WERE WE READY FOR INDEPENDENCE?

Fifty four years ago the Union Jack came down at Kololo airstrip and the Uganda flag went up signalling the end of colonial rule and a descent into chaos that we are only beginning to unravel.

In hindsight we were not ready for independence – we were a small little country in the middle of Africa, mostly illiterate, with huge infrastructure deficits and institutional inadequacies, without the capacity or the temperament to run a modern state.

Some disagree.

“We were ready for independence,” insists Kavuma Kagwa, who turned 26, weeks after Uganda gained independence.

“The British concentrated on education, agriculture and later on medicine. At independence we had an agricultural officer at every Gombolola (LCIII). We were graduating doctors from Mulago. The leaders of our political parties were very educated men,” he added.

For good measure he threw the anecdote of Dr Dionysius Bamundaga, a pioneer graduate of Mulago medical school, who was the first indigenous doctor to operate a European.

“The provincial commissioner of northern Uganda’s wife in 1953 got an appendicitis attack while in Gulu and there was no time to get her to Nakasero Hospital which was where European’s were treated. Bamundaga who was the provincial medical officer at the time volunteered his services which the PC grudgingly accepted. The operation was a success and soon after Governor Andrew Cohen made a radio announcement that indigenous medical doctors could operate on Europeans.”

The case of Dr Bamundga is more case of an exception to the rule.

"According to the 1962 Civil Service Survey there was no chartered accountant, solicitor, architect or pathologist and there was only one geologist, one veterinary officer, one entomologist and two dentists in public service....

This should not have come as a surprise since total enrollment at Makerere at that time, the sole university was only 364. There were about seven million Ugandans at independence.

While the civil service was not the only employer at the time it dominated the private sector especially in its employment of specialist skills.

The scarcity continued into the administration where the same survey showed that of the 408 executive class posts in the civil service Ugandans only filled 102 of them while another 106 were vacant.  In the super scales which were just below executive class it was even worse with Ugandans only filling 269 or about 20 percent of the 1,250 positions available.

But this should not have come as a surprise. In 1962 there were only 364 students at university, JC Ssekamwa reported in his book “History & Development of Education in Uganda” going on to reveal that there were 1991 students enrolled in O-Level in the whole country at the time. The number of students graduating from O-Level in 1960 was 700. It is not clear whether this means they were moving on to A-level or not.

"To get a sense of how deficient our manpower training was at independence, if O-level enrollment had kept pace with population growth there would be just under 10,000 students in lower secondary school today...

Today there are about 1.3 million students enrolled in secondary school.

In lamenting our backwardness they never tire of reminding us how Uganda was at par with some South Eastern Asian nations – South Korea and Singapore, who now enjoy developed world standards in 1962.

A cursory look over the data not only shows that not to be true, but more embarrassingly shows in key areas like human resource  and infrastructure we are only just catching up to where they were in 1962!

If we take South Korea as an example. In the year of our independence, South Korea was still reeling from the after effects of civil war that had split the peninsula into two.

They had a per capita GDP of $103 while we were at $62. That may give the impression we were nearly toe-to-toe with them at that point but place this figure against a figure like secondary school enrollment and the chasm between our two situations becomes apparent.

While as noted above our O-level enrollment was about 2,000, South Korea had an enrollment of 620,000 for the comparable age groups. Note too that today we only just double their 1962 secondary school enrollment figures.

By another measure the doctor to patient ratio in South Korea was 0.344 per 1000 it is now about 2 doctors for every 1000 South Koreans. Figures for Uganda were hard to come by but today we have a patient to doctor ratio of 0.41, we are just better than South Korea in 1962.

These disparities are reflected wherever you look.

South Korea had 27,000km of road in 1962, today Uganda has about 20,000 km. The Asian nation was generating 1,512 Gwh of power 54 years ago we are now doing about 3,000 Gwh according to official figures.

The point is that comparing ourselves against the south eastern nations when we attained is a false base.

"Of course the colonial authorities’ primary mission was not to educate or empower Ugandans, so our deficiencies in manpower and infrastructure should come as no surprise...

And there are no guarantees that they would have worked hard to bridge those deficiencies except for the benefit of an elite few. But knowing this puts into sharper perspective the losses to the country caused by the lost decades of the 1970s and 1980s, which can be argued were due to the very same shortfalls in human capacity that we inherited.

So for those who were there, do they still think we were ready?

“Very much so. For me those comparisons with Asia don’t interest me very much, after all when are you ready,” Presidential media advisor John Nagenda asked.

“I wasn’t interested in politics at the time but the feeling was it was time and we would sort ourselves out on our own.”

WHAT DO WE NEED TO DO TO GET OUR TARRIF DOWN TO $5CTS

President Yoweri Museveni while speaking at the opening of the Uganda Manufacturers Association (UMA) annual trade fair once again promised the industrialists that power tariffs will come down in the near future.

Currently his focus is on Bujagali dam which is selling power to the grid at about $11 cents (sh340) a unit.

The President has expressed his desire the question then is how do we get that price down from current levels?

First of all looking at the composition of the Bujagali tariff of $10.1 cents, the rate at which they sell it to Uganda Electricity Transmission Company Ltd (UETCL), $6.7 cents goes towards repayment of debt and equity repayments to the shareholders, $2.3 cents is earmarked for taxes and repayments to government and $1.0 cents goes towards other costs – operations and maintenance and administration. These are the averages under the current agreement which lasts 30 years from 2012 when the dam was commissioned.

"According to figures that were seen last year which have changed somewhat by now, the simplest – but by far the easiest way, to collapse the tariff would be for government to get $1.4b (about sh5 trillion) or half of all the revenues we collected last year, pay off the shareholders – the Aga Khan’s Industrial Promotion services (IPS) and American private equity firm Sithe Global and retire all the debt. Sithe Global is currently in talks to sell its majority stake to in the project to Norwegian firm SN Power....

With one fell swoop we will have loped of $6.7 cents and brought the tariff down to $3.4 cents.

Ideally we should get all this money in cash so that there are no debt repayment costs and then it can have a real say in setting the tariff.

The challenge is government does not have this kind of cash lying around.

The next best thing would be to refinance the project by extending the term of the current agreement to say 50 years instead of the current 30. The Build Operate & Transfer (BOT) agreement calls for a handover of the asset to Uganda after 30 years.

Under such an agreement the average tariff over the life of the project would almost half to $6.6 cents.

The next best thing would be to pay off all the debt, which people familiar with the project estimate at about $530m, this would account for about $3.8 cents of the tariff bringing it down to $6.3 cents.  A removal of government taxes and repayments would then pull the tariff further down, below the magic $5 cents a unit number to $4 cents.

However given that dollars do not pave Kampala’s streets we could either pay off the investors or refinance the debt hopefully with money that will significantly dent the tarrif. And in addition forgo government revenues.

However calculations are that tariff would increase in both instances if we are still saddled with investor dividends and interest rate payments of higher than 8 percent per annum. The current debt costs about 3.8 percent over the duration of the project.

And if we were to borrow to get rid of the private investors on the project – government owns just over four percent, the new lenders would demand a higher usage of Bujagali, a plant factor of much higher than the current 70 percent. The higher the plant factor the lower the tariff.

"It’s clear that we don’t have the cash to send our private partners on their way and to borrow to do so may not have the desired effect, except make another set of arrangers and bankers rich...

But to reduce the tariff is not only a Bujagali challenge, even if the tariff from the dam account for about 60 percent of the current tariff to UETCL.

There is the issue of the 700 MW Karuma dam and the 183 MW Isimba dam which it is expected will come on line within the next five years.

The projections that these dams will sell power at $5.3 and $6.6 cents a unit for Karuma and Isimba dams respectively but that presupposes they will be firing on all cylinders from day one.

However industry experts wonder where the 800 MW of demand will come from. Uganda given its low industrialisation sees seven in every ten units generated  going to domestic consumption. There is only so much power a family can use. But even more of concern is that with the roll out of prepaid meters the industry has seen a falloff in demand or at least a slowing down in the growth in consumption.

"If government really needs to ensure the two new dams and Bujagali are working at full capacity and therefore lower the tariffs, they will have to go out and seek investors of the type that snap up this new capacity immediately. This would not be unlike what former energy minister Syda Bumba did in flying around the region to sign the regional power utilities to take up Bujagali’s power when it came on line as a precondition for donors to unlock their taps...

But beyond that we need to work to reduce commercial and technical losses on the transmission and distribution networks so that gains made in generation are not lost before they get to the end user.

Five US cents is the Promised Land, but there will be no silver bullets in getting there.

But I am sure government is well aware of all this and have girded their loins for the battle ahead.

OF PATRIOTISM AND THE QUEEN OF KATWE

Last week the much anticipated premiere of the Queen of Katwe happened in Kampala. This event would have gone largely unnoticed had it not been for journalist Timothy Kalyegira’s scathing remarks about the event and the 20 minutes of the two hour film he watched.

His comments kicked up a firestorm on social media – and not much elsewhere. The few of us on social media when we lurch onto one cause or another tend to believe the whole country, even the world, is paying attention. The truth is that more Ugandans were engrossed in the Kampala Carnival than the rantings of one film critic and his haters.

Let me first say that as of writing this column I had not watched the film so I have no insights to share about it. And I will not try.

However, going by the general plot – girl rises from dirty poverty to the brink of world domination, it is a good film for Uganda to be associated with. Better than the one’s about our dark past --“The Last King of Scotland” or “The Raid on Entebbe”. The overriding theme in this new film set in our country seems to be one of hope. That born in the direst of circumstances one can rise above the hardship and gain world attention for a positive achievement.

But what was real interesting about the social media fire fight was that every so often one person or another would accuse Kalyegira of not being patriotic. That his criticism was uncalled for given that Hollywood has made a film about Uganda to celebrate one of our own.

"It is a thing we human beings do, to close or “win” arguments we are disturbed by, uncomfortable with, we evoke a higher authority. Daddy said or things are not done like that or this or that holy book says such, such and the other. More often than not the authorities we quote, on closer scrutiny, did not mean what we claim they did, but it is convenient for us to quote them if only to shut up the other party and have our way....

Who is a patriot? To simplify, a patriot is one who loves his country and wants the best for it. As a opposed to a nationalist, one who believes his country can do no wrong. You might think the distinction is small but it is very pronounced.

Whereas patriotism can be exercised by everybody, every time, nationalism is most strongly felt by the people with a vested interest in the ruling elite of the time.

The Queen of Katwe gives us a nice neutral subject around which we can explore this question.

Going by our above definition it is patriotic to support a film that portrays Uganda in a positive light but it is also patriotic to demand that the film be made to a higher standard. It would nationalistic to deny any poor representation of Uganda in the film – the slums, the unsophistication of the plot or the actors, but it would also be nationalistic to adopt Phiona Mutesi’s rise to prominence as a result of Uganda’s improved general environment.

The point is using the words interchangeably is the source of much confusion and unnecessary hostility, and we are not just talking about The Queen of Katwe.

"Criticism of the way things are is the patriotic duty of all citizens, when you see something wrong, diminishing the country you love, you should bring it to someone’s attention. To be nationalistic and deny anything is wrong only plays into the hands of those benefiting from the status quo....

Of course how you express that displeasure could very well make the difference between whether people take notice and do something about it or rubbish you as a heckler and ignore you all together. In effect throwing the baby out with the bathwater.

So yes the critics of The Queen of Katwe, as with everything in Uganda, can be accused of being insensitive and even ignorant but being unpatriotic should not be one of the charges levelled against them.

SHOOTING THE MESSENGER

There seems to be a standoff between parliament and the press following the averse reporting on some MPs recent trip to the US and their demands for hundreds of millions to buy cars.

Parliament seems to be under the impression that the reporting of parliament stops at the plenary and the committee rooms and should not extend to the honourable members’ activities in everyday life – although the negative commentary has come from their official duties.

This might be dismissed as a spurt between lovers but this is a more important issue for the furthering of democracy, that should not be swept under the carpet.

For background’s sake parliament is the third arm of government – the others are the executive and the judiciary. Parliament broadly speaking, represents the people and performs an oversight role of government in determining that it is working in the best interests of the people. This is in addition to its role as law maker.

The press, whereas it is not an arm of government, has been recognised as the fourth estate. With the other three being the church, royalty and the representatives of the people. The term the fourth estate was coined during the time that England was transitioning from a feudal to democratic system.

Assigning the media the title of the fourth estate was a recognition that whereas the rulers’ excesses need to be checked, those who check the rulers need to be watched as well.

"Parliament must know that the outrage expressed by the media is at a best, a milder representation of what the public feels; A public who suffers understaffed, underequipped and ineffective social services. A public that endures poor transport systems; A public that sees little hope in an economy which is not ticking along as it should...

When you add to this the MPs splurging on foreign trips and threatening to throw their toys out of the pram if they don’t get their way, then you can see where the disgust comes from.

The media after all is a mirror to our society. If society does not like the media it, society, probably needs to take a good look at itself. The same can be said for our parliament.

The ideal is that parliament and the media should work together in holding the powers that be accountable, but parliament should not assume that the lenses will never be turned on them, especially since they are probably one of the biggest concentration of budgetary expenditure in this country. And also because parliament is manned by the human beings who at the best of times are fallible.

That being said, parliament is within its rights to have differences with the media, to question its methods and every so often be loudly vocal about their disapproval. But in looking for censure of the media, there are institutions through which this can be channelled.

By seeking out these institutions, in fact parliament will be strengthening institutions, devolving power from individuals and promoting due process.

"You have to worry when people in power cannot take criticism. It makes you wonder about what they are hiding or the insecurities they harbour. If one is secure within themselves they should be able to see beyond the raw emotion or delivery of the criticism, turn it around into a force for good...

The truth is, despite previous evidence, we actually expect a lot from parliament, its members and the institution. Our criticism is not unlike the scolding of a parent or teacher who knows his charge can do better. Believe it or not we do not believe parliament is beyond salvage.

OF OIL AND LOCAL CONTENT

A few months ago government issued production licenses to two of the three oil explorers paving the way for final preparations for oil production to begin.

Government had already issued a production licence to China’s CNOOC in 2013 who argued they could not do anything major until its partners, UK based Tullow Oil and Frances’ Total got their own licenses.

"It has been reported that up to $20b (sh66trillion) or about the GDP of Uganda will be invested by the time our oil fields reach peak production. Uganda has an estimated 6.5 billion barrels in the ground of which about 1.6 billion barrels are recoverable. At peak production it is expected that Uganda will be pumping out 200,000 barrels a day....

In money terms this could mean Uganda earning as much as 10 percent of GDP in royalties, profit sharing and tax revenues.

That is all very nice but those are official revenues, payments to government. There is the issue not being much discussed, which is the issue of how will Ugandan businessmen benefit from this windfall.

This discussion is going on in backrooms and not in the public space despite its benefits beginning to accrue well before real production begins and long after it stops.

Already we are seeing how it is a real issue with the building of the billion dollar Karuma Dam and the smaller Isimba dam. The contractors on this sites have pointedly ignored local producers of steel, cement and other inputs arguing that they are of inferior quality are not in adequate supply or don’t meet one requirement or another.

As a result manufacturers who had tooled their factories to take advantage of this new construction boom are operating well below capacity, with the excess capacity going begging, aggravated even more by the current economic slowdown.

Like the construction of the two dams, it is important to realise that exploitation of our oil find will continue with or without our input. The companies involved have already committed hundreds of millions of dollars to get this point and you better believe it that they have well laid out plans for every possible contingency including lack of local supplies.

If need be they will import their toothpicks, firewood and even toilet paper if we are not ready.

Speaking to various providers of local content it is clear we are not ready at a policy level or local capacity level and time is running out.

"Take for instance the job sector. It is estimated variously that the oil companies will be employing as many as 15,000 in fields varying from welders, electricians, plumbers and truck drivers. But outside the oil companies many more, in multiples of those hired directly, will be required...

We have a few thousand artisans of various types working in our local industries, doing business or just wandering the streets for lack of opportunity, so the industry will very handily absorb all this slack?

Think again.

According to Patrick Mbonye, founder of human resource consultants Q-Sourcing, the industry will not be hiring any one off the street and will definitely be hiring the graduates of our various vocational institutes.

“There demands are very specific. One needs to have internationally recognised certification to have a chance of working in the industry, first because they want to be sure your skills are up to their requirements and secondly, for their own regulation issues, “he explained.

For instance, in the second instance, to match safety regulations they need to insure the workers but the insurance firms will not insure unqualified people.

Mbonye’s firm The Assessment and Skilling Center (TASC), which is affiliated to several international certification bodies, has done some assessment of some of graduates of a vocational institutes and the results have been dire.

“Our people don’t have the skills required. Period.” He says. “They have done a lot of theory but cannot apply it.”. He warns that by the last quarter of next year, 2017, when actual work will begin, hundreds – he estimates at least 3000 artisanal workers will be needed, of artisans from around the world will be making their way here, taking our bread from under our very noses....

Mbonye says it is not a lost cause yet but time is of the essence, as taking the best of our current crop of workers and raising their skill level will take at least a year.

A disdain for vocational training  means that gaining certification may seem a pricey affair, TASC’s cheapest certifiable course costs $1,400 for a five-week basic electrical installation course by the City & Guilds, the UK based global leader in skills development.

His is one of only two organisations in Uganda that offers this certification – the other is Kinyara Sugar Works.

Maybe we should be content with the anticipated hundreds of millions government will collect in revenues and not try to be too clever and try getting prepared at an individual level for the oil but that will be stupid at best and criminal at worst.

ELLY RWAKAKOOKO: URA’S BLAST FROM THE PAST

Last week former Uganda Revenue Authority (URA) commissioner Elly Rwakakooko sauntered into our news room to shoot the breeze about the good old days.

I wish.

Rwakakooko had come in to set the record straight about his time at URA and what eventually led to his departure from the tax authority, which last week commemorated its 30 years of existence.

“I declined another term because I didn’t entirely agree with the methodology being used to discipline people not paying tax,” Rwakakooko remembered.

At that time a paramilitary organisation, the Anti-Smuggling Unit (ASU) was constituted to clamp down on smugglers but also apprehend tax evaders.

“ASU was becoming a big military unit. I said no. I even closed their accounts. I even declared the group a security threat and refused them entrance into the URA offices.”

A look back into the papers then shows that there was real tension around the situation reported as a standoff been Rwakakooko and ASU boss Kale Kayihura.

"Rwakakooko, who says he initiated tax education of the public at URA, said it is counterproductive to try and collect taxes by force....

“If you don’t educate people about the value of taxes they have paid, they will revolt and then what will you do?”

He remembers a survey he did of 36 of the then 39 districts and documented cases of the killing of policemen following a nominal increase in the graduated tax rate.

“You can only enforce tax collection if the people broadly agree to pay tax.”

Rwakakooko who worked in Canada and Kenya, was once the chairman of Uganda Commercial Bank and a lecturer at the Institute of Public Administration (IPA), now the Uganda Management Institute (UMI) says the challenge for URA remains the continued informality among business men.

He says up to 80 percent of all taxes collected comes from Kampala as if nothing is happening beyond the city’s suburbs.

The economy is becoming more formalised by the day he recognises, but he frowns at the slow pace of progress.

“This process needs to be supported politically we have no choice we need to raise more revenue urgently.”

Currently Uganda’s revenue to GDP, an important measure of whether enough tax is being raised in a country, stands at about 12.6 percent. Below the Sub-Saharan Africa  average of 13.8 percent but way below Kenya or Mauritius where 18.4  and 19 percent of GDP is collected respectively.

He says there is one other thing that lets us down as a country.

“Strategic planning. If you do not engage in strategic planning you will have problems,” he said. We will be able to identify our priorities and tailor our expenditure with these plans in mind.

“Some politicians – not all, are too selfish. They don’t care about telling lies. We have to tell the truth. If a strategic plan is in place and people want a road and its not a priority tell them,” and he stopped at that.

"He rues that political expediency is dominating our actions, where more strategic thought should be applied...

Lest we forget Rwakakooko was also at the center of a very strategic question about twenty years ago.

“I was opposed to privatisation. Not the principle but the methodology,” he recalls. At the height of the discussion he was the chairman of the committee on the national economy in the National Resistance Council (NRC).

He argued then that if you opened the sale to foreigners who were better capitalised they would come in and drain out the lifeblood of the economy.

What did he propose?

“I wanted the UDC (Uganda Development Corporation) to take the lead.”

The argument against this at the time, was that we didn’t have the managerial capacity nor the capital to resuscitate these companies.

He acknowledges that management was a problem but that this could be contracted from abroad. As for the dearth of capital he says that was not true and if Ugandans were mobilised to take an equity stake in the companies that would not be a problem. More participation by Ugandans too would hold managements accountable.

“You see what is happening at Bugisu Cooperative Union (BCU). Once it is owned by Ugandans they will protect their interests.” But adds the proviso, “If you have the support of the center of course”.

  

The members of BCU have been fending off political interference in its operations recently.

"Does he think his analysis was vindicated at the time? “Oh yes! But my friends complain that the realisation has come too late. But you hear it people are calling for the revival of UDB to unlock some of the issues in the economy.”...

If he had his way he would resurrect the coffee and produce marketing boards as well as our textile industries as trigger for self-sufficiency.

“Nobody owes us a living. We have to do this ourselves.”

Our conversation come to an end. Maybe too soon. So what is he doing with himself now? He wants to retire to his village and push community development. He is already involved with more than 128 cooperatives and ten cooperative unions working to unlock the full potential of the dairy and beef industries in southern Uganda.

CONGRATULATIONS URA!

This week tax collector Uganda Revenue Authority (URA) celebrated 25 years of its existence, a laudable milestone not only because of the passing of the years but of how the institution has developed over the years.

After years of decay the old revenue office at the finance ministry had collapsed and would have been unable to meet the challenges of a society in urgent need of funds to for recovery. That being said it still had some human resource many of whom continued into URA and formed the initial backbone of the now autonomous tax collector.

The atmosphere at the time was a new government trying to find its feet.

The tussle between the command economists – mostly bush war veterans and the liberal economists – mostly technocrats in the finance ministry and central bank had only just been decided in the latter’s favour.

"Among many urgent reforms needed – breaking up government monopolies, liberalising the markets in everything from produce to currencies, was the urgent need to collect revenues...

The tax man has never been a popular member of society. It did not help that improved revenue collection was a condition for engagement for the donors especially the World Bank and IMF – the favourite punching bag for the post-colonial administrations on the continent.

As a condition for support it made sense to insist on better revenue collections, otherwise how would the donors get their money back?

In its first year of operation they collected sh180b or just under $180m, which figure is up to sh11.2 trillion in the last financial year or about $3.4b.

"The more than 60-fold jump in collection during the period is laudable in itself and reflects not only the growth in the economy but the increasing effectiveness and efficiency of the Authority....

Interesting too is  how we in those 25 years we have shifted away from reliance on taxes from external trade to domestically generated revenue. Can you believe that coffee exports were our biggest source of revenue at one time?

These improvements have not come without sweat, tears and even blood. Tax payers have fought the URA on the introduction of VAT, resisted the paying of road licenses and continue to weave and dodge against paying any number of taxes.

While there is cause for chest thumping about how much more tax we collect as ratio to GDP, which comes in at 13 percent, it below the Sub Saharan Africa average of 13.8 percent, and well behind Kenya at 18.4 percent, Mauritius 19 percent and South Africa 26.9 percent.

Increased revenue collection is critical to finance infrastructure, health and social services. But more importantly to wean us off aid, allowing us to determine and follow up on our own priorities.

"A need to collect more domestic resources will also improve our politics. As it has been because government was being financed externally – at one time more than eight in every ten shillings in our budget was from donor assistance, they did not have to negotiate with the population raise revenues. ..

As long as you could tick off some perfunctory targets like reducing the number of people living on a dollar day the aid taps would continue to flow. But to raise taxes there has to be a negotiation with the locals and they need to see some return on their money before they willingly pay up, that takes greater negotiation skills than is needed with dealing with donors, which leads to democracy.

So clearly URA is at the center of determining the future of this country.

Of course URA has little leverage over what goes into the tax code and is often criticised for doing their work in the classic case of shooting the messenger. There is really little scope for introducing new taxes, future progress will be determined by how effective URA is in roping more and more people into the tax net.

Despite some unwelcome sounds from our political elite it is safe to say that URA’s foundations are solid enough that it is possible they will be here to celebrate their golden Jubilee in 2041.