NOW WE ARE GOING INTO CAR MANUFACTURE? #SMH

Last week the Kiira Motors Company (KMC) unveiled their 25 year old business plan.

The company which started as some engineering undergraduates tinkering around resulted in the development of the Kiira EV prototype, a car that runs on electric power in 2011. According to the business the planned car assembly plant will employ up to 10,000 people, is projected to be profitable by 2023 and at full capacity in 2039 will be rolling out 60,000 units.

The project will be developed by Makerere University and the government.

You will forgive me if I do not share the same enthusiasm for the project as its promoters.

When the Kiira EV was launched I struggled to put the development in its place in the wider context of Uganda. It was a great achievement for the students and their supervisors without a doubt. I wondered whether maybe they could license the process to someone else. Then disturbing noises started about how we are going to commercialise the concept and even build buses.

Disturbing because whereas the car may have passed muster technically, it did not mean the market will embrace it. It was hard to even get a price of how much a Kiira EV would cost on the road.

So when last week the promoters revealed that KMC’s cars would go at $20,000 (sh66m) I had to pinch myself.  I would have dismissed it as a bad dream were it not for the fanfare that surrounded the business plan’s launch.

Let us start from first principles.

Despite the congestion there are less than a million cars on Ugandan roads today. Easily nine in ten of these are second hand cars bought for less than $10,000. Most if all of them bought cash down.

For years the dealers of brand new cars have tried to bend government’s ear towards making new cars easy to buy. They suggested more taxes on second hand cars, relax conditions on asset financing, to name a few. Government made some concessions here and there but nothing to get the new car industry flying.

These concessions pale in comparison with what KMC will demand to be a viable enterprise. Already it was reported that the land and infrastructure required will cost $36m (sh120b).

Concessions are necessary to make the car affordable, a $20,000 car in Uganda would be dead on arrival, setting 2023 as a breakeven date would have to be taken with a tablespoon of salt.

And if you can’t sell the car locally do we believe we can compete abroad?

"Secondly, as a country we have neither the comparative advantage --  that we can make cars better than any other product, nor the competitive advantage --  that we can make cars better than other people, which is a red flag for the enterprise. Both conditions are not insurmountable but at great cost and without guarantee of success...

Essentially, we will have to deny much needed funds to social services and infrastructure development to indulge in this adventure and after we have poured in millions of dollars, only to find that after all, we cannot make a commercial success of it. Ask the Kenyans.

And finally and connected to the last point is, is the push into car assembly the best use of our hard earned cash? Wouldn’t we be better building more roads or dams, whose outcomes would have a more far reaching effect on the economy?

One can argue that the car assembly industry would be a technological leap for us and would throw off many more industries that would have wider applications like electronics, metallurgy and upholstery. But advances in technology and supply chain management suggest that to make the industry viable the plant will require fewer than the 10,000 workers suggested and most components will be sourced abroad.

Indian industrial conglomerate, Tata in 2008 started producing the Nano car, a small energy efficient, inexpensive car with a $2,500 price tag. They thought the 30 million middle class would lap it up. They are still waiting. Initial indicators were that the car was too expensive, being more costly than a motorcycle so they stayed away.

"I would love to be wrong on this but whichever way you look at it this project has no wheels, is a whacky distraction from more serious priorities and can only be justified as a vanity project – until it doesn’t work...

OF HOES AND THE CHATTERING MASSES

A few weeks ago President Yoweri Museveni set off the chattering masses with his announcement that he was going to see that government distributes 18 million hoes to villages across the country.

The response from the urban elite was unbridled derision, we the chattering masses were rolling in the aisles our sides threatening to crack with the absurdity of the campaign pledge.

Aren’t we supposed to be modernising agriculture? Shouldn’t we be distributing tractors? Credit to the chattering masses they dusted up their primary arithmetic skills and did a quick calculation.

That if a hoe is sh25,000 (that should have warned us to how out of touch the calculator was, a hoe goes for sh7,000 in Arua.  But never mind him) government would spend sh450b. The calculator then divided this by sh120m – his proposed cost of a tractor,  and came up with 3750 tractors he then divided this by 110 districts (actually there are 112) and came up with about 34 tractors per district.

Even I was amazed at the possibility.

But then when one thought of it, one wondered whether a lack of tractors more than hoes was the key issue in the agricultural sector?

For the chattering masses modernisation of agriculture is synonymous with mechanisation, which is not entirely wrong.

"A cursory look around Uganda’s agricultural sector shows that yes hoes are still very much in use, but also that they are in short supply...

Ever since the Chillington tool company based in JInja folded up its plant and left the country in the early part of the last decade we have not been making hoes locally. They folded because they couldn’t compete with the cheaper imports.

In 2011 then finance minister Maria Kiwanuka scrapped the 10 percent import duty on hoes as a way to lower their costs and eventually raise productivity. That intervention was missed by the chattering masses but signals a recognition that there are issues with our farmers getting this much needed implement.

The majority of farmers – 96 percent of the 3.95 million farming households, in Uganda are small holders with farms of less than three acres according to official statistics. A tractor is not their immediate need. 

Interestingly of all the farming households 3.4 million of them have hoes according to a 2011 statistical abstract from the agriculture ministry. So one wonders about the half a million households without a hoe, what do they use to cultivate their crops? And is one hoe per household enough?

The numbers also show that only about 30,000 households employ tractors.

But to see mechanisation as the only evidence of modernised agriculture is to keep a narrow view of the issue. Essentially mechanisation suggests increased productivity, defined as out per unit input be it land, labour or capital, but increased productivity can be managed in our context without mechanisation as we the chattering masses think.

In the areas around Mubende the Neumann foundation is working with coffee farmers to improve the productivity of their holdings. According to the Uganda Coffee Development Authority (UCDA) the average yield of a coffee farm in Uganda is half a ton a hectare, but the farmers in the project double even triple, this out put on their own, with not a tractor in sight.

The key to their improved yields is the extension services made available to them by the Neumann Group, which means they benefit from information about better coffee farming and handling practices, setting up and running farm organisations, improved bargaining power and access to inputs on credit.

To make the argument that giving farmers hoes is backward thinking is fallacious.

"As the numbers show hoes are urgently needed. However beyond hoes it is clear that our farmers are getting little to no guidance, and therefore unable to improve productivity and therefore remaining in poverty...

The same Agriculture ministry figures showed that of the nearly four million farming households 0.68 million or about a sixth of all farmers benefit from extension services.

In an ideal world we should be clamouring for tractors instead of hoes, but in the current circumstances that will be like me pining for a private jet to go to work when I need a car or better public transport.

In my mind the joke is really on us the chattering masses.

THE REAL PROBLEM WITH THE IDI AMIN ERA

There seems to be some confused thinking about the Idi Amin era.

Revisionists point to the building of the Nile Conference center – now the Serena Conference center and the Mpoma earth satellite station as some of the achievements of his eight year period.

Some for good measure throw in the expulsion of the Asians. To hear some of these people who were not born by 1986 speak about it, the Asians had a stranglehold on the economy and were it not for the Asian expulsion we would not be where we are today. Which is exactly nowhere.

The record shows that by 1979 when the Conqueror of the British Empire was overthrown the Ugandan economy was on its knees having regressed back to a subsistence economy, as all industrial capacity had ground to a halt.

"But the more you examine the period you realise that the breakdown in physical infrastructure was not the worst legacy of the era. The real tragedy was the break down of the spirit of a once proud people and the missed opportunities for development that cannot be recovered...

The spiritual, as opposed to the physical or material loss to this country was brought into sharp relief when a fortnight ago journalists were conducted on a tour of Kakira Sugar Works, the centrepiece of the Madhvani empire.

The 10,000 hectares that is the nucleus plantation – they also have an additional 25,000 hectares overseen by their outgrowers, the sugar plant, which produces 180,000 tons of sugar annually, the 50 MW power generation operation and a planned plant that will distill 20 million liters of ethanol from molasses, were all impressive in their scale but even more impressive was to imagine the work, organisation and perseverance into building this industrial complex.

Easily each of those four units is a multi-million dollar operation.

The patriarch of the Madhvani clan, Muljibhai came to Uganda in 1908 but only went into the sugar production business in 1930. So from a purely mathematical standpoint the sugar works have been in existence for at least 85 years. However I prefer to think that the sugar works were in the making for at least 100 years, because to ignore all the work done by Muljibhai in setting himself up to launch the project.

The lesson here is that given the size of our economy, which is not very big, the undertaking that we see at Kakira has taken 100 years and two generations to build.  There are no shortcuts.

Which brings me back to the losses that go beyond the destruction of the physical infrastructure during the Amin era.

Kenya had many more Asians than Uganda did in 1972. At independence in 1963 the Asian population in Kenya was about 180,000, the number of Indians expelled from Uganda in 1972 were about 50,000 give or take a few thousand.

This single decision denied our businessmen the mentorship that would have gone on to launch thousands of indigenous businesses, as has happened in Kenya, which has a much more influential and vibrant indigenous capital base.

In fact our biggest indigenous businessmen learnt their craft from their Asian bosses in the 1960s and 70s.

"We celebrate the cronies of the state to whom businesses were dished to in 1972. But if you look for where they are now, you would be hard pressed to find a handful who parlayed those assets over the passing of the last 45 years into sizeable business with at least a national presence, live alone regional presence....

Anyone who has attempted business knows that serving apprenticeship at the feet of a more accomplished mentor, will serve you better than all the business management books listed on Amazon.

Of course the argument can be made, because of the collapse of the economy Ugandans are by default the most entrepreneurial people in the world. The flip side of this is that, few businesses ever make it to their fifth birthday. Maybe if the Asians had stuck around we would have fewer business men but better quality ones.

In expelling  the Asians the loss to our economy was much more intangible than material and while the economy may have recovered to its 1971 level almost a decade ago, I fear we may never recover the otherworldly losses that arose out of, not only the expulsion of the Asians, but also the breakdown in ethics and cultural values during the time.

MAGUFULI, THE SOCIAL MEDIA PRESIDENT

Last month Dr John Magufuli took office as the President of the Republic of Tanzania after a hotly contested campaign against Edward Lowassa, a defector from the ruling Chama Cha Mapinduzi (CCM) party.

Whereas some observers held out that Lowassa had a real chance of overturning the CCM’s half a century hold on power, Magufuli beat him handily polling 58 percent of the votes.

Sworn in as president on November 5, Magufuli lost no time in making his presence felt. Days into his presidency he visited Muhimbili Hospital, a major referral hospital, and finding it in a deplorable state fired the administrator and gave the staff days to get some vital equipment up and running or risk going the same way as their boss.

He was not done yet.

He then slashed the budget for a celebrations for MPs and used the savings to buy beds and mattresses for that same hospital.

"What some might have dismissed as kasigiri and thought would burn out as soon as it erupted were sorely disappointed...

Magufuli then took an axe to foreign travel trips for officials, dictating that Tanzanians embassy staff will represent the country abroad. The savings for this he has earmarked for social services.

Unfazed by the grumbling of government bureaucrats, Magufuli questioned the wisdom of the paying public servants allowances for work they were supposed to do anyway.

The coup de grace – until the next one, Magufuli scrapped this year’s independence celebrations which fall on 9^th December, wondering how the country can spend millions on these celebrations when cholera is running amok in some places. He has directed that instead Tanzanians will engage in public cleaning of their surroundings.

And oh yes! He has also stopped the sending of Christmas cards by government offices staring this festive season.

They may look like tokenism, even grand standing from afar, but h they have succeeded in setting the tone of his presidency and sending out the message that it will not be business as usual with the good doctor of chemistry.

Two things have managed to swing the regional and international spotlight on Magufuli.

People who know Magufuli are unsurprised by the devout Catholic’s willing ness to overturn the status quo but even they express surpise at the speed and extent of what he has done.

He has held several ministerial briefs under his predecessor Jakaya Kikwete, including the lucrative works ministry, where some of his contemporaries vouch for his clean reputation.

Magufuli is no political novice, after all you do not capture for yourself the leadership of the CCM by being a wall flower, but the explosion in social media means that his exploits were being broadcast in real time to networks of thousands even millions finding its way across the world before the TV bulletins, something that was impossible even five years ago.

"Of course it helped that he served as breath of fresh air into an ossified political landscape and played to an audience – around the region, used to government fat cats living  first world lifestyles amidst their dehumanising poverty...

If anyone had any doubts about how social media can be a game changer the Magufuli phenomenon has to have put those to rest.

Two things can happen.

Buoyed by the groundswell of support Magufuli can ride it to do a much needed clean-up of Tanzania’s politics and carry the momentum to introduce other unpopular measures, like the complete opening up to the East African Community and the unlocking of this sleepy giants full potential.

Or he can succumb to the blow back from the rattled beneficiaries of the status quo, who are undoubtedly burning the midnight candle to subvert his “people’s revolution” and return things to business as usual.

On a purely sentimental basis I hope Magufuli beats back his detractors and continues on his pro-people crusade, but I fear that the inertia of Tanzanian bureaucracy, which is the slowest in the region anyhow, will bring the bulldozer – a soubriquet he earned while for his indomitable spirit in the face of obstacles in his previous ministries, to a grinding halt.

In the latter case I would love to be wrong. Time will tell.

UGANDA’S SUGAR INDUSTRY IN DANGER OF IMPLOSION

The El Nino rains and cane poaching are expected to affect Uganda’s sugar production, the latter issue will also affects the long term viability of an industry which has made a remarkable recovery after years of neglect. Uganda last year produced 438,000 tons of sugar way above the local demand…

Read More

THE POWER OF CONSISTENT CONTRIBUTION

Last week the New Vision Staff Savings & Credit Cooperative commemorated ten years of its existence.

What started off as a lunch time discussion has blossomed into a company with more than a million dollars in assets and a net asset value of a billion shillings.

Those numbers look like nothing compared to the biggest tax payers in the country (The New Vision SACCO also pays taxes) but it has taken a decade to grow the business with our own resources. Even more noteworthy is that members who did not have two cents to rub together at its inception have accounts that run in the millions of shillings.

At the event the Dunstan Kisule, the CEO of the Y-SaveSACCO, which inspired the New Vision SACCO, gave us a snapshot of what they have achieved in the last 16 years, which was enough to snap us out of our complacency at what we have achieved so far and give us new targets to aim for going forward.

"Cooperative organisations in their various permutations are a powerful tool for pooling resources and deploying them in direct response to the societies that they serve...

But the even more powerful lesson from the Cooperatives is they debunk the fallacy that we do not have the resources amongst ourselves to cause local development. By employing the time and proper organisation we can achieve more in time than we can ever believe possible.

My best SACCO story is the Wazalendo story, the biggest SACCO in Uganda, whose members are the officers and men of the UPDF.

After a decade of operations the 73,000 strong organisation reported total assets of sh130b ( $36m) and shareholder equity of sh67b. This is all the more remarkable because we all know that our soldiers are not the best paid members of our society.

This organisations are formed with a social mission at the center of their raison d’etre but they all make profits, so profits and social responsibility are not mutually exclusive. In fact businessmen are coming around to the fact that revenues and profits are only a by-product of providing a service to society.

And we are not reinventing the wheel. SACCOs dotted the countryside for years, only disrupted by our turbulent past, they are still there trying to make the best of a difficult situation. But their mobilising resources nevertheless, putting to shame people who think there is no money in the rural areas.

"It is a well worn cliché but whose wisdom is irrefutable that when there is collective action the sum total of its effect is more than the sum of the individual parts. They call it synergy, one plus one is not two but eleven...

Decades of donor dependence means that every time we have a need we look outside ourselves, be it as individuals, communities or even nationally when if we put our minds to it most of the resources we need we can mobilise domestically.

But beyond that SACCOS if run soundly take advantage of what Albert Einstein called the eighth wonder of the world – compounding, essentially that benefits (in this case interest) beget benefits begets benefits.

So if one saved a million shillings in year one and there was say a five percent interest on that money every year, it would take fourteen years to double that figure. But for a saver who is consistent adding a million year for those fourteen years a rough calculation suggests they will have accumulated about sh21million – sh14 principle and sh7m in interest.

And we have not even begun to look at the capital gains from the increase in value in members shareholding in the coop, which if the costs are kept down and profits retained aggressively can grow multiple times faster than the savings.

Across the border from us in Kenya where SACCOs have gone largely undisturbed at least since independence, the hundreds of SACCOs peppered around the country control savings of more than $20b or the equivalent of Ugandan economy. But the Kenyans have moved to the next level and are now forming investment clubs with as much vigour as they did the SACCOs in the years gone by.

The SACCOs when well-run serve a useful social service but beyond that as a force for transformation of societies where access to finance is restricted.

They do not need hand-outs, though money injected in well-run SACCOs can produce prodigious returns, what they need is advisory services on how to run them properly and build their capacity in sustainable ways.

REGION SORELY NEEDS POPE’S CALMING PRESENCE

The more things change the more it seems they stay the same.

The last time a Pope visited Uganda a genocide was bubbling under the surface in Rwanda, an intractable war continued in South Sudan, and in Somalia Mohammad Farrah Aidid was trying to strengthen his grip on a country which was in the throes of implosion after the overthrow of Siad Barre two years previously.

Fast forward to today and Pope Francis is visiting a troubled region grappling with civil war, disease and poverty.

The Somalia peace process flatters to deceive, South Sudan is squandering its promise, Burundi is on the edge of the kind of wanton violence, a throw back to Rwanda two decades ago and in the Central African Republic --- Pope Francis’ final stop on this tour, the center is failing to hold as marauding gangs make the country ungovernable.

In the interim Uganda has fashioned itself into a regional enforcer with campaigns in the Democratic Republic of Congo, Central Africa Republic, South Sudan and Somalia. It has participated in peace missions further afield in Liberia.

Uganda sees itself as a peace enforcer than peace keeper, holding the ultimate sanction over warring parties a mission that evolved out of the disgust at the sterility of UN peace keepers during the Rwanda genocide.

"Pope Francis, which name he chose in honour of Saint Francis of Asisi, who famously yearned to be an instrument of God’s peace, may agree on the general principle of seeking regional peace but may disagree with Kampala’s methods...

He will complete the second year of his papacy in March next year, a papacy which has done more to change the perception of his office through his message of compassion and his humble demeanour, than any other Pope since Pope Paul  VI.

Pope Paul VI whose 15-year papacy came to an end on his death in 1978, created more dialogue with other religions and opened the mass to a personal appreciation by millions by allowing the use of local languages. Previously the high mass was said in Latin.

He comes at a time of charged emotions as Ugandans rev up for a crucial presidential election next year, yet another cross roads in this country’s political journey.

A campaign loaded with vitriolic, coloured by past slights and painted with character smears which while we giggle at the name calling we know we are fast reaching a place of no return where resolution will be a zero sum game. And we are only two weeks in to the campaigns.

The main antagonists President Yoweri Museveni, KIzza Besigye and Amama Mbabazi have suspended their campaigns for the duration of the successor of St Peter’s trip, before they go after each other with hammer and tongs again.

"It would be an important interlude during which we as a country can reflect and even take St Francis of Assisi famous prayer to heart, if only to banish our turbulent past and the foreboding signals ahead....

Lord, make me an instrument of Your peace.

Where there is hatred, let me sow love;

Where there is injury, pardon;

Where there is doubt, faith;

Where there is despair, hope;

Where there is darkness, light;

Where there is sadness, joy.

O, Divine Master, grant that I may not so much seek to be consoled as to console;

To be understood as to understand;

To be loved as to love;

For it is in giving that we receive;

It is in pardoning that we are pardoned;

It is in dying that we are born again to eternal life.