Tuesday, April 29, 2025

MOBILE MONEY FORCING A RETHINK IN THE FINANCIAL SECTOR

About a fortnight ago MTN mobile money and absa bank published their 2024 results, on the same day in the newspapers.

Absa formerly Barclays, has been in Uganda since before independence while MTN mobile money will make 15 years this year. But the banking services MoKash will make only nine years, later this year.

The interesting thing about the numbers is that MTN Momo, last year with after tax profits of sh250b was more profitable than absa – sh177b. A trend that we obviously missed, because in the previous year MTN Momo was already more profitable than absa with net profits of sh202b as compared to the bank’s sh146b...

Even more interesting is that MTN momo did this with a smaller asset base of sh1.6trillion versus sh5.4trillion for absa. While absa’s return for its share holders, about 21 percent beats that of the mobile money provider – 15 percent how long before even this number is flipped the other way?

When the history of Uganda is written this overhauling of the banking sector by fintech will be an interesting one to study.

But the effect is not only on the banks, the whole economy is being reconfigured around the relentless march of the fintechs, led MTN and Airtel’s mobile money platforms.

From 2005 to 2015, the telecom sector laid the groundwork for digital inclusion, predominantly through mobile voice services. But the real transformation began in the next decade, from 2015 to 2025, when mobile data and fintech services surged to the forefront, redefining Uganda’s digital landscape.

Between 2005 and 2015, Uganda’s telecom sector was at a turning point. The mobile phone revolution was in full swing, and mobile voice services were rapidly growing, with the subscriber base expanding from just a few hundred thousand to over 10 million by 2010.

This surge was driven by the affordability of handsets, falling tariffs, and increased competition between mobile operators.

By 2015, the number of mobile subscriptions had reached an estimated 17 million, a clear indicator that Uganda was becoming a mobile-first society.

But while voice services dominated the telecom scene in the first decade, mobile data and mobile money were still in their infancy. Data services were beginning to gain traction, thanks to the advent of 3G networks and the proliferation of affordable smartphones. By the end of 2015, mobile internet subscriptions were still relatively low compared to voice services. Only about 5 million Ugandans were using mobile internet, a far cry from the mobile voice subscriber base. The usage was mainly confined to the urban centers, with rural areas lagging behind in terms of internet penetration.

Mobile financial services, began to make their mark starting around 2010, with MTN Mobile Money and Airtel Money leading the charge. While still in the early stages, these services offered basic mobile money transfer capabilities, allowing users to send and receive money via their phones. By 2015, mobile money services had registered around 10 million users, signaling a growing appetite for financial inclusion among the unbanked. However, profitability from mobile money remained limited, with many telecom companies still focused on expanding their user bases and network coverage.

Fast forward to the period from 2015 to 2025, and telecom services in Uganda have gone through a seismic shift. While mobile voice services continued to grow, the pace slowed as the market became increasingly saturated. By 2020, Uganda’s mobile subscriber base had crossed the 23 million mark. But voice services are no longer the golden goose they once were. Instead, the real growth story is in mobile data and mobile money.

Mobile data, in particular, saw explosive growth with the introduction of 4G networks, allowing Ugandans to enjoy faster internet speeds and access data-driven services. This year mobile data subscriptions are expected to exceed 15 million, a huge leap from the 5 million recorded in 2015. With more Ugandans relying on mobile devices for everything from entertainment to education to work, data has become a critical enabler of economic activity.

Mobile money subscriptions are projected to exceed 20 million – MTN mobile money reported 13.8 million active users, outstripping traditional banking services by a significant margin.

The profitability of mobile money services has grown exponentially in lockstep with rising subscribers. Industry players expect that mobile money could account for up to 40% of revenue for major telecom operators in Uganda, a sharp increase from the minimal contributions seen in the earlier period.

The mobile money revolution has been such that, more than before 2015, telecom services have become central to Uganda’s economic engine. The sector has become a major driver of financial inclusion, spurring economic activity, enabling access to digital services, and providing new opportunities for business growth as handsets have gone from being luxury items to indispensable tools of everyday life.

In 2005–2015, mobile voice was the star, with data and mobile money services just beginning to take off. By 2015–2025, the narrative had shifted dramatically, with mobile data and mobile money leading the charge in terms of growth and profitability. MTN reported in 2022 that for the first time revenues from voice had fallen below 50 percent of total revenues.

The banks have not been left behind with all beefing up their online presence, but clearly the momentum from mobile money and the fintechs is irresistible and forcing a rethink in the financial sector.

 

Tuesday, April 22, 2025

THE BUJAGALI TAX WAIVER

 Almost a decade ago in 2016 President Yoweri Museveni made it known that he wanted the power tariff to be charged to big industrial concerns to be not more than US5cents.

At the time the biggest drivers of the tariff were Bujgali Uganda Ltd (BUL), distributor Umeme and South African firm Eskom, which had the concession to run the Kiira-Nalubale power complex.

Folding Kiira-Nalubale into the Uganda Electricity Generation Company Ltd (UEGCL) last year and the end of the Umeme Concession in March were in aid of Museveni’s wish.

In addition, government allowed a refinancing of BUL’s debt, extending the repayment period so the interest payments can be lower, with the savings reflected in the tariff.

But it was also established that because in the contract BUL was guaranteed a certain capacity charge, to lower what BUL charged,  government committed to giving Bujagali a tax waiver for the duration of the loan, whose tenure comes to an end in 2030.

"According to the Auditor General’s report, which parliament commissioned last year, with the tax relief BUL would charge UETCL 19.58 percent less for power generated. An Electricity Regulatory Authority (ERA) report pointed out that without the tax waiver end user tariff would increase by 4.7 percent...

Parliament’s Finance Committee while deliberating the Income Tax Bill 2025, however think that BUL should not have an extension of the waiver, which ends in June, arguing that BUL have been overcharging consumers since their 250 MW dam was commissioned in 2012, have redeemed much of their investment already and that previous tax waivers have not caused an appreciable reduction in the tariff.

This means that if government wanted to lower the tariff, it would cost BUL money and threaten the viability of the concession which runs out in 2042.

But first let us go back to the beginning of Bujagali and why it produces the priciest power in Uganda. At the end of the 1990s American firm AES Nile Power started the process of trying to develop the Bujagali dam. The country was in the throes of frequent loadshedding, as the Kiira-Nalubale power complex’s 380 MW was below peak demand.

The novelty of the investment in Uganda attracted political opposition and unfair sniping from the environmental lobby, delaying development and AES run out of time and surrendered the project.

A consortium fronted by the Aga Khan took over the project and the dam was commissioned in 2012 putting an end to the daily loadshedding we had become accustomed to.

A lot of the contracts in the power sector were negotiated at time of uncertainty. There were barely 500,000 customers when Bujagali came on line, the economy was still recovering from years of mismanagement and civil war and no one else wanted to commit the nearly $900m needed to develop Bujagali. The government did not have the money to do it and traditional lenders like the World Bank did not think Uganda needed an additional 250 MW...

During intense conversations to renegotiate the BUL concession a decade ago, when Museveni first started pushing for the US5cents tariff, several options were explored including buying out BUL totally, but this option would not have the desired effect of lowering the tariff, in fact quite the contrary. Hence the tax waiver.

The bottom line is that the tax waiver is still required to achieve our goal of cheaper power for Uganda. We forget the ripple effect affordable and available power has on the general economy, which it can be argued far outstrip the tax losses.

At the height of the loadshedding in the early 2000s it was estimated that businessmen were losing at least 30 days of production annually. This was an average, the reality was much worse and included the increased cost of running diesel generators to do business.

 

DOING BUSINESS IN UGANDA IS HAZARDOUS BUSINESS

The recent Umeme debacle has taken me back years, reminding me how difficult it is to do business in Uganda.

Umeme last week announced they would dispute the $118m (sh433b) government had paid them, arguing that they have got strong grounds for the full payment of what they claimed -- $234m. And an additional $9m for works in progress is also being negotiated.

Umeme’s 20 year power distribution concession came to a close at the end of March. Under the terms of the concession they were supposed to be paid any unrealized monies from the investments they made that had not been paid for through the tariff.

The Auditor General’s recommended figure was half what Umeme had claimed. The AG arrived at his figure because the regulators who were supposed to be overseeing the concession, claimed there are investments they did not sign off on and therefore Umeme was not due compensation for them. So maybe they should park them up and go with them?

Questions should  be asked of the regulators of how billion shilling outlays were made without their knowledge. It is not as if Umeme was smuggling in stock into the bar to sell as their own, without the owner knowing.

"Businessmen are not saints and hence the need for regulation. But I fear that while as a nation we claim that we are a private sector led economy, our government and specifically its bureaucrats, go out of their way to make it difficult to do business in this country...

Either there is a wholesale ignorance of how businesses operate, which would be a hard sell – this is not 1970s Uganda or that they are intentionally throwing up hurdles for business for ulterior motives. Your guess is as good as mine.

It reminds me of the privatization process and how we lost a lot of value and prize investors because our officials and politicians just did not get it. Or didn’t they?

The winner had to be the attempted sale of the Coffee Marketing Board (CMB). The sector had just been liberalized so CMB’s market share had plummeted to about 10 percent. Nevertheless the Privatization Unit (PU) were touting its near obsolete four million bag a year processing plant and the land on which the CMB sat in Bugolobi as the key assets.

"During the first round of bidding Swiss trading firm, Sucafina, bid $8m, the highest for the offered 49 percent of the company. MPs were jumping up and down calling Sucafina daylight robbers and other less charitable names from the communist lexicon. All because the net asset value of CMB being offered was an inflated $40m. The politicians ordered PU to cancel the bid and retender the offer. This time Sucafina was the only bidder and offered only $4m. The politicians huffed and puffed and, as if to cut off their nose to spite the face, they cancelled the whole sale of CMB.

Needless to say CMB collapsed with its processing capacity and the site is now being sub optimally used for other things. Maybe we would like to check whether it still belongs to the Government of Uganda.   

Who knows if Sucafina had taken over CMB, Uganda would have made bigger inroads into the global processed coffee market. Now we are busy fighting shadowy types who are trying to corner our coffee market.

The MPs publically failed to make the distinction between net asset value, the stated value of the company on the books, when you subtract liabilities from assets and what the market is willing to pay. The latter being a function of market share and how much remedial work they would have to do to get the company up to full speed among other things.

Of course, the cheaper the businessman can get it the better for him. But us on the other side of the table as the sellers, beyond the dollar amount, need to factor in the improvements in service, tax revenues and job creation that passing on these tainted assets to a more efficient producer would mean.

Providing the investors with the right environment can be wildly beneficial for the improved living standards of the citizen.

Another privatization that had politicians snorting and grunting was the sale of the Uganda Commercial Bank (UCB). The bank, which controlled about 80 percent of deposits was a load stone on the industry, its inefficiencies affecting the whole sector.

While it was profitable at the time of its sale this was only managed by some clever accounting. The government extracted sh100b in bad debt and filled  the hole with bonds, and to ensure it did not build up its stock of bad debt, a moratorium was placed on all lending. For income UCB was just buying double digit yielding government paper. Who would not be profitable under those circumstances?

The politicians at the time fought its sale, arguing that it was giving up too much of the economy to foreign interests. Well the alternative was to keep it and sink the banking industry permanently.

After a failed attempt to steal the bank by some local players, the central bank took it over and sold it to Stanbic.

In 2019, 

about 20 years after the bank was sold, Stanbic paid the treasury $22m in tax on profit, about the amount they bought the bank for in 2002, and every year since they have paid more than $20m in taxes. But that is the smaller benefit to the economy. By being more efficient than its predecessor they are lending to the private sector. Last year Stanbic’s loan book stood at sh4.2trillion or about $1.1b. The government’s budget in 2001/02 was about $1.3b.

Whether business is foreign or local, is not a concern of the man on the street, who benefits from improved services, jobs and the services that come with the increased taxes. But rather it is the interest of an elite, who want to usurp these assets for themselves and the rest be damned.


Tuesday, April 15, 2025

WEALTH BY THE POWER OF SMALL THINGS

BOOK REVIEW:The Wealth Code: Small Habits to Prosperity    



AUTHOR: Ray Brehm


This handy little book – 85 pages, offers a fresh perspective on wealth-building, challenging traditional ideas about money and success.  It is a compilation of articles by people – including our very own Monica Rubombora, talking about their main take on money -- its making, keeping and growing.

While it has more of the same financial literacy lessons we have had over and over again, three of the 13 chapters stood out for me. Not to denigrate the other ten.

It starts interestingly with the chapter “The wrong balance sheet” which author Brehm argues, rather than focusing solely on financial gains, adopt a more holistic view of prosperity—one that includes relationships, health, and personal fulfillment alongside financial success.

In The Wealth Code: Small Habits to Prosperity, Ray Brehm throws out the traditional approach to wealth-building and replaces it with a smarter, more balanced way to achieve lasting success. One of the first things he challenges is how we measure wealth. Most of us look at our bank accounts, investments, and what we owe to determine how well we're doing financially. But Brehm says that’s a pretty limited view. “The way you have been taught to measure Net Worth is flawed,” he writes.

If this has you rolling your eyes, you are not alone. Easy to say for a person who has attained financial freedom.

Nevertheless, the well worn cliché that true wealth is about a lot more than just money should be ignored at your own peril. Think about it as looking at the bigger picture—your relationships, personal growth, and overall well-being. If you're only focused on your financial assets, you're missing the other important parts of life that really make you feel rich. For
 the rest of us in the rat race it is all about money, but the author argues you don’t get money by looking for money, but by adopting the habits that will bring you the money, one of which – surprise, surprise is staying healthy.

“If you don’t have your health, wealth becomes irrelevant,” says Lisa McNair Palmer, the chapter’s author. Straightforward but powerful point. If you’re not healthy, making more money doesn’t really help you enjoy life or even use your wealth effectively. And what is the money for after all, than for its benefits to be enjoyed by you and your loved ones?

Palmer stresses the importance of investing in your physical and mental health just as much as you would in stocks or real estate. If you’re constantly worn out or dealing with health issues, it’ll be hard to build any kind of wealth. So, it’s important to put as much effort into taking care of your body and mind as you do into making money. Exercise, eat well, get enough rest—it’s all part of building a strong foundation for long-term prosperity.

Experts agree that exercise need not be much more than logging a few thousand steps a day.

Many people overcomplicate wealth-building by diving into risky investments or trying to follow complex financial strategies. But Josette Mandela believes the key to success is simple math: save more, spend less, and invest wisely.

“Small habits compound into great wealth over time,” she writes. The trick isn’t to find one big financial win—it’s about making small, consistent decisions every day that eventually add up to significant gains. It’s about being patient and letting time do the work for you. Instead of stressing out over trying to hit it big, Mandela encourages us to stick with simple habits that will help us grow our wealth steadily over time.

What makes The Wealth Code

so impactful is that it shifts the focus away from just chasing money. Instead, it’s about building a balanced life where health, mindset, and wealth all work together. When you stop measuring success by the size of your bank account alone and start considering your overall well-being, you set yourself up for a more fulfilling, lasting prosperity. By investing in small, consistent habits—whether it's taking care of your health or sticking to simple financial practices—you can build true wealth that goes beyond just the dollars in your pocket...

Think of an athlete who wants to run the 100 meters in under 10 seconds to qualify for the Olympics. He doesn’t just go out and try and run under 10 seconds every day. He practices his reaction to the starting gun, his sprinting technique, he lifts weights to get stronger, he charts a competition schedule that will allow him peak just before Olympics, these and many small things he does with the aim of running a sub-10.

It the same with wealth, you do not go out to focus on being a millionaire, but this book through the various perspectives of the authors counsels, that you focus on the small things you do everyday, not all directly connected to money that will allow you eventually become wealthy become wealthy hopefully, but probably more important enjoy the journey while you are at it.

Very enjoyable read. Other chapters on tithing, leveraging expertise and  recognized authority provide much food for thought. This book may very well add new perspectives to your quest for and ease your journey towards wealth.

 

Sunday, April 13, 2025

UGANDA: THE UNREALISED PROMISE

A decision taken at the beginning of the last century to keep Uganda as a small holder farm economy as opposed to a settler economy, has reverberated down the years ensuring food sufficiency on one hand while at the same time stifling private capital development.

Commissioner of Uganda between 1901 and 1907, Sir James Hayes Sadler, decided that unlike neighbouring Kenya, Uganda was not suited to European settlement. The hot humid climate that came with malaria infestation and the Tse Tse fly, which spreads sleeping sickness, he thought should be best left to the Africans.

This one decision was a blessing and a curse, because unlike in Kenya, Zimbabwe or South Africa, European possession of the land and eviction of the locals was minimized, but also means that the country’s land tenure system is convoluted and difficult to maneuver discouraging large scale investments.

But to get Ugandans to produce the cash crops – cotton, coffee, tea and tobacco to feed British industry, the colonial administration instituted a number of taxes aimed at encouraging production. The hut and poll taxes, were levied on every hut and adult man to raise revenues to administer the colonial project and to incentivize the local population to grow crops for export.

To the current day in central and southern Uganda families have a few trees of coffee on their small holdings, as an income earner, while the rest of the holding is dedicated to food crops for subsistence. The average land holding in Uganda is about five acres

These small holder farmers made Uganda a major exporter of coffee, cotton and tea. Not to thumb their nose at the small holder farmer, it is reported that favourable commodity prices in the first half of the last century financed the building of the Owen Falls dam (now the Kiira dam) and the Kilembe copper mines, with some left over to help the UK fund the war effort during the Second World War.

The Indian community, many of whom were descended from the railway workers who built the Ugandan railway, inserted themselves as middlemen – because of their access to capital, bulking the produce from the smaller farmers, often employing cooperative unions, for export to the UK.

The railway reached Kampala in 1931 and was extended on to Kasese by 1956. It was funded by British government grants and loans, some of which came from the locally generated revenues.

This separation of roles caused tension, as the Asians had lobbied the colonial government to shut Africans out of key economic activities like cotton ginning and became the spark for pro-independence agitators in many parts of the country.

This animosity played into post-colonial governments, offering the opportunity for first President Milton Obote to put in motion efforts to nationalize foreign businesses, which President Idi Amin followed through by expelling the Asians in 1972, in a desperate effort to shore up his already floundering popularity.

By gutting Uganda’s commercial class, Amin set the stage for at least two decades of economic decline. It has been reported that the Madvhani family alone by 1972 controlled about a third of the economy through their investments in the sugar industry and supporting industries.

The expulsion of Asians also denied local entrepreneurs much needed mentorship, which their Kenyan cousins benefitted from to build a more robust indigenous capital base. The cronies and local entrepreneurs who took over the Asian assets have nothing to show for the free-lunch they got, with many of the businesses collapsed or failed to transcend the generation of the original beneficiaries.

Amin’s reign of terror also triggered a brain drain, forcing the middle class to flee the country. A few hundred thousand Ugandans disappeared or lost their lives during his rule from 1971 to 1979.

It was also during his reign that the East African Community (EAC) a promising project of economic integration that would lead to political federation, was scuttled.

Obote’s return to power in 1980 while setting in motion plans to resuscitate the economy, the recovery was hobbled by insecurity driven by local insurgencies, the major one being the National Resistance Army (NRA) rebellion, centered just north of the capital, Kampala.

When the current administration led by Yoweri Museveni took power in 1986, inheriting an economy that had regressed into subsistence, had shrunk to less than half its 1970 size in real terms, was short of cash and had major deficiencies in infrastructure and human capital.

Buoyed by the good will that came with restoring a semblance of peace and security in most of the country, Museveni’s government initiated a spate of donor sponsored reforms that liberalized the economy – freeing the exchange rate, privatizing state enterprises and disbanding commodity marketing monopolies, triggering the longest stretch of economic growth in the country’s history.

The reforms caused some trauma as thousands of civil servants lost their jobs with rationalization of the civil service and privatization of state enterprises, fiscal discipline cutoff the freeloaders and increased competition led to the closure of many businesses that had previously benefitted by the huge margins they enjoyed in the situation of scarcity that had prevailed for years.

On the flip side the reforms has attracted billions of dollars in foreign direct investment, unlocked indigenous business initiative, all which have resulted in a quantum leap in revenue collections. The government collected about sh400b in revenues in 1985/86 but is set to collect sh31trillion in this financial year.

This increased revenues has helped government increase literacy rates, longevity of the population and expand service provision. While gaps still remain in everything from security to infrastructure and human capacity, that progress has been made is undeniable.

The reforms also facilitated the return of the Asians, who have once again recovered their place as the pre-eminent commercial class in the country with interests in retail. Real estate, manufacturing and other services. A few years ago it was reported that their businesses account for more than half the revenues collected annually by the Uganda Revenue Authority (URA).

Every so often calls for a nationalization of the economy are mooted, with the main champions arguing that the economy has been hijacked by foreigners, who repatriate their profits abroad rather than reinvest in the country.  It is feared that these calls can gain currency as the Museveni regime reaches the evening of its run and their inability to narrow local inequalities can conveniently be blamed on foreign capital.  A more sinister motive is that a group of connected elite want to appropriate these assets using the state before the Museveni era comes to a close.

Over the last four decades of Museveni rule the reforms have shown dividends as the economy has diversified away from agriculture – coffee accounted for nearly all export receipts and revenue collections in 1986. Services, construction and manufacturing now account for two thirds of economic output today.

It helped too that in 2000 the EAC was revived and has done a lot to promote regional trade by providing demand for industry in the EAC. The EAC has now expanded to seven nations beyond the initial three. Progress is being made, it is now a customs union with the free movement of goods and services across the borders but not without teething problems. Progress towards the more demanding monetary union, whose main feature will be the adoption of a single currency, has been a bit labored and slow in coming.

 However, endemic corruption and a growing debt service burden means Kampala finds itself unable to, more equitably spread the economic gains of the last four decades, improve service delivery and bridge major infrastructure deficits that would help vault the country to its next level of development.

The country waits with bated breath for the first oil from the fields in western Uganda to alleviate current economic challenges that include a cash squeeze, resulting from a holding back of donor financing over displeasure at a recently passed Anti-Homosexuality law and growing official corruption. Commercial viability of Uganda’s oil reserves – booked at 2.5 billion barrels, was established in 2006 and development of the fields begun in 2022, following the passing of enabling laws for its exploitation and the arriving at final investment decision, that would unlock the funds needed.

The recent census showed that seventy percent of the population is under 30 years old, or were not born when Museveni came to power. An aging leadership – Museveni will be 80 in September, finds itself scrambling to keep up with a youthful population’s demands for better and widespread social services, jobs and hope, complicating an eminent power transition.

At independence the hope that Uganda, with its huge natural endowments – it has at least half the arable land in the region and growing educated class, was a guaranteed economic success, was squandered by tribalism and factionalism, whose after effects continue to hobble the small east African nation’s progress.  

 

Tuesday, April 8, 2025

MAKE SETTLING DOMESTIC ARREARS A CAMPAIGN ISSUE

Last week it was reported that government has allocated an extra sh1.4trillion to settle domestic arrears, monies it owes to the private sector.

This is a very welcome move considering that domestic arrears are about sh14trillion and in the last few years government has been earmarking about sh200b towards the budget line.

However, we will be forgiven for asking for more. Because, assuming by some miracle arrears are held steady at sh14tr it would still take at least a decade to clear the current stock, assuming the current rate of redemption. Totally unsatisfactory...

But let us take this out of the realm of the abstract. Let us have a businessman, call him Jack, who wins a tender to supply goods, say cement to government. Let us assume the deal is to supply 10,000 bags of cement to a unit of government over three months.  Jack chases the paper work gets the contract and the accompanying documents to start servicing the deal, which among other things stipulate that he will be paid within 90 working days of delivery or about five months.

But he does not have the money on hand to procure the cement, a few hundreds of millions, so he goes to his bank with the paperwork in hand and gets a loan. He gets the money, buys and supplies the cement to government.

Then suddenly he cannot be paid. Stories galore. His five months turns to a year or two or three. He services the interest with whatever other cashflow he has, but this proves unsustainable and soon the bank auctions his home and other property, he had put up as collateral. All the while there is no evidence the government will make good on their commitment to him soon. Tomorrow never comes.

This is the fate of thousands of suppliers to government.

The pages of our newspapers are filled daily, with the adverts of auctioneers taking this or that businessman to the cleaners. A big part of the reason is the government...

Finance minister after finance minister has admonished his officials not to contract new supplies if there is no money. The bureaucrats on their part blame the shifting priorities of government on the state of affairs – budgeting for one thing but changing its mind when monies are due for payment. The mushrooming arrears have been a perennial lament for the last four decades.

"It has become so bad, that banks are no longer willing to discount government invoices. There is a general lack of confidence in government. Which is a problem since government remains the single largest consumer of goods and services in the economy...

So while the economy continues to grow (do they record arrears as government expenditure when computing GDP?) there is gritting of teeth in the hills of Kampala. It all seems a fiction.

Whichever way you look at it this is not a sustainable situation. It threatens the economic gains of the last four decades – when businesses continue folding, tax revenues dwindle and government continues to accumulate arrears, it will not be long before the economy collapses.

The challenge of course is that our government and its bureaucrats have entered (or have been for some time) in a dangerous phase where it is everybody for himself, God for us all and the devil take the hindmost....

They don’t care. The above is really text book economics, so it would not be a revelation to them. They don’t care.

It is self-destructive. Its shooting ourselves in the foot. What would it benefit a man to accumulate the whole world while his neighbours are scrambling for crumbs? He will soon be fair game.

So thank you very much finance ministry but the sh1.4tr is not half enough. We need to up that number, but more importantly tighten our procurement procedures so these recurring theme is brought to a halt. I will not hold my breath for it.

But I know what would move the needle on this issue. Somebody needs to make it a campaign issue and government will move. Like they did with universal primary education, the abolition of graduated tax and the scrapping of property rates on residential houses. Let someone include the wiping out of domestic arrears in their campaign manifesto and you will see.

 


Thursday, April 3, 2025

BIDCO: A DEVELOPMENT DILEMMA


One year after the inception of a $150m (sh278.2b) palm oil development on Kalangala island, project sponsors BIDCO are soldiering on, despite incessant attacks from environmentalists and sniping from entrenched local industry interests.


One year after the inception of a $150m (sh278.2b) palm oil development on Kalangala island, project sponsors BIDCO are soldiering on, despite incessant attacks from environmentalists and sniping from entrenched local industry interests.

But despite being the most vocal opposition to the project, the environmentalists admit they are hard pressed to put a monetary value to preserving the island’s ecosystem that would outweigh the anticipated value BIDCO is bringing to the island.

They argue that by slashing forest cover to make way for the plantation, the islands will lose out on their unique species of vegetation, alter the climate of the area and suffer massive soil erosion.

In 2004, the Government gave BIDCO a go-ahead to establish an oil palm project. Under the terms of the project, BIDCO was to establish a 26,500-hectare oil palm growing operation and set up a plant to process the palm oil from the plantations.

BIDCO would provide the expertise and the funds to get the project off the ground, while for its part, the Government would make the land available allow a 25-year Corporate Tax holiday and 12-year Value Added Tax (VAT) deferral for the plantation project.

Currently, about 3,500 hectares have been put under palm trees out of the 5,500 hectares provided by the Government so far most of which has been on land reclaimed from the forest.

"First of all, we are not burning the forests. We just cut down the trees and leave them in the fields to rot. The bio diversity is not being lost. It is just migrating to the forests we are not touching," Kalangala plantation manager Lim Choon Meng said on a recent tour of rows and rows of plantation.

"Secondly, the impression is that most of the island is covered in forest. That is not true. So far, we have planted about 1,500 hectares of grassland with the palm trees," he said.

Meng also pointed out that they are adhering to an agreement to maintain a 200-metre strip of trees between the plantation and the lake shore and growing cover crops between the palm trees as preventative measures against erosion.

He said he plans to plant an additional 1,000 hectares before the end of the year, but he was desperate for more land on which to plant seedlings.

"I have about 500,000 seedlings waiting for transfer to the fields, some of which are more than a year old and need to be transferred now or I will have to lose them but the land is not forthcoming," Meng said.

According to the managing director of the Uganda project, Kodey Rao, under the agreement, the Government was supposed to have provided the whole 26,500 hectares within a year of signing the agreement, which has not happened.

"We have about 5,500 hectares available, but need the whole component as soon as possible to ease planning," he said.

Partly as a result of BIDCO’s activities, the island is experiencing an economic boom.

"Land prices are rising, Kalangala town is growing and immigrant labour is swelling the island’s numbers.

"The wage bill for our workers is higher than the wage bill for Kalangala district administration and we have not even begun commercial production," Rao said.

BIDCO employs about 1,500 workers whom it pays twice a month, which invariably leads to higher sales for shops in the nearby trading centres.

"The improvements around here since BIDCO touched down are amazing," the district agricultural officer, David Balilonda, said.

While agreeing that the workers’ salaries have brought increased liquidity into the Island’s economy, he sees more fundamental benefits.

"The project has opened up roads where there were none. Communication and trade across the island has been greatly improved," Balilonda said.

A new ship, the 108-passenger MV Kalangala, was commissioned in February and sets sail from Entebbe compared to the old one which docked in Masaka. That has improved access to the mainland.

"We are seeing more tourists especially Ugandan tourists since the new ship started," former MP Mulindwa Birimaso, who owns the 30-room Palm Beach Hotel Resort said.

"Everything has an impact on the environment, even your breathing. The question is: what is being done to mitigate this impact?" Rao asked.

"We think we have put together an environmentally-friendly package while at the same time putting together a project that will have a transformative impact on the island’s economy, ".

Rao estimates that the $150m injected into the project will have a six-fold multiplier effect on the economy through saved foreign exchange, job creation and support services.

On the project’s outgrowers scheme, the company projects that on a hectare of land (about 2.5 acres), a farmer will be able to get $1,000 (sh1.85m) per month.

Environmentalists are having a hard time countering these benefits with evidence of their own that shows that the islands trees will have as great an economic impact.

"Building a case for non-monetary benefits is difficult," National Forestry Authority’s spokesman Gastor Kiyingi said.

"But the calamities that come with such environmental degradation do not take long to show themselves," he said refering to the ill- advised move to build a dam parallel to the old Kiira power dam, a situation that has caused a larger than usual outflow and is partly responsible for the reduced water levels on Lake Victoria.

Today, people are looking for political advice but neglecting professional advice, Kiyingi said.

That maybe but for the time being, the locals remain unconvinced.


PS This was published in teh New Vision 20 years ago.... an update long overdue

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