BEGGARS WE ARE, BY OUR OWN DOING

They say beggars cannot be choosers. So it would follow that everybody’s ambition should be to prevent a descent into beggarhood or at least postpone it for as long as is humanly possible.

One characteristic of poverty is a lack of options and therefore a diminished capacity to negotiate. So it is in our best interests to keep our options open at all times or as often as a possible.

With this is in mind I was totally flabbergasted by the new twist in the Shimoni land saga.

To recap. A few years ago Saudi billionaire Al Waleed bin Talal was offered the said land, about 15 acres of prime land to build a five-star hotel. The way the project was sold to the public was that the hotel would be built just in time to host visitors to the Commonwealth Heads of Government Meeting (CHOGM). Along the way Al Waleed’s Kingdom Holdings proposed a partnership with government to build the hotel, which government turned down.

Kingdom Holdings then went about sourcing a partner, with the consequence that the deal was delayed.

Last week Dubai based Azure Holding, a special purpose vehicle set up between Kingdom holding and Kensington Holding, announced it will push ahead with the project, with Kensington Holdings a majority stakeholder in the new company.

And we thought we had got closure on the issue.

But no, this is Uganda nothing is as it seems.

Former investment Minister Professor Kiwanuka Semakula called a press conference, asserted that the government had rejected the partnership, had repossessed the land and had in fact, got a new investor for the project. It did not help too – in the context of our history, that the minister lambasted “Ugandan Asian speculators”.

Queries to the relevant officials in the investment ministry and the attorney general’s chambers were met with befuddlement and in one instance a senior official brushed the professor’s as his personal opinion.

Whatever the truth about the situation is one has got to wonder and be concerned by this obvious uncoordinated troop movement within government, especially on an issue as strategic as investment.

The impression one comes away with is that government’s left hand has no clue what government’s right hand is up to.

They say that capital is a coward, it hates risk. And as any one who as attempted to invest knows, risk can be actual or perceptual. Risk in this case relates to loss of capital. So for example actual risk may derive from political instability or lawlessness in an investment destination. Perceptual risk may derive from sentiment and not necessarily based on fact, so for example fighting confined to northern Uganda could jeorpadise the attraction of investment to the Kenyan coast, because investor perception is that the war is in the vicinity of the proposed investment site.

And perceptions colour even objective analysis and can quickly get out of hand rising to irrational exuberance or descending into paralyzing apathy.

So what the minister’s outburst and the lack of a strong government denial or confirmation of the professor’s position, does for potential investors is heighten the poor perception of Uganda’s investment climate.

You can preach from the roof tops how returns on investment in Uganda can top 40% but an investor will choose South Africa where returns may just manage double digits over Uganda, because the risk of capital loss is much less. Credible investors will choose certain but stable returns over an uncertain windfall.

It was wise of government to pull out of doing business in the 1990s, otherwise we would still be suffering month long waits for services we now take for granted like phone lines and money transfers. In doing that, government’s role shifted to creating an enabling environment for the business community. And this is not restricted to providing reliable power and efficient transport networks, to enhancing confidence through promotion of the rule of law and strengthening regulatory institutions.

The issue goes beyond the validity or competence of the project promoters, the display of confusion within government does not help potential investors overcome their wait and see approach to Uganda.

This lessens our options as a country and therefore weakening our ability to negotiate with or attract blue chip investors thus perpetuating our poverty.


Published April 2009, New Vision