DO NOT THROW OUT THE BABY WITH THE BATH WATER

I am not a big fan of parliamentary probes. They tend to be high on drama and low on substance.

Last week's parliamentary report on the National Social Security Fund (NSSF) probe did not disappoint in this regard.

The probe which took two weeks in February, was called in response to gender minister Betty Amongi's allegations of mismanagement at the fund that were preventing her from renewing former managing director Richard Byarugaba's contract.

The probe hearings served up a lot of sensation and ended up besmirching the reputations of the minister, board and management. Given the tone of the probe its recommendations for minister Amongi to resign, scrapping of the board and suspension of the entire management should not have come as a surprise.

Its former US President Barack Obama who said that democracy is messy. And in the exercise of that messiness a lot of good can get thrown out with the bath water.

"When you strip away all the dazzle and razzmatazz I came away feeling that the good performance of the NSSF management over the last decade was overshadowed and unfairly so by what I thought were some administrative lapses...

These lapses while quite shocking were often seen out of context and blown out of proportion.

First of all the fund has shown consistent growth since 2011 growing to sh17.5trillion last year from sh1.7trillion. A tenfold growth that has been independently verified and speaks to the progress the management has made for its members.

And while it is true that some investments have not shown much growth during the period, it is unrealistic to expect uniform growth in a basket of assets and to pick certain parts of the portfolio, which are under performing to damn the entire portfolio.

In fact, to objectively judge the Fund one should look at their 10 year strategic plan that was drawn up in 2015 and expected to expire in 2025.

In this plan they had set a target of growing the fund to sh20trillion,  a target they seem to likely to achieve ahead of target; to improve customer satisfaction to 95 percent, a figure which stands at 83 percent today; growing staff satisfaction to 95 percent by 2025, which is currently at 92 percent and finally to reduce turnaround time for processing of benefits to one day from the average of 26 days in 2015. Today this figure stands at nine days.

"This progress shared publicly with the members annually, suggest that more has gone right than wrong at the Fund. To lose sight of this would be to unfair to the management and demotivating for future leaders of the Fund....

One issue that was particularly unfair was the committee's criticism of the sh16b and sh17b bonuses paid to staff in 2021 and 2022 as excessive and uncalled for.

In any other organisation in this country those figures would seem outlandish, but in both cases this was in recognition of the funds creation of sh2.3trillion and sh1.7trillion in additional value. Simple arithmetic would show this was one percent or less of the value created and well with in a realistic range.

The number looks big if not viewed in its proper context.

The parliamentary probe was a good one to the extent that it gave everybody a hearing, the challenge was the conclusions it arrived at, which painted the management and staff in a less than fair light.

I know that the attraction to control or at least influence the goings on at the sh17trillion Fund can be hard to resist for even the most upright saints. But we need to recognise that the Fund is on a positive trajectory and it  should be helped to maintain this for the benefit of its members and the economy as a whole.

I have been a member of the Fund since my first paycheck in December 1995, I have an obvious bias to see NSSF continue progressing in its positive direction for at least the next five years. Beyond my own selfish needs it will do me good if it continues being profitably run well into the future so my sons and their children after them can benefit.

"This has been the longest stretch of good performance of the Fund in living memory and  compares favourably with other funds in the region....

The Kenya's NSSF, which has been in existence longer than our own, lags behind our Fund in performance. By one measure, their assets have grown an average of eight percent annually over the last five years compared to 17 percent per year for our NSSF. And  this despite our Fund being bigger than theirs.

As we go into the debate of the report by the whole house of parliament, we  would do well to keep this perspective in mind.

Again to paint this period black would be a great disservice to the management and the future prospects of the Fund and if the house cares anything about the members of NSSF they will do well to keep this in mind.

UCB; FLOGGING A DEAD HORSE

Easily half of all Ugandans alive today were born after 2000. This is a source of great opportunity for the country, in that if managed well, this young population will deliver a boom in the economy in coming years as they become productive citizens. 

On the flip side, it also gives opportunities for revisionists to confuse the youth about the country’s history.

In the last week the fate of the defunct Uganda Commercial Bank (UCB) and the role of former central bank governor Emmanuel Tumusiime Mutebile in its demise came up. It was suggested, no, forcefully declared, that Mutebile’s closure of the UCB was part of an imperialist plot to weaken the economy.

I personally reported on the UCB privatization process, but before that the seeds of its destruction were laid by bank and government officials who thought they could suspend the laws of economics, politics and good sense to keep the bank afloat, accelerating its demise instead...

By the time the NRM came to power in 1986, UCB like the rest of the economy was on its knees. It was the biggest bank by deposits and with 36 branches – a branch in almost every district, was the biggest by branch network as well. But the huge branch network was more a liability than an asset as they were not connected and could not activate the synergies that would come with the branch network.

To illustrate, as recently as 2000 before it was privatized, if you drew a check in UCB Kasese and came to cash it in Kampala, it would take at least a month before your account was credited.

It does not take a detective to surmise the shenanigans that would go on to speed up the process.

This is important, because in the 1988/89 budget, then finance minister Dr Crispus Kiyonga announced the launch of the Rural Farmers Credit Scheme (RFCS), which was supposed to avail credit to small farmers, he however lamented that the UCB network, through which the scheme was being implemented, was too limited. He reported with glee that the Bank was set to open 136 new branches in the coming year to facilitate the scheme.

This was obviously a political decision.  There was no mention of how much government was going to give UCB to aid this project, which would have been necessary to shoulder the four-fold expansion of its network. In the next budget he reported that the bank branches had actually risen to 170.

Bankers tell me that to open a new branch anywhere in the country today would take at least $350, 000 or more than sh1.2b and that’s before salaries and overheads. So even if we reduced the cost of opening a bank by a factor of 10 to about $35,000 the bank was going to lay out at least $4.8m in a year to make the minister’s wish come true. Even the government of Uganda would be hard pressed to come up with these figures at the time. In the previous year government had collected sh17b in tax revenues or about $113m at the official exchange rate of sh150 to the dollar.

So, the bank must have dipped into its already strained resources to meet this commitment and it would not be a stretch to imagine that, they used depositors' money as well, in the hope they would put it back before customers realized it.

This did not happen, as the RFCS was a spectacular disaster that accelerated the bank's downward spiral. The general economy did not benefit from the scheme , the evidence being that 40 years later we are still a subsistence agricultural economy....

It was no wonder then, that one-time UCB boss Professor Ezra Suruma reported in his book “Advancing the Uganda economy” that cash was short in the bank at one time, that to cash your check at the main branch, you would be asked to wait as depositors came in and their money given to you. No bank would reach that state of illiquidity now before it was shut down. Which is as it should be.

While the connected types are blamed for borrowing the money and running, the unsustainable expansion of the branch network egged on by armchair economists, takes the bigger blame for the bank’s troubles.

And the government tried to save the bank. It swallowed all the bad loans that resulted from the RFCS, and placed them in the Non-Performing Assets Recovery Trust (NPART), filling the ensuing hole in UCB’s books with sh100b.

Finance minister Jehoash Mayanja Nkangi lamented that with those funds, he would be able to build three new classrooms for all schools around the country. That’s the cost of government intervention the critics do not factor in their musings.

But after cleaning the balance sheet, UCB went right back into its evil ways, accumulating bad debt and generally acting as a weight around the neck of the industry and the economy.

"So, to stop further hemorrhage government stopped the bank from lending, with all deposits it got going into buying treasury bills, which in 1992/93 were traiding at more than 20 percent, explaining how UCB became profitable again just before its privatization...

 But the bank was supposed to lend to the public and not to the government. People in the know discount the profitability of the bank at this time, as it was not serving its core function.

In a nutshell that is what led to the privatization of UCB, government could not support it and it was leading to the inefficiency of the entire banking sector.

The government insistence and Mutebile’s eventual disposal of the bank has actually ensured that the bank serves its role. So much so that UCB, now Stanbic, pays in taxes every year for the last three years, the equivalent or more than $20m. This is the amount Stanbic paid for UCB.

The revisionists want us to believe that selling the bank to foreign capital, has been a disservice to the economy, while presenting no evidence. It is just sexy to abuse foreign capital. The evidence paints a very different picture.

UCB was privatized in 2002 since then across the industry, deposits have increased to sh30.2trillion as of June last year from sh1.33trillion in 2000 (I couldn’t find 2002 figures in time for this). But more importantly lending jumped to sh18.3trillion from sh0.53trillion during the same period. This growth is not solely attributable to economic growth, as credit grew by about 17 percent annually, almost thrice as high as the average 6 percent growth shown by the economy during the comparable period.

While credit to real estate development, personal lending, trade and manufacturing are still ahead of agriculture, it is safe to say it is Ugandans who have benefited the most from this trend. Personal lending grew to sh3.7trillion in June last year from an insignificant number in 2000.

The critics seem to suggest that if banks were locally owned we would have done better, suggesting maybe locals would be given favourable rates and managers would look away when they default, is that the kind of banking industry we want? Especially since the beneficiaries would be an even narrower base of connected people as we have seen in the past.

If as Ugandans we are failing to gain funding for our personal projects the evidence shows it is more a function of our poor business acumen than that UCB is dead.

 

WHEN IS ENOUGH EVER ENOUGH?

Many years ago a local paper published a story about how one minister had proposed he be paid a few hundreds of thousands of dollars to organize an audience with the president for the payers.

As soon as the story ran, the minister called the newspaper and in his defence complained that other people had eaten more money than him and that they should go after those ones before rounding in on him. He did not deny he had solicited the funds.

"We have been served up spadefuls of moral relativism over the last two weeks with the revelations about the Karimojong roofing sheets.

According to the story, the Office of the Prime Minister and more specifically the ministry of  Karamoja affairs, has been dishing out iron sheets meant for development in Karamoja, to everybody but the Karimojong.

Beneficiary politicians have argued they used the sheets for roofing schools, health centers and even an animal shed. None of these charitable projects are within walking distance of the Karamoja region.

The politicians, while sidestepping the question of why they got the iron sheets, clearly marked for Karamoja, have gone on to explain that the sheets were not for their individual benefit – though one minister acknowledged it would help his reelection prospects in 2026.

If you were hoping for a wave of cabinet resignations on this clear abuse of power, do not hold your breath.

One does not know whether to laugh or cry.

The NRM government has not got a patent on corruption.

The colonial project was a corrupt exercise, in which the colonialists  took control of the country, extracted resources cheaply for their industries, while putting back the bare minimum into the local economy, just enough to subjugate the people, train a local elite as their agents and ensure the continuation of the extraction. At independence out of a population of seven million there were 300 A-Level students.

"After independence, to reverse this naked exploitation, government, short on manpower, never the less pushed the africanisation of public offices agenda, where the colour of your skin rather than competence was the leading qualification. This was the beginning of the end of the little meritocracy that the colonialists bequeathed us....

We went beyond the colour of skin to the language we speak, the village we came from and who we married, non of which were a gauge of one’s competence.

When the NRM came to power in 1986, top of the agenda was to broaden their narrow political base. While denials will come fast and furious, that it was not official policy for the victors to help themselves to public resources, it is clear at least, that the NRM has pointedly looked away when officials have enriched themselves beyond what their public emoluments can justify.

It has not been unusual for senior officials to retort at questions about their wealth by evoking their bush day credentials.

And we Ugandans are also complicit in this looting. We were so grateful for them saving us from the dark days that a penny pinched here another there, would not raise much alarm.

But as one media personality asked in exasperation many years ago, “Why don’t they give us their invoice and we pay them?”

And that is the crux of the matter. When is enough, enough?

However, corruption does not work like that.

Take a normal working Ugandan, who is used to a monthly paycheck. Take that away and there will be much gnashing of teeth and renting of cloths. The same with public officials take away their office where they have had unrestricted access to the public kitty and all hell will break loose.

"They have commandeered the public purse – this year’s budget was sh48trillion, and by some moral gymnastics, have convinced themselves they are allowed to plunder the treasury at leisure. You can see it in their replies when they are caught with their hands in the till. There is no remorse, to the point that they wonder what the fuss is all about...

And of course the extent of corruption has grown from year to year. Not only because the resources in the treasury have grown – many years ago one minister resigned because he had appropriated 2000 liters of diesel to himself, compare that with 12000 iron sheets stolen from the Karimojong and you begin to scratch the surface of the exponential growth of this industry.

It goes without saying that we should be worried. These rapacious officials will not suddenly get a moral revelation and stop their thieving ways, but instead their appetites will grow and grow. They will become so powerful they will capture the state, making themselves untouchable and woe onto anyone who tries to move on them, they will dispose of that person install their own compliant crony and accelerate the eating.

The playbook is well established, documented and time tested.

 

 

 

OF THINGS LEFT UNDONE AND THE CONSEQUENCES

Last week the finance ministry issued the final instructing on how accounting officers should draw up their budget for the next financial year.

In “The second budget call circular on finalization of the budget estimates for the financial year 2023/24,” secretary to the treasury Ramathan Ggoobi drew the broad outline of the next budget, which has been bumped up to sh50.87trillion from the previously announced Sh47.328trillion.

Despite the increase in spending Ggoobi said there will be no borrowing in 2023/24, there will be no budgetary increases for any ministry, travel abroad will be restricted to the president, vice president, parliaments speaker and deputy, the chief justice and his deputy, the prime minster and principle judge.

He went on to announce the suspension of any salary enhancements in the public service, vehicle purchases, workshops and seminars among others.

"You could almost hear the affected public servants laughing in their beer.

The indiscipline in public finance management of this government is legendary and one can only wish Ggoobi luck...

The constraining of government expenditure is to ensure resources to start construction of the standard gauge railway, fund small scale solar funded irrigations investments, construction power distribution infrastructure, capitalization of the Uganda Development Bank (UDB) and The Uganda Development Corporation (UDC).

That being said the government’s intentions are noble, especially since they are trying to put the brakes on our extravagance, focus on investments and will pay massive dividends in future.

It could have been worse. In Kenya across the border, interest payments account in 2020/21 for 70 percent of their export receipts, while Uganda’s total debt service obligations are less than 10 percent of our export receipts, according to Stanbic Bank’s recent Macroeconomic Outlook.

In addition our eastern neighbour’s total interest payments  as a percentage of tax revenue stood at 30 percent while ours was under 20 percent in the 2020/21.

While we fixate on our debt levels to GDP, which crossed the psychological 50 percent mark last year, the more threatening figure is what portion of budget is going to debt servicing. In the new budget sh23trillion is going towards debt servicing against a budget of sh50.871trillion or just under half the budget.

Everybody knows what happens to you today is a function of something you did or did not do in the past.

Without diminishing the effect of the Covid-19 pandemic on the economy, we are in this tight squeeze partly due to things we did not do in the past.

The presidential directive especially on the railway is one of those things we should have done along time ago. It should have been obvious to me but a few years ago – before Covid, someone involved in the railway told me that industrialization can not happen if we continue depending on the roads. That the history of industrialization shows that railways and water transport are major drivers of industrialization. I remember having flashback about the Ruhr industrial region in Germany, named after the Ruhr river, that was used to ferry coal, iron ore and steel, similarly The Great Lakes industrial region of north America.

Interestingly to make resources available we are cutting back on the consumption budget of the government.

"Observers have cried their voices hoarse arguing that the ever expanding public expenditure would catch up with us one day. I guess our day of reckoning is here...

Another project that comes to mind is the 600 MW Karuma dam. Construction of the dam begun in 2013 and it was supposed to be commissioned in 2018, five years down the line and not a watt of power has been generated.

In a country where only a quarter of the population has access to the grid, the demand for power can not be denied. People may argue about effective demand – those who can pay for the power, but we know that there is still suppressed demand – not to mention some industrialists can not turn up here for lack of reliable power. So imagine if the 600 MW had come online in 2018, government coffers would be richer from the experience – not only from taxes from the operations but from all the new businesses that would have spouted as a result. The current cash squeeze might not have been so bad.

"Part of the reason the Karuma dam is so delayed is the flawed procurement process. It was so bad that it took President Yoweri Museveni to decide who gets what in an almost Solomonic judgement that also involved Isimba, which is dogged by its on structural issues....

Go around any sector of he economy and you will hear tales of woe, of things left undone, which have come back to haunt us.

Do we have the discipline to go through with the current measures? I hope so.

SAPS; UGANDA’S FAVOURITE BOGEY MAN

Picture this, you are in a world of hurt. Your income can not cover a month as the demands on that money –school fees, rent, fuel, food are just overwhelming. As if that is not enough, you lose your job. So, you go to your neighbour who is better off, for a loan.

Your neighbour would love to help, but more importantly he wants to get the money he lends you back, at some pre-determined point in the future. He is not a charity.

So, he sets some conditions for you if he is to lend you the money. Getting a job may not be easy, so most immediately he makes it a condition that you cut back on your lifestyle – move into a cheaper house, shift your kids to less expensive schools, cut out morning and evening tea and on some days you can eat two instead of one meal.

In the meantime, he wants you to look for a job. He may even be willing to pay your school fees to upgrade your qualifications. He wants to improve his chances of being paid back.

You have a choice to put pride aside, bite the bullet and accept the prescription in order to get the loan or tell your neighbour to go to hell and go and beg or con someone else who will lend you the with less onerous conditions.

Extrapolate this to the national level and these are the choices that faced the NRM and the Obote II before them.

"When the NRM came to power in 1986 not only were the national coffers bare, but also the economy had shrunk below its level fifteen years prior. In fact, it took almost 15 years from 1986 to grow the economy back to where it was in 1971...

After trying to get the economy back on its feet on our own resources failed, they turned to the World Bank and the International Monetary Fund (IMF) for help.

To access financing from these two Bretton Wood institutions they had to sign up to some conditions, which basically were to cut back on government spending and raise tax collections – Structural Adjustment Programs (SAPs).

This is not high finance, its commonsense.

Among the things government had to do was to shrink the size of government, sell loss making parastatals and liberalise the economy, let the private sector drive growth. In terms of raising taxes the Uganda Revenue Authority(URA) was created and invested more in infrastructure.

The measures to cut costs meant for starters, quite a few people lost their jobs a government was downsized and parastatals were sold off. Government struggled or cut budgets to things like university education and sports.

It is understandable why people were not happy with it.

"NRM tried to do it alone, thinking they could print money to climb out of the economic hole they found themselves, but this only made matters worse, with inflation hitting 250 percent a year...

To put that inflation rate in perspective it means prices were doubling every four months. That meant if you paid one million in school fees for your kids in January when you went back for second term it would be two million shillings and in third term would be four million shillings. we were here screaming when the price of petrol went up from sh4000 to sh5000 a 25 percent increment in a year, what would we be saying in 1987 when inflation was galloping out of control?

So when I hear people criticizing SAPs I think two things, either they were the beneficiaries of the economic chaos or they don’t know what they are talking about. I found that more times than not it is the latter rather than the former.

The main criticism of the SAPs was that it opened up our economies to the acquisition of our “assets” by foreign capital.

In Uganda’s case we are being very generous by classifying our parastatals as assets. An asset makes you money but these companies were a drain on the treasury, diverting money for more essential services to prop up under capitalised and badly run companies. People say if only government had recpaitalised the companies they would have been fine. When I hear this I don’t know whether to laugh or cry.

Government was so broke that it shut down Uganda airlines because it could not afford the sh10b (about $10m) a month it cost to keep it afloat. Today government would fill little pain with such payments.

If our “assets” were taken it was because of our own weakness. Kenya across the border from us did not have to let go of their state enterprises, because they were actually net positive contributors to the budget.

Now I hear President William Ruto is looking to flog them on the open market to raise money to clear some of the country’s huge debt. Common sense.

 

GOVT, KINYARA SWEETHEART DEAL SOURS INDUSTRIAL SUGAR SECTOR

 A deal to discourage importation of industrial sugar is set to make Kinyara Sugar Ltd windfall profits, as the only producer of industrial sugar, but has distorted the market leading to reduced production, job losses and increased imports of confectionaries.

Industrial sugar is used in the production of soft drinks, pharmaceuticals, icing sugar, sweets and other confectionaries. It is more highly processed, whiter and finer than the sugar we use domestically.

Kinyara started producing industrial sugar in 2021 and in that same year, government suspended a duty remission of 10 percent, industrial sugar users were allowed in the importation of the critical input.

Under the East African Common External Tariff (CET) goods, which are essential for production but unavailable in the region, are allowed 10 percent off the import duty -- duty remission, as a way to support industries that use it in production. A suspension on the duty remission means the importers would pay 100 percent of the import duty, forcing their costs up and maybe the price of their products up as well.

"Kinyara has an industrial sugar plant that has an installed capacity of 60,000 tons, though actual production has not exceeded 30,000 tons, way below the local demand of 98,000 tons....

The industrial sugar consumers have complained about the suspension of the duty remission as a way to force them to buy industrial sugar from Kinyara.

The government in two meetings held with the sector said local production of industrial sugar was to be supported and users would be “encouraged” to buy from local producers rather than import.

In a meeting convened at the finance ministry in March 2022 it was reported that the suspension of the duty remission was “sneaked in”.

“The importers of industrial sugar informed the meeting that they had made orders based on the gazette notice dated 30^th June2021 that run for the entire financial year ending 30^th June 2022. And therefore, their imported refined industrial sugar is currently stuck in bonded warehouses and factories are bound to close,” according to minutes from the meeting.

Under the terms of the suspension the importers had been given import quotas lasting until March 2022 and by the time of the meeting on 29^th March 2022,

“URA informed the meeting that the importers of industrial sugar had exhausted their quantities under the duty remission quotas, as provided for under the amended gazette dated August 2, 2021,” according to the minutes which Business Vision saw.

But beyond the ambush, importers of industrial sugar questioned the quality of Kinyara’s product and complained that its supply was erratic at best.

Users complained that Kinyara’s in tests done by the Uganda National Bureau of Standards (UNBS) and Chemiphar had among other short comings shown that the sugar had a high moisture content unsuitable for making icing sugar and caused machine damage because of the existence of water insoluble matter.

One company complained in a November 2022 meeting, “Locally sourced white sugar has hard particles and causes damage to machinery”

Another company complained that “They are faced with challenge of limited supplies and this is because they require over 125MT a month, but Kinyara can only supply 60 metric tons per month.

“In addition, local sugar prices have increased from sh165,000 to sh240,000 (per 50kg bag wholesale).”

This situation will open the door to importation from regional confectioners who are still enjoying the duty remission denied Ugandan counterparts.

In response Kinyara admitted it cannot supply the whole market.  It reported that the demand for its sugar is mostly coverd by Coca cola, Pepsi and Riham “Who take up 90 percent of its production and are therefore given priority when orders are placed.”

However, sources familiar with the operations of the Coca Cola Beverages Uganda and Crown Bottling company – Pepsi, dismissed these claims as lies and said they had ever only got samples for testing.

“The quantities they refer to would only run the factory for 20 minutes and was not up to scratch in quality,” he said.

"Part of Kinyara’s inability to produce at full capacity is an industry wide shortage of cane caused by the unplanned licensing of millers by the trade ministry mainly in the Busoga region. While there has been an explosion in the number of millers there has not been an attendant increase in sugar cane production....

This situation has led to poaching of cane by millers from as far as Atiak in Busoga or in Bunyoro from Busoga. As a result the industry expected sugar production is not expected to meet the target of 600,000 tons in 2022.

Both companies have urged government to go slow on suspending the duty remission until after their parent companies have tested Kinyara’s sugar and given the green light to use it.

In both finance ministry meetings they in addition, said that they – Coca Cola Beverages and Crown, are locked into long term contracts with foreign suppliers that cannot be terminated without suffering penalties.

Following the end of quotas last March importers have had to lobby intensely to government to allow the duty remission continue until at least Kinyara can supply the market with better quality sugar and more consistent quantities.

But they complain that their imports can be frustrated and it takes more lobbying to have them released under the duty remission.

As if that is not enough industrial sugar users complain that Kinyara’s product is significantly pricier than the cost of landing industrial sugar here from traditional sources.

In November Uganda Manufacturers’ Association (UMA) pointed out to the finance ministry that “It has come to our attention that the international price for sugar is $533 per ton, price landed at Mombasa is $729 per ton interior freight cost is $74 per ton and EAC duty remission is 10% bringing the price of a ton of sugar at $883, (Ugx. 3.4 million). A ton of sugar from Kinyara as at 9^th November, 2022 was at Ugx 4.1 million (Ugx. 205,000 per 50 kg bag). Kinyara sugar is priced 17% higher than the rest of the region.”

 “While the global prices have generally been on a decline, Kinyara prices have taken an opposite trend rising with every different consignment ordered,” UMA complained.

 That was in November last week an industry player said, “We buy off the futures markets so we have already established the price for our next shipment in 3 month’s today… this can easily be around USD 550 per ton… so a guy from Bujenje Masindi selling his at USD 1,200 is having a laugh.”

 

"Industry players complain on the sidelines that this deal was intended to favour Kinyara and talk of other producers is a red herring...

 Industry players are adamant they are not against locally produced industrial sugar.

“You would be mad to forego a competitively priced locally produced product for an imported one. It does not make business sense. We are saying that let government consult industry players, let us know their plans and we work towards them together. This situation has been handled badly, unnecessarily,” an industry player told Business Vision.

 

 

COMMENT REGARDING KINYARA WHITE SUGAR PRODUCTION 

Kinyara white sugar refinery has an installed capacity of 60,000MT per annum. Plans to expand the refinery to produce 75,000MT per annum are underway expected to be operational by end of March 2023. This expansion brings the refined industrial sugar production capacity to 120,000 MT per annum which includes other producers like Mayuge Sugar and GM Sugar. 

After commissioning the first sugar refinery in the whole of East Africa in Q3 of 2021; in line with the Uganda Manufacturers Association (UMA) and Ministry of Finance, Kinyara Sugar embarked on obtaining the UNBS Certification in Q4 2021. The refined industrial sugar is therefore certified by UNBS and Kinyara follows all the international sugar production norms and standards. 

The available refined industrial sugar stocks are enough to supply the local market needs and no single product went off the shelf because of lack of sugar. As a matter of fact, the company has exported more refined industrial sugar than what has been sold locally so how can one claim that there isn’t sufficient capacity? 

It’s also worth noting that the existent import duty remission scheme is being abused by some industrial users who claim higher consumption than what they actually use and later divert the cheap imported white sugar into the retail market. This usually happens at a time when domestic sugar prices experience a temporary spike which presents an opportunity to import and sell to make profits. 

The quota scheme is being abused by the many importers who are exaggerating the quantities of sugar to sell in the retail market. Some of the importers who actually use the brown sugar are now importing refined industrial sugar as a substitute for the brown sugar especially when the sugar prices rise and this ends up in the retail market. Currently, only carbonated beverage companies make up 90% of the market for the refined industrial sugar. Other purported users over state their refined industrial sugar requirements and later divert it into the retail market. The abuse of the import duty remission scheme is affecting the export market for the light brown and brown sugar within the East African Community partner states hence causing a big challenge to the entire sugar industry and the related value chains. 

The concerns raised by EAC partner states are pertaining production of surplus sugar in Uganda yet the country still imports refined industrial sugar. It’s therefore important to put in place some measures that protect the local refined industrial sugar production in the country and stop the abuse of the import duty remission scheme.

 

 

 

 

 

 

OF SMALL, THE MOBILE PHONE AND THE ECONOMY

There was a celebration to be had. Everything – the cake, the drinks, the guestlist, were in place. The last call was to be to Small, a far from small lady, who operates out of Kumbuzi on Gayaza road, and delivers the most succulent roast goat, the one which easily falls easily of the bone and its juices so tasty that closing your eyes as you chew, is the natural reflex.

For the first time ever, Small could not be contacted. Her phone was off. Demand for her offerings are so high that a drive to Kumbuzi was imperative. She was there suffering a slow day because her phone was stolen only hours before.

After making the appropriate sounds an order was placed for her world beating goat ribs and some chicken. The bill? sh147,000. Sh147,000 money she would have missed on a slow Sunday.

But it also made me wonder how much money she makes when her systems, read her suppliers, grill and weather, are all on go.  But most especially her phone.

In 1999 Uganda’s GDP growth jumped to 8.1 percent from 4.9 percent the previous year.

There had been no coffee boom, the donors were a bit pissed with us for going back into the Democratic Republic of Congo (DRC) and had withheld aid, 1998 was the year of El Nino, the freak weather pattern which manifested as uncharacteristic heavy rains, so harvests were affected.

"But in the previous year South African telecom MTN entered the market and in 1999 we were the first country in Africa in which mobile phone connections exceeded land line connections. Which was not saying much, as at the time there were 50,000 land line connections ...

I like the to think MTN’s huge investment in trying to stretch their reach around the country, had some thing to do with it but more importantly it is the greater efficiencies to business that came with this new connectivity that made a major difference.

Small is anecdotal proof in the 21^st century how connectivity is helping business. In 1999 this must have been nothing short of revolutionary. Traders no longer needed to guess at the availability of supplies and prices; meetings could be called or cancelled with a phone call; you did not have to chained to your desk phone to stay in touch.

They may look like small things, but they add up when they were spread over 100,000 new phone users.

Of course, since that mobile phone has increased phone coverage is now national, about 70 percent of the population now have access, but in addition we are now also connected to the internet via our phones, and can now send, save and borrow money using our phones. Each additional capability is increasing business efficiency and opening up new business avenues.

"A few weeks ago I asked at one restaurant, part of our largest chain, how much of their business is done physically against their delivery service option. Off the top of his head the manager said 60 percent of their business is delivery. That was mind boggling because the popularity of this restaurant is such most time seating space is at a premium, which ever day you visit....

He went further to describe one time he was at Kigungu landing site in Entebbe, kilometers away from the nearest branch and was shocked to see their delivery bikes there, delivering nojitos.

The efficiency of the telecoms system cannot be overemphasized (thanks god the government company no longer enjoys a monopoly). It is so important that a breakdown can become a national issue.

I remember about a decade ago I was in Nairobi and telecom operator Safaricom’s mobile money service went down for a few hours, the uproar was such that the management of the company were called in by government to explain how this could happen.

Small’s experience last weekend reminded me how critical an efficient telecom service is to the continued growth of the economy. But also, as a tool for reducing the inequality of opportunities in the economy.

"Access to opportunity is a function of there being opportunities to begin with and good infrastructure for entrepreneurs to take advantage of those opportunities. In badly serviced economies it is an infinitely small percentage of the population who have access to opportunities. Good, efficient telecommunications can even paper over other infrastructural deficits, like bad roads.

In the twenty first century governments have to walk a tight rope between expanding access to mobile phones and throttling this with unnecessary taxes and arbitrary regulation.

As if the point needs overemphasising, one boda guy after his phone suffered the same fate as Small’s, got a new line, filled his tank and rode around to wall his clients informing them of his new number.