ROYALTY UGANDA INC

It was reported this week that kings and traditional leaders have formed a company. This company is supposed to help the kings engage in business, raise funds and promote development in their kingdoms.

The directors of the company will be the kings and chiefs of Uganda – except the Kabaka as he was not present at the company’s inception.

This company the “Forum for Kings and Cultural leaders” has great potential as a force for transformation not only in the cultural leaders’ lives but also in their subjects as they propose to, through it, participate in projects like immunization, food security and document their respective cultures.

Of course this will be no ordinary company and the political dynamics aside, it will be interesting to see how they leverage their assets under their control and respective influences to make it work.

I like the idea because if executed properly it has the potential to liberate the leaders from the crutch of state hand outs and secondly, will bring them down to earth as they grapple with the challenges of managing a business in Uganda.

Some of these leaders have access to large tracts of land by virtue of colonial inheritance and they will have more than a passing interest in what’s going on with the Land Amendment Bill 2007.

The bill being debated in parliament currently seeks to seal a loophole that was living tenants vulnerable to eviction by their landlords. The current amendment will regularize the relationship between the landlord and tenant, unlocking these assets will be an added challenge.

Political, cultural or religious leaders of any description are rarely good businessmen, so the cultural leaders will be well advised to get professional managers to help them unlock the wealth under them and leverage their positions for profit.

The Queen of England at last count annually earns about 110 million pounds or about 346 billion shillings from the crown estate, which has been in her family since 1066. In addition she has other investments that pull a few more billion shillings annually. She does not manage her portfolio personally.

The Aga Khan’s wealth, generated from judicious investments around the world, uses the monies generated thus to fund his health, education and other social projects. Again he is not directly involved either in generating the wealth or managing his charities.

And these cultural leaders unlike us mere mortals do not have the luxury or option of “eating” all their money before they die. They need to make very prudent long term investments that will carry for generations to come. Much easier said than done. It is hard enough to generate wealth in one generation without working through the dynamics of creating wealth to last generations and a system that will keep growing this wealth.

Coincidentally this was the Global Entrepreneurship week, organized in Uganda by Enterprise Uganda.

Enterprise Uganda has set itself the task of creating Uganda’s next generation of entrepreneurs and in their training modules they are quick to stress that money is not everything. Other qualities like vision. Creativity, integrity and perseverance will hold you in better stead over the long run than all the money in the world.

The cultural leaders will be well advised to take a few lessons from Enterprise Uganda in order that their project can take off and stay off the ground for generations to come.

You have to envy these gentlemen. Uganda’s poverty is not for lack of money but for the inability to aggregate our small monies into meaningful sums. And our inability to do that is for lack of leadership in every sphere of our lives.

Of course we are relying on myth but assuming the legends are true their collective wealth – if unlocked could make the company a serious player in corporate Uganda.

I am excited about this new company and wish the kings and traditional leaders the best. But then like every progressive move in Uganda maybe I shouldn’t hold my breath.

Published November 2009, New Vision

BUFFET’S LESSONS FOR NSSF

This week American billionaire Warren Buffett paid out $34 billion or about four times the size of Uganda’s economy to buy a controlling stake in a railway company that ships the most coal around the US of any railway company.
This investment came from a man whose networth has taken a $10b hit during the global financial crisis. But don’t cry for Mr Buffett, at the end of September his wealth was still estimated at about $40b.
Only days before news of this mammoth purchase across the Atlantic, the Auditor General revealed that NSSF made a sh50b loss largely due to the value losses on its share portfolio.
Paper losses on the stock exchange are not unusual but what made me really worried for the NSSF was when current chairman Vincent Sekono told parliament, 'The stock exchange is a gamble…'

If I had any say in the affairs of NSSF I would make Warren Buffett essential reading for all management at the fund.

Buffett made 78 years this year and is the second richest man in the world. His wealth has been anchored by his success in investing on the stock exchange. He bought his first share at 11 and often jokes that he wonders why it took him so long to get started.

His investing philosophy has not fundamentally changed since his twenties.

Buffett invests in good companies, as measured by the extent of their competitive advantage in their respective fields and especially if they are selling at a discount to their underlying value.

This philosophy is also underpinned by his attitude to the stock exchange. The stock exchange Buffett says, is only useful to him in as far as it tells him when somebody is doing something stupid in the market, either they are overpaying in which case he may sell or they are selling at a discount in which he may buy shares of companies he likes.

Buffett like NSSF is a long term investor, he believes that if he buys a good company which for one reason or another, the market is underpricing, the good performance of the share will be reflected in the share price eventually.

In the interim he says, the share may lose value but as long as the underlying business remains sound he sees no reason to panic. In fact he argues that if it was a good business at $100 a share and is now selling at $50 that is all the reason to buy more.

Going by his success of the last half century therefore, the stock exchange is not a gamble Mr Sekono.

It is risky yes, (isn’t crossing the road too?) but it is not a gamble.

Buffett’s take on risk? “Risk comes from not knowing what you are doing.”

To illustrate, when I drive to work in the morning, I don’t think it is risky but if I was to give my one-year old son the keys to the car and send him off to the supermarket that would be risky.

I was doubly worried when parliament jumped into the fray and declared that the NSSF officials should be held accountable for the sh23b loss NSSF made in its purchase of Kenyan telecom company Safaricom shares last year.

Going by Warren Buffet’s criteria the question should be whether Safaricom has an enduring competitive advantage and whether it was bought at a price judged to be a discount when measured against projected future earnings.



It remains a mystery to me why NSSF is overseen by people – civil servants and MPs, who are not contributors to the Fund.

Were these two parties beneficiaries of the scheme it can be argued, they would be more prudent in their recruitment decisions and less rash to prescribe remedies that are detrimental to the fund’s return.

But that is debate for another day.

The bottom line is that NSSF can take useful lessons from Warren Buffett if only because he has been investing longer than the Fund has been existence and secondly, he has been spectacularly successful in the process as well.

And as they say, you cannot argue with success.

Published November 2009, New Vision

THE HIDDEN FACE OF CORRUPTION

In the last week the New Vision has published excerpts of the Auditor General’s report on the finances of the Commonwealth Head’s of Government Meeting (CHOGM).

Hosting CHOGM two years ago was a major landmark for Uganda in as far as we had several heads of state streaming including the Queen of England. Prior to the event questions were asked about how the government planned to leverage the event to for example, promote tourism.

The answers were vague at best and mainly revolved around “Just by hosting the event the world will know Uganda and tourists will come in automatically.” We are still waiting.

But the Auditor General’s provides adequate explanation why our planners were not looking beyond hosting CHOGM. Clearly officials could not afford to blink for fear that they would miss out on the free-for-all feeding frenzy that was going on around the CHOGM funds trough.

Interestingly the eye popping revelations about the sh370b-and-mounting event caused less of stir among the public, compared to the missing millions lost by national Forestry Authority boss Damian Akankwasa or the hundreds of millions in assets acquired by Principal Accountant Nestor Gasasira on sh6m a year salary.

This should not surprise anyone. We the public cannot wrap our heads around the billions of shillings pilfered annually by state officials but can relate to tales of enrichment of individuals because there we can compare with our own often sorry, predicament.

As a public we have become increasingly cynical. As outsiders looking in on the party, we cannot help but feel that considering the huge sums being stolen that there must be tacit approval from the system.

Otherwise how for instance do the car dealers for instance pass off three year old cars leased for the event as brand new and then go ahead to inflate the contract price way beyond what one would pay to buy a brand new car?

If our state machinery cannot, will not or do not want to check these kind of shenanigans
what confidence can we have in the same system protecting is from terrorists?

As far as I can see everyone is for sale. How different is it diverting billions towards self enrichment, when people die from preventable diseases because our health system cannot cope for lack of resources from taking money from a terrorist to look the other way while his bomb kills a handful of revelers on Saturday night?

And the general public should stop giggling at tales of graft and care about corruption’s repercussions. Poverty eradication should be our number one priority because beyond its dehumanizing impact it has a destabilizing effect on whole societies triggering instability and chaos.

Corruption is like a tiger, you may only ride it for so long (please don’t try that at home) before it runs amok and turns on the you.

Many times in this column I have argued that this country does not lack resources, it just lacks management -- and this goes beyond technical capacity to include managers with threadbare moral fiber.

The vicious cycle has long been complete. The bar of morality has been pulled down so low it is now part of collective psyche to believe one cannot prosper without stealing. We applaud our corrupt officials even if the mathematics is clear there is no way he/she would have accumulated what they have on a civil servant’s salary.

Looking forward it is not difficult to see that corruption if it has not already happened, will be so pervasive as to be unmanageable by the civilized judiciary processes. It will get so out of hand that one to the back of the head with your family billed for the bullet, will become a more palatable option.

Fortunately an anti-corruption bill is being brought to the house which proposes the confiscation of a convicted corrupt official’s property.

But this should go further and empower Uganda Revenue Authority or another such agency to bring anybody to task to account for their wealth, if their income declarations with the tax authority do not support the person’s wealth.

The question is who will bell the cat?

Published October 2009, New Vision

ANATOMY OF CORRUPTION

Corruption has been in the air these last few weeks. The President reiterating his resolve to fight the scourge. A few hundreds of millions of shillings went missing here. A few billion shillings went missing there. And you can be sure a few millions of shillings grew legs every day in this, that or the other office.

Various surveys show us to be one of the most corrupt nations in the world.

But Ugandans do not need surveys to tell what we come against everyday of our lives.

In fact we need to be grateful that our public corporations were privatized and the economy was liberalized. Otherwise you would, still be waiting for a phone line, making daily pilgrimages to minister’s offices for your quota of beers for your Christmas party and withering away at a thankless, dead end job for lack of alternative employment...

It gets one to thinking about corruption, its perpetrators and what kind of mindset it takes to be corrupt.

To begin with corruption is a euphemism for theft, like “putting out of action” is for killing or “forceful carnal knowledge” is for rape.

It is also one of the crimes which becomes ever more pervasive as no one is willing to hurl the first stone or take out the speck from the neighbours’ as they have been blinded by the plank in their own.

The jury is out on why corruption thrives but it is obvious for there to be corruption there has to be opportunity, a person of questionable moral standing and I would like to add, financial illiteracy.

Any official with access to funds has an opportunity to steal, so we shall not belabor the point.

Issues of moral fiber are to a large extent, beyond the scope of this page.

So I will restrict my self to financial illiteracy, a functional ignorance of how money works, is made and grown.

Let us use Mr D as an example of a corrupt official. Mr D holds an office – be it public or private, from which he has access to funds. I would like to believe that there are few psychopathic individuals who aspire to high office specifically to steal funds. I think they get into office with good intentions and then along the way get disensitised towards pocketing first small and then ever increasing amounts.

It is this group officials whose minds I would like to decipher.

Many of these officials have followed the traditional career path – school, first degree and many times second degree. They have been brought up on the credo that you study hard, get a good job, earn a higher and higher salary and become rich.

However the more they earn the reality hits them; that riches do not automatically follow from a higher pay. They come to the shock realization that the more they earn the more they find themselves bonded to their job. With every pay increase their consumption patterns rose to match and now they can not do without their job.

They look richer – they driver a top of the range Japanese 4WD, they buy their suits in Europe, no beer for them they drink spirits that need an accent to pronounce and they live on one hill or another previously reserved for Europeans during colonial days. But deep down they know they are living a fantasy, a fantasy they would not sustain on their own steam.

Assuming an annual take home pay of not less than sh120m, it is not advanced mathematics to workout that to earn this annual take home – this not counting transport, entertainment and the per diems, they know they would need assets of at least sh1.2b. And this is assuming all their money is in 364-day treasury bills which by this week’s auction were yielding 9.93 percent.

Retirement beckons. For the last 15 or so years of his working life he has been living high, accumulating questionable assets – that farm is more a status symbol than anything, those houses built a few years ago are showing a negative return on investment and his money in the bank is being eaten away by double digit inflation.

What is a man to do? The temptation is overwhelming. Pride is at stake – he cannot retire to a life of relative destitution and squalor, he has an MBA for God’s sake. Where’s that imprest?

Published October 2009, New Vision

EXPECTING TOO MUCH OF OURSELVES

Yesterday the country commemorated its 47th Independence day. I wrote this before the major speeches of the day were made. It would be amiss if these speeches did not remind us of where we came from and where we are heading.

Fifty years ago the British empire was a load the British treasury could barely carry, coming out of the Second World War. Things were so bad that Britain, on the verge of bankruptcy borrowed $3.5b from the US to stabilize its economy, boost reconstruction and kick start production. The last installment of this loan was paid back in 2006.

Had the British and all other colonial powers economies, not suffered such a battering during the second world, it is debatable whether independence would have come as soon as it did.

In Uganda as in many other countries of the empire, Britain ceded political power to the most vocal cliques of the day. The economy however was designed to serve foreign industry – railroads to the ports, growing of cash crops and a battery of apprentices to run an administrative system programmed to serve foreign over local interests.

Decades of wandering in the desert, blundering from government to government, means we have placed little emphasis on rejigging the system to cater to our needs.

Instead in Uganda and on much of the continent, we have cultured a state so predatory as to be more vicious than its colonial forbearers in serving an urban elite while simultaneously sucking the lifeblood out of the rural masses.

In tossing up numerous what-if scenarios I have come to the fatalistic conclusion that given our context at independence what ever we would have done in the last 47 years would have brought us to more or less the same place we are at now, with very little variation.

Where did we go wrong? We went wrong like a bride on her wedding day who thinks the wedding is an end rather than the beginning of a new journey.

Because we did not see beyond independence day the project developed cracks at the first instance of stress. And for lack of a longer term, collective vision anchored by a desire to improve the lot of the people, we have not recovered from that first test. The same can be said for any number of countries on the continent.

With the benefit of hindsight it is obvious we expected too much of ourselves on 9 October 1962.


The book Germs, Guns and Steel by Jared Diamond provide a nice framework from which to analyse human history.

Diamond’s explanation for why the northern hemisphere is more advanced than the south hinges on a geographical accident – the east-west orientation of Eurasia (Europe-Asia) versus the north-south formation of the African continent.

Across Eurasia climate was more consistent allowing for the growing of the same crops and rearing of similar animals. With shared information between societies, agricultural practices were improved and the peoples of these regions were able to produce food surpluses – regardless of the fact that they had one planting season a year.

The surpluses were employed to, feed the thinkers – who run society and accounted for its advancement in all fields and support professional armies, which served as a buffer against internal unrest and helped project the country’s will beyond its borders.

By lurching from crisis to crisis, taking one step forward and then three back they have now settled upon a workable and people sensitive system of government.

These developments were initiated hundreds of years ago, in a protracted process during which Eurasia saw its share of senseless and bloody wars, irredeemably corrupt leaders and failed states.

Which brings me to the conclusion that if we take our attainment of independence as a starting point, it is too soon to believe we shall see functioning states on the continent, when we are not producing food surpluses, let alone cash, skill or surpluses of any description.

We therefore can not sustain the critical mass of thinkers to examine the issues of the day and chart a way forward for our societies.

Instead we blunder around making the same mistakes over and over with the best case scenario being that we stay in the same place, but the more likely outcome being that we regress every year.

Published in October 2009, New Vision

THERE IS HOPE FOR UGANDA

It is a week in which President Yoweri Museveni said the dance with the corrupt was over.

It was also the week in which sh900m got lost under a bed! The mind boggles. I exercised my mind with how I would invest the money – albeit that it was not mine, to show the highest return. I would be on the lookout for double digit annual returns. Real estate? Not likely. Shares? No guarantees. Private equity? Maybe but our entrepreneurs have their issues. Treasury bill and bonds? I saw the recently auctioned two-year bond offered 12.3 percent a year – I could thrive on sh110m a year.

But I want to talk about more grassroot issues.

While our politicians and urban elite dominate the headlines, the inexorable wheels of progress continue to roll regardless of their shenanigans.

WFP country manager Stanlake Samkange in an interview published this week projected that his organisation may be buying as much as $100 million worth of food from local farmers within five years. This will represent almost double what the UN agency bought locally last year.

Whereas the increased income to farmer and community is exciting the more durable benefit is that to achieve these numbers farmers are organizing themselves into larger groups to better benefit from cheaper inputs and increase their bargaining power. If WFP were to fold its tent and leave town the farmers will still be left with these valuable organizational skills and institutions.

And we are not reinventing the wheel. During the industrial revolution European artisans – cobblers, tailors and watchmakers, formed guilds or associations to take advantage of the ever increasing demand that came with increased employment. They were the forbearers of the largest companies in the world with billions of dollars in turnover.

On a recent interview on Vision Radio’s Talk of The Nation evening show, Private Sector Foundation’s Ruth Musoke was gashing about how farmers and small businessmen around the country of their own initiative, are forming associations to leverage economies of scale.

I have to admit I was a bit dubious about the PSF’s proposed Business Association & Community Development Awards 2009, which will recognise such groups. Totally out of touch with what is going on in our rural areas, my thinking was that there are not enough of them to have a credible competition.

Ms Musoke disabused me of my misconceptions regaling me with tales of hundreds of farmers, boda bodas, sand miners and any number of other workers or businessmen all over the country coming together.

As a nation we are poor because our people are poor, our people are poor because we are not aggregating our resources – our capital and skills, because we are still in love with playing around in our small little pond, with no larger ambitions.

Things are changing and huger entities are coming in, players so big even governments cannot hold them back from dominating our markets. And they will dominate our markets because the consumer only cares to get what he wants, when he wants it, at an affordable price and all the sloganeering in the world will not change that.

Also supplementary to all this I am encouraged by the work of the Uganda Commodities Exchange, which is going around facilitating market access for the farmer groups by pooling their produce.

By ensuring that the produce is of acceptable quality and stored in regulated warehouses USE is playing an important market making role that has not existed since the heyday of the cooperative societies. Understandably production is up and will continue to rise as long as these mechanisms remain intact.

It is not rocket science. And our people are not lazy. A little bit of leadership can go a long way and the proof is there for all to see.

The political environment plays a role in allowing these associations to flourish but the nature of the human spirit and evolution is that these self-help groups will emerge regardless.

I read about corruption, the insensitiveness of the public sector to business and the self aggrandizement of the political class and I often am tempted to throw my arms up in despair. But every so often stories filter through of individuals and communities coming together first to cater for their subsistence but then invariably growing into larger concerns that produce surpluses and enrich them and their communities.

There is hope for this country yet.

Published October 2009, New Vision

EXPECTING TOO MUCH OF OURSELVES

Yesterday the country commemorated its 47th Independence day. I wrote this before the major speeches of the day were made. It would be amiss if these speeches did not remind us of where we came from and where we are heading.

Fifty years ago the British empire was a load the British treasury could barely carry, coming out of the Second World War. Things were so bad that Britain, on the verge of bankruptcy borrowed $3.5b from the US to stabilize its economy, boost reconstruction and kick start production. The last installment of this loan was paid back in 2006.

Had the British and all other colonial powers economies, not suffered such a battering during the second world, it is debatable whether independence would have come as soon as it did.

In Uganda as in many other countries of the empire, Britain ceded political power to the most vocal cliques of the day. The economy however was designed to serve foreign industry – railroads to the ports, growing of cash crops and a battery of apprentices to run an administrative system programmed to serve foreign over local interests.

Decades of wandering in the desert, blundering from government to government, means we have placed little emphasis on rejigging the system to cater to our needs.

"Instead in Uganda and on much of the continent, we have cultured a state so predatory as to be more vicious than its colonial forbearers in serving an urban elite while simultaneously sucking the lifeblood out of the rural masses...

In tossing up numerous what-if scenarios I have come to the fatalistic conclusion that given our context at independence what ever we would have done in the last 47 years would have brought us to more or less the same place we are at now, with very little variation.

Where did we go wrong? We went wrong like a bride on her wedding day who thinks the wedding is an end rather than the beginning of a new journey.

Because we did not see beyond independence day the project developed cracks at the first instance of stress. And for lack of a longer term, collective vision anchored by a desire to improve the lot of the people, we have not recovered from that first test. The same can be said for any number of countries on the continent.

With the benefit of hindsight it is obvious we expected too much of ourselves on 9 October 1962.


The book Germs, Guns and Steel by Jared Diamond provide a nice framework from which to analyse human history.

Diamond’s explanation for why the northern hemisphere is more advanced than the south hinges on a geographical accident – the east-west orientation of Eurasia (Europe-Asia) versus the north-south formation of the African continent.

Across Eurasia climate was more consistent allowing for the growing of the same crops and rearing of similar animals. With shared information between societies, agricultural practices were improved and the peoples of these regions were able to produce food surpluses – regardless of the fact that they had one planting season a year.

The surpluses were employed to, feed the thinkers – who run society and accounted for its advancement in all fields and support professional armies, which served as a buffer against internal unrest and helped project the country’s will beyond its borders.

By lurching from crisis to crisis, taking one step forward and then three back they have now settled upon a workable and people sensitive system of government.

These developments were initiated hundreds of years ago, in a protracted process during which Eurasia saw its share of senseless and bloody wars, irredeemably corrupt leaders and failed states.

"Which brings me to the conclusion that if we take our attainment of independence as a starting point, it is too soon to believe we shall see functioning states on the continent, when we are not producing food surpluses, let alone cash, skill or surpluses of any description...

We therefore can not sustain the critical mass of thinkers to examine the issues of the day and chart a way forward for our societies.

Instead we blunder around making the same mistakes over and over with the best case scenario being that we stay in the same place, but the more likely outcome being that we regress every year.

Published October 2009, New Vision