his countrymen feeling shortchanged and disenchanted.

This disillusionment was leveraged by his opponents and in an effort to hang on to power Mugabe   forcefully redistribituted land starting in 2000 whose net effect has been to collapse the productivity of the agricultural sector.

"While he hang on to power, barely, the ripple effect from this political expediency has affected industry, services, the general economy to the point that the once food basket of South Africa cannot feed itself, they now use the US dollar as their currency because the Zimbabwe dollar was decimated by hyperinflation and for all intents and purposes Zimbabwe is teetering on the edge of economic ruin....

The official figures show that the real incomes of the average Zimbabwean are now down to the levels they were at around the end of the Second World War, a fifth of Zimbabweans now live outside the country and the billions of dollars are going to be required to resuscitate the economy.

There are numerous lessons but the one that sticks out for me is that governments should collaborate rather treat with suspicion the productive sectors of the economy, to ensure long term stability of their nations but also, from purely selfish perspective, to ensure their continued stay in power.

The productive sectors, agriculture, manufacturing and services as opposed to the rent seekers and corrupt, are what create jobs, pay the taxes and drive innovation.

While governments main reason for existence, couched in populist justification, is to hang on to power this should not be at the expense of the private sector.

"Once a government treats the private sector with suspicion and even actively undermines it, you know the end is near...

Wherever you look around the world, a country’s viability is determined by the robustness of its private sector and this can only come through the active collaboration between the private and public sectors.

So while one can sympathise with Mugabe for inheriting a poisoned chalice in 1980, his putting his political survival ahead of the welfare of the private sector is what has brought him to his current sorry situation.

The catch of course is that, if as a leader you prop up the private sector, it becomes a counterweight to your government and disagreements can end up being resolved politically to your detriment.

PICKING UP THE PIECES OF THE ASIAN EXPULSION

On Saturday last week marked 45 years since President Idi Amin’s deadline for the expulsion of the Asians in 1972.

Amin claimed he had dream in which he was directed to expel the Asians. The President, who had run out of ideas of how to reinvigorate support for his presidency barely a year after he took power, lurched onto the envy of his henchmen as a way to give his popularity a boost.

Like in any another war, his “Economic War” registered the truth as the first casualty. The charge that the economy was floundering was because of the Asian businessmen who dominated retail trade was a convenient lie used to cover his motives that some say were driven by much baser instincts.

"And like war the damage was indiscriminate and we have never really recovered from it. The Asian expulsion accelerated the downward decline of the economy, gutted the civil, health and education services and while it led to a short period of affluence by those who benefited from the spoils, it never delivered on its promise...

Some people using some arm chair logic argue that if the Asians had remained the country would have been overran by them and the economy would be fully in their control. But that is to ignore or to be ignorant of the fact that by 1972 there were 180,000 Asians in Kenya as opposed to 50,000 that were in Uganda then. We don’t get a sense that the Asians have overran Kenya. They are key players in the economy, yes but that is not their fault. Blame it on their thrift and diligence. Values the Kenyan businessman has been quick to learn.

It is no wonder that Kenyan businessmen are more accomplished than our own. They have benefitted from the mentorship of the Asian businessman and it shows.

We are one of them most entrepreneurial countries in the world. Who can blame us. In the chaotic 1970s and 1980s when the economy collapsed relying on one job was not an option. Business was not for soe special class of people who knew the workings of money but everybody was in it.

Of course our businesses were and still continue to be predominantly about subsistence. As a result we also have a high attrition rate, with less than one in ten businesses making it to their tenth birthday.

We don’t know the meaning of once beaten twice shy, because no sooner have we buried one endeavour than we are off to start another. Which is how it should be.

The mentorship the Kenyan businessman has benefitted from is an understanding of how to separate capital from everyday expenses, how to utilise credit, the value of trust and customer care. And it shows on our supermarket shelves.

"So the Economic war laid waste not only to hundreds of millions of shillings – hundreds of billions of shillings today, commercial value but also obliterated decades of business intelligence about how to operate in the Ugandan economy...

The “lucky” few who inherited the illicit booty are nowhere to be seen today and have nothing to show for the manna that fell from Amin’s palms.

But the even bigger scandal is that the Asian community have trickled back and after two decades of putting their nose to the grinding stone now account for almost half of our tax collections!

It’s an old Indian trick Sudhir Ruparelia once told the Financial Times, you make ten shillings, eat one and plough the remaining nine back into the business. Repeat until rich.

Of course we have our excuses for why the Asians have prospered – again, and we are still spectators on the side-lines – they have cheap capital, they pay their workers peanuts, they cheat, we rarely acknowledge their work ethic or their financial prudence. They must have an unfair advantage that we don’t know about. What we are really saying is that we don’t want to do the work needed to get where they are, so we have blocked our minds to finding out how they do it and when we care to speculate about the tricks that bring in quick money.

As a result on last count there have been next to no successful transition of business from founder to the next generation by an indigenous owned business. This is telling because for a business to grow sustainably it does so over years even decades – except of course is you are a cyber entrepreneur.

 As a result we have no indigenous business that has a presence across the east African community or even one with a national presence from Kisoro to Kabong and fro Arua to Kalangala.

A country is only as viable as its private sector. The private sector creates jobs, pays taxes, fosters innovation and brings in the hard currency.

"By nipping the growth of the business community in the bud Amin in fact, doomed our country to donor dependency and economic servitude...

Talk about unintended consequences!

MEDICS’ STRIKE; DAMNED IF YOU DO, DAMNED IF YOU DON’T

This week doctors went on strike for better pay and working conditions.

Unlike a strike of taxi drivers or shopkeepers or even cooks, the doctor’s strike has reverberated through the population, especially those who cannot afford private care.

And unlike other strikes the doctors can keep it up for longer than most, because while they will not be seen in demonstrations, they can sustain themselves by working in the private sector.

"A lot of industrial action has fallen short in this country because other strikers cannot support themselves outside their public sector jobs...

How did we get to this?

We have to go back to the 1970s and 1980s when, not only was no new infrastructure built in the sector but also the rate of graduation of medical professionals did not keep up with population growth.

According to the World Health Organisation (WHO) there were 11.7 doctors for every 100,000 doctors in 2010 compared to nine doctors for the same number of Ugandans in 1965 shortly after independence. Most of the gain in these numbers came in the since 2002 when the number was 4.7 physicians per 100,000.

Up to 2010 our population had grown more than four fold since independence.

Kenya in 2010 had  19.9 doctors per 100,000 people. But the real measure in the region is Mauritius which in 2010 boasted 107 doctors per 100,000.

To show the enormity of the task ahead, to equal  Mauritius 2010 numbers we would have to increase the number of doctors twenty fold from the about 2,000 doctors we had in 2010.

This deficit is also reflected in all other medical professionals and in the sector’s infrastructure.

"In trying to redress this imbalance in the last three decades we have tried to shore up health care by investing in health care centers, to decentralise the services, we have more than just Makerere graduating health professionals and more recently we have given our referral hospitals a complete overhaul.
But it seems as if the faster we run the further behind we fall....

This context is important because a country’s health sector is only as good as its public health services.

Everywhere in the world investors in the sector will just do just enough to be better than the public health system to be competitive.

If in the health system there are no doctors, drugs or beds then the private sector will just ensure it has a few more doctors, a slightly better stocked pharmacy and few more beds to make it worthwhile for the public to pay for the service.

It is no wonder in Uganda that we still travel abroad for treatment 50 years after independence. Our private health care is not that much better than the one you get from the crumbling health system.

The doctors are within their rights to sue for better pay. For the lifesaving work they do it’s hard to argue that they are paid adequately.

The government says a pay readjustment is coming shortly.

One can see government’s dilemma.

In pulling Uganda up by the bootstraps over the last three decades they have faced numerous sequential challenges. So what do you do first – security, the roads, schools, hospitals, power generation etc? And when you decide on the order to invest do your priorities remain static? But most importantly how much do you have to commit to any or all of these sectors?

It is not helped that there was a universal decline in all sectors in a situation of few or no resources. 

So one suspects the decision was often that because there was not enough to go around some sectors will suffer as we beef up the ones ahead in the queue of priorities. And even within the individual sectors there prioritisation challenges.

And despite all this is did not help that some agencies were created with salary structure way beyond public sector pay grades and continued unabated.

"One can sympathise with government’s numerous challenges, but not as much as with the doctor’s plight...

That being said it would be useful if the doctors found another way of engaging government other than depriving the greater public of their lifesaving services.

There must be a way for them to keep working as they negotiate with government for better, if for nothing else than that they are no ordinary workers. Which again strengthens the case for their improved pay.

HAPPINESS, THE ULTIMATE AIM OF DEVELOPMENT

Last week while in Dubai President Yoweri Museveni met up with state minister for happiness Ohood Al Roumi. My knee jerk reaction was to laugh. What does a ministry of happiness do, I wondered.

But it speaks to the ongoing discussion about how to convert wealth creation – GDP growth into general well-being.

"That it’s possible for a country to grow consistently for years even decades and the majority of its people do not enjoy the benefits of the progress...

There many reasons why this may happen but two leap to mind.

It is possible that the drivers of that growth do not affect the majority of the population. So for instance in Uganda’s case growth in the past came from services – financial, retail and telecommunications, construction and industry. Agriculture which provides a living for at least seven in every ten Ugandans has been suffering less than double digit growth forever.

So the gains were concentrated in the urban areas mostly, with the rural areas feeding off the crumbs.

The second reason maybe and related to the first, is that the people may not be equipped to take advantage of this growth when it happens. This may be due to the fact that they may not be connected to the centers of power and therefore growth, as happens in oil producers Angola and Equatorial Guinea passes them by or that they may not be educated and healthy enough to tap into the manna.

So take two men who while they share the same physical space, their economic fortunes can be as different as night and day.

Jackson is a graduate of Makerere University, has ACCA accreditation and whose grounding in finance has seen him climb the ladder in the banking industry over the last 20 years of employment. 

His salary broken down to an hourly rate, assuming he works eight hours a day, five days a week and 11 months in a year comes down to about sh250,000 – this is without his annual bonuses.

His gate man, Mujuni dropped out after his O-level. He has some basic proficiency with a rifle and close contact combat. While he has been employed for as long as Jackson, he earns the relative pittance of sh1,875 an hour. Apart from the lower wages, he works double the number of hours that his boss does.

The difference in fortunes when you provide for luck, old boy networks and differing intelligence, really comes down to the fact that Mujuni’s schooling was cut short. When you add it up Mujuni has barely seen half as many blackboards as Jackson.

It is also true that while guarding his master’s pad, Mujuni is more prone to malaria – at least thrice annually, than Jackson – who can’t recall his last attack.

Money and time spent treating malaria are additional drawbacks to his earning power – he gets paid per day not per month.

Meanwhile just like Jackson, Mujuni resides in Kololo – in a matter of speaking. Just like Jackson he works in Kampala, which accounts for more than half the country’s economic activity. And yet amidst all this abundance Mujuni struggles, no, fails dismally to reach out and snatch a share of all this wealth whizzing around him.

So redressing inequalities, which happen when economic growth is not equitably shared, starts with ensuring the activities in which the majority operate are supported to grow and at an individual level, you do this by providing education, health and other services which will give everybody a fair shake at the game of life.

Sounds too simplistic? 

Think about the generation that started life in the rural areas – their first classes conducted under trees, with their first alphabet scrawled in the dust using a sharp stick, who only broke free from the village because they stuck to school longer than their siblings and friends who stayed back in the village.

"It therefore follows that to determine a country’s prospects at widespread wellbeing for its people look at it education and health systems....

It is unrealistic to expect equality in society, but a minimum standard of living for everyone where some people and their future generations are not condemned to sub-human existence is not much to ask, or is it?

But back to Dubai’s ministry of happiness. While material well being does not guarantee happiness, improved material well being where one is free from disease and can look to the future with hope, is a good starting place for happiness.

And if we set happiness – an intangible, as a national goal we may be better able to line up the tangible steps we need to take to attain this far off goal. And we are not talking about the momentary burst of happiness that come with being with this or that person or come with a joke, but a sustained level of joy for everybody, every day, year after year.

So I am not laughing at the Dubai state minister of happiness anymore. She and Dubai are onto a good thing.

VENEZUELA SHOULD SERVE AS A CAUTIONARY TALE

Events across the border have captured our collective imaginations in recent weeks. US President Donald Trump never disappoints from day to day with his faux pas. Now everybody in show business is running scared for fear of the next set of revelations on sexual harassment. And meanwhile British prime minister Theresa May is scrambling to negotiate a soft Brexit that has left her isolated at home and abroad.

These and many other stories are a big deal.

But in South America Venezuelans are fighting an existential battle with disease, hunger and poverty and we are not just talking about the bottom of the pyramid people. Increasingly now everyone in Venezuela is living below the poverty line.

"It wouldn’t be a big deal. We would have brushed it off just another Godforsaken third world country excelling only at doing things wrong at every turn. But Venezuela has the largest oil reserves in the world. And as if that is not enough, is a stone’s throw away from energy hungry USA...

Things are so bad in Venezuela that inflation has sky rocketed to the point that people are throwing money away– the International Monetary Fund (IMF) projects it go beyond 2,000 percent next year from this year’s 650 percent.

Things are so bad that murder and kidnapping are the only serious growth industry.

Things are so bad that malaria which was eradicated in 1961 – before the US, is back with a vengeance, so are measles and there are no HIV or hyptertension drugs.

Things are so bad that people are dying of starvation in the streets, because the government would rather meet its international debt obligations than import food. If they did not meet their debt obligations, debts which were incurred during the oil boom days when a barrel peaked at $114.

The official figures paint a rosy picture of an upper middle income country with a GDP of $440b – almost 20 times our economy’s size and per capita incomes of about $8,000.

How did it come to this?

As so often happens it was a case of expedient politics being applied to remedy economic shortfalls. 

Former president Hugo Chavez in an attempt to endear himself to the Venezuelans after being overthrown once before, used oil to massively expand social programs, nationalised companies and looked the other way when his cronies were gouging themselves at the trough of state resources.

As long as oil revenues stayed high some of the worst ills could be paperd over.

Oil, which was discovered in 1935, has so dominated the economy that it accounts for a third of the Latin America’s economy, 80 percent of export earnings and more than half the tax revenues.

So when prices started falling to current levels of about $50 a barrel the emperor’s nakedness was exposed. As if that was not enough during the good days Caracas borrowed voraciously against future oil earnings. As it is now it receives almost no money from oil exports but still ships off massive amounts to Russia and China as debt payments.

"While we scout the globe for best practice in how to deal with our oil sector, we should not lose sight of how not to run an oil economy – and Venezuela, better than Nigeria and Angola can serve as a powerful cautionary tale...

Thankfully we are at least making the right noises.

The government is committed to using revenues to boost our infrastructure, which is important to ensure that other parts of the economy can continue to grow alongside the oil industry.

We are also talking about a sovereign fund, financed by oil revenues  and housed abroad. This is important because if all oil revenues gush back into the economy it can cause a massive appreciation of the shillings and make our other exports uncompetitive.

The argument that we should bring the money all back and not keep it offshore developing other economies is a populist one but not based on the facts. If the sh7trillion NSSF is struggling to find bankable projects in Uganda what of the estimated trillions of shillings in revenue we are expecting annually when production kicks off?

Beyond infrastructure it would do us a world of good if we could shore up our education and health services. This would enable upward mobility of larger parts of the population. A healthier and better educated population is a more productive one.

The temptation to start a flurry of state enterprises will always be there but we should resist the urge. 

State enterprises are not only inefficient, because their main role is not to deliver service or show a return but to pay off constituencies, they also distort markets, frustrating private sector players through preferential treatment, while giving suppliers and clients a raw deal.

We lack the discipline to run or even oversee the good running of good state enterprises, unlike Dubai. We would be better served if, along with improving our infrastructure – soft and hard, we developed industry wide incentives for investors – foreign and local, to come and set up the companies that can ensure an alternative economy to oil exists. These industries’ output would eventually eclipse oil.

"As we all know in our personal lives, there is no money that is too much to finish. Oil is a finite resource and we should behave with this in mind, unlike Venezuela which was seduced into thinking the good times would always roll...

And now after decades of betting solely on oil the irony is everything else doesn’t work, the oil industry inclusive and yet they still have billions of oil barrels underfoot!