IT’S ABOUT THE PEOPLE …

Last week in an open letter, the Bill & Melinda Gates foundation laid out what they see as theIR vision for the poorest of the poor in Africa.

The annual letter outlined the four areas which will serve as game changers and where interventions will have the highest impact – health, farming, banking and education.

In health they celebrate that since 1990 infant mortality has been halved while maternal mortality has fallen by two thirds. They project that infant mortality will be halved again over the next fifteen years and diseases like Guinea worm, elephantiasis and river blindness will follow small pox and polio into extinction.

In farming they lament that the continent spends $50b annually on food imports poor farm productivity is at the heart of the problem, African can only manage a fifth of output per unit area compared to their US counterparts. They see the continent climbing out of this trough with productivity increasing by half over the next decade and a half, with the use of fertiliser, better planting techniques and improved timing.

Improved access to financial services through mobile banking will allow the poor more access to their assets and help them transform their lives. It was noted that in this one rare incident innovations are flowing from the poor south to the north as Africa embraces these financial services while consumers in the developed world continue to pussy foot around them.

And finally while access to education has jumped in the last fifteen years with numerous universal primary education initiatives around the continent, with improved technologies in computing and telecommunications students will have access to better and wider resources improving education quality. But they warn that as long as the disparity in access to education continues to disfavour girls the gains may be limited.

"Women spend more on the family. Educated women raise healthier children. And educated women will ensure their daughters not only go to school but stay there longer....

A decade ago or so ago when Bill Gates started shifting his attention away from software firm, Microsoft, which he founded  and towards philanthropy, it was clear to him that despite his billions there was only so much he could do. So he decided to focus his interventions on health and education.

He has worked out that improving human capacity would be the best use of his dollars. He could build a few kilometres of road or lay down railway lines or build power dams – critical interventions in themselves, but he seems to have worked out that investing in people is key.

I read somewhere that emphasis on physical infrastructure is useful but improvements in human capital are critical for sustainable development. We keep hearing how Uganda was at the same level of development as many of the south east Asian countries in the 1960s. But that comparison was being made using GDP per capita figures. The truth is while Uganda had less than 500 A-level students at independence countries like South Korea were already churning out thousands of graduates annually.

Of course our processes were short circuited by chaos – triggered by people with low human capacity. Assuming we had maintained stability it is unlikely we would have matched up to South Korea or Singapore or Taiwan today because of the low base of our human capacity at independence.

"We can build all the roads, dams and railways that we want, but if we don’t have the manpower to exploit them others will come and employ them for their own ends. It is not rocket science....

But who better to shine a light on this truth than a computer programmer, who was at the forefront of the cyber economy, which shoved the smoke stack, brick and mortar economy to the side.

Maybe we should take him seriously, after all his personal wealth is almost thrice the size of the Ugandan economy and he made it without stealing!

SUING GOVERNMENT FOR BRAIN DRAIN, DO THEY HAVE A POINT?

A suit brought against government challenging an official program to export health workers to the West Indies will raise interesting questions about government’s responsibility to its citizens.

The Institute of Public Policy & Research (IPPR) in their suit filed last year argued that it was wrong for government to facilitate the export of  critical labour abroad when Uganda’s health service remain woefully understaffed.

In the news report on the subject several Ugandans came forward to narrate harrowing stories of how they had lost loved ones for lack of personnel at the health centers they visited.

Attorney General Peter Nyombi in response was quoted as saying it’s the right of every Ugandan to seek gainful employment anywhere.

The legal issues aside there has to be something fundamentally wrong with a country which is short of resources, be it human or raw materials, exports these to another country whose need may not be as great as its own.

As an indicator Uganda’s doctor to patient ratio is about seven for every 100,000 Ugandans. To attain the World Health Organisation’s (WHO) recommended 17 doctors per 100,000 we would need to more than double the number of doctors we now have. Our current numbers meanwhile have been built since independence!

You can expect too that our other health worker statistics fall way below the minimum requirements set by the WHO.

So clearly the health workers we are sending abroad are not surplus to requirements.

It’s ok to send manual labourers, househelp, one can even just make the argument for teachers and engineers but if one were to draw the line somewhere it has to be with health workers.

So after they have paid their taxes, insurance, mortgages and the annual holiday to some tropical destination, they will send back a few pennies home. So through their diligence and hard work they will rise to the top of their professions and be a credit to their homeland. Given the statistics it’s unlikely but so they will make some money and transfer the technology on retirement in the way of new investment in the field.

We understand the right to free movement of people and we wouldn’t begrudge a specialist doctor going abroad for better pay but when government itself is facilitating the brain drain you have to wonder.

"In abetting the exporting of labour government is admitting it has failed to help create jobs locally but even worse is abdicating its responsibility, actually actively sabotaging its own efforts to provide good health care of the citizens of this country...

You can build all the hospitals and health centers you want but if you don’t have the people to man them they become white elephants in the midst of need. That is criminal.

Government may argue that it has no money to pay its health workers a wage commiserate with the huge contribution they make but that does not stop them from facilitating improved services in the private health care industry to ease the pressure on its own resources. As a stop gap measure of course.

But the quality of private health care will only be so much better than the services in the public institutions. If public health is crumbling like in our case, the private sector will not be that much better.

This laissez faire attitude is good for promoting the private sector but does not work in redistributing the increasing amounts of the wealth this country is creating year-on-year.

"And the lack of funds argument is a thread bare excuse that doesn’t stand up to scrutiny, especially in light of the estimated sh300b that goes missing annually from state coffers. Not to mention the additional hundreds of billions that go uncollected because connected persons are evading tax with impunity or the misuse and even grabbing of government property for individual use or the perennial inflation of our public administration with the creation of new districts and ineffective agencies...

Government needs to be clear that improvements in living standards for all Ugandans, not only the few privileged connected ones, is its raison d’etre. We cannot all be flown abroad for expert treatment but we can at least have the basic minimum requirements to support an effective and all inclusive health sector.

Once that is internalized we will not have hair brained schemes like the one where we are exporting health workers to Trinidad and Tobago.

And by the way Trinidad and Tobago have a 118 doctors for every 100,000 of its 1.2 million population, who needs the help more?

EVEN THE SWISS CAN'T DEFY MARKET GRAVITY

Three years ago alarmed by the rate at which the Swiss Franc was appreciating against the Euro the Swiss central bank that it would limit the EURCHF to not less than 1.2000 .

A dramatic appreciation of the Swiss Franc against the Euro would hurt its export and tourism industry, the corner stones of the economy.

The fundamentals – the general health of Europe’s versus the Swiss economies, dictated that the Franc should strengthen against the Euro.

Two weeks ago – and up to $200b or half their GDP, spent holding the peg, the Swiss central bank gave up which led to a dramatic 40 percent appreciation of the Franc against the Euro in less than an hour.

The Swiss have suffered the very same fate they were trying to avoid. Their exports now will cost consumers up to 20% more than last week, which may not be good for sales.

"It’s never a good idea to bet against the market, even if you believe the market is wrong. As they say the market can remain irrational longer than you can remain liquid....

There has been a long history of government’s trying to play the market – often a political decision not an economic one.

The British tried and when they failed trader George Soros is supposed to have made a billion pounds. The Argentine’s wrote a one-for-one peg into their constitution when they couldn’t sustain it their currency plummeted, triggering an economic crisis in the south American nation – and cost as the initial Bujagali project. The promoter American firm AES were burned by their huge investments in Argentina and couldn’t afford Bujagali. 

Closer to home Zimbabwe tried to print itself out of a bad economic situation, this has resulted in the south African nation doing away with its own currency and now transacting only in hard currencies.

When political expediency overrides good economics the end result is never a happy one.

The dollar strength is sweeping around the globe and Uganda has not been immune to its impact. The Uganda shillings has is 15 percent weaker than it was at this time last year, which ordinarily would cause stress for us as we are mainly an importing country.

The dollar is now teethering on the brink of sh2,900 the highest it has been since October 2011, and as if on cue the calls for government to intervene to stop the dollar rise are mounting.

Uganda imports more than it exports, so most of the discomfort is being felt by our importers. The exporters as long as they have little foreign input and looking forward to improved margins.

Thankfully global oil prices have also been in decline. Higher oil prices would have meant a higher oil bill and this would have a ripple effect in the economy as transportation charges rose.

"Trying to hold a currency to a certain level regardless of the reality is not unlike a person who tries to maintain his previous standard of living, when things have become costlier or when his income is less than previously...

Invariably he will dip into savings and once those are exhausted the collapse will be dramatic.

The smart thing to do would be to cut the cost of living to match reduced income. By trying to defend a certain rate country’s end up dipping into their savings and when they inevitably have to stop the collapse can be dramatic.

Of course the Swiss National Bank’s action went largely unnoticed here. However the losses sustained by the retail forex brokers accounted for Alpari UK, a popular broker for Ugandan retail traders.

It’s a bit complicated but suffice it to say that a few clients’ accounts were not only wiped out but went into negative balances, which were reflected as losses to the broker. In the space of hours Alpari went from one of the largest brokers to zero, a testament to how risky the forex trade can be.

The company tried to get a buyer at the end of last week but when that failed went immediately into receivership.

For people who had accounts in theory the funds are safe but it might take a while redeeming them as receivers KPMG go through the process.

TO THE RICH MORE WILL BE ADDED

Last week anti-poverty NGO Oxfam released a report, which showed that in a few years the richest one percent will own more than the rest of us combined.

And the head of Oxfam, our very own Winnie Byanyima, was quoted as saying,

“Do we really want to live in a world where the 1% own more than the rest of us combined? The scale of global inequality is quite simply staggering and despite the issues shooting up the global agenda, the gap between the richest and the rest is widening fast.”

She called for a reining in of powerful vested interests that perpetuate the status quo, where the rich get richer and the poor get poorer.

Byanyima said the major problem is that with the concentration of wealth comes a similar trend with power, leaving the poor voiceless and unable to cause change for the better.

The inequality is not only a reality but it is rising all around the world, destabilising national politics, aggravating environmental degradation and fuelling illicit trade. Something will have to give and the fallout is bound to be ugly.

Knowing the dangers this continuing trend poses to global stability the question is, what to do?

Obviously the wealth gap should be narrowed as much as possible.

"The knee jerk reaction seems to be, blame the situation on the “greed” of the rich. That they are taking more than their fair share and they are doing this by keeping salaries low, dodging taxes and repatriating the profits abroad.

The rich on the other hand recommend that the poor work harder and stop wasting their time on booze, sex and war....

In the words of Australian billionaires Gina Rinehart, “If you’re jealous of those with more money, don’t just sit there and complain. Do something to make more money yourself — spend less time drinking or smoking and socialising, and more time working.”

Needless to say the solution is somewhere in between those two extremes.

To get the poorest of the poor off the floor they need an income. Studies have shown that the better the education on average the better the income. They also need proper health care to ensure they can sustain a high level of productivity.

Basically the provision of quality education and health care is a function of government be it through public health services or creating an enabling environment for private health care to flourish.

Then we need to grow the jobs or create an environment in which businesses can be thrive so the rest can earn a living.

But income – what one earns, is different from wealth – how much of what one earns, one keeps. The wealthy are adept at converting earned income into wealth, making most of their income from what they own than from their salaries.

Steve Jobs at the time of his death was worth more than $10b but had annual salary of $1. If you used his salary as a measure he was living way below the poverty line of a dollar-a-day.

The world over – especially with the collapse of communism, the private sector is where the jobs are created.

It is no surprise that some of the countries with the narrowest wealth disparities rank highest in the World Bank’s Ease of Doing Business survey.

So again it’s the responsibility of governments to create an enabling environment for business. An environment where, there is adequate, functional infrastructure, corruption is minimised, the workforce is well skilled and the regulatory environment is efficient and responsive.

At the end of the day the wider the wealth disparities are in a county is how inefficient the government is in creating wealth, through the encouragement of business on the one hand and redistributing this wealth through the building of infrastructure and improvement of the quality of the human resource.

Governments are either ineffectual because they are held hostage by the business lobbies,  which force them to do their bidding by allowing them keep wages low, allowing tax loopholes to persist and abrogating its responsibility as driver of policies beneficial to the majority.

On the other hand, out of sheer incompetence or misplaced ideological bias, governments are incapable of generating the economic growth needed to lift up society as a whole.

The wealth gap will not be bridged by dishing out money as some charity organisations propose.

The real focus in tackling wealth inequalities in our countries and in the world should be on governments. One, do they have as their singular goal the improvement of the living standards of their citizens and if they do they have the willingness and competence to make this happen?

It’s popular to bash the rich, and granted there are some unscrupulous types among their number, but if you think about it, the genuinely rich grow in wealth by producing more, employing more and subsequently paying more in taxes.

It follows therefore, that to reduce the wealth gap we need more not fewer wealthy people, even if we are jealous of them...