IF I WAS A PRESIDENTIAL CANDIDATE

The presidential campaigns got off to a relatively calm note earlier this week – so calm in fact that Inspector General of Police Major General Kale Kaihura threw a party for his officers in charge of overseeing the campaign.

Meanwhile the candidates are putting the finishing touches to their manifestos and I hoping to add my two cents to their thinking processes.

As far as I am concerned there is only one issue in this country and every other issue derives from it – poverty.

As far as I am concerned poverty is the root of all our evils.

Was it a coincidence that this week that the Uganda Bureau of Statistics released results showing that poverty levels had fallen to 22% from 31% five years ago. Poverty here is defined as a situation under which a person lives on less than $1 a day.

The improvement in our figures has a lot to do with the people of northern Uganda returning to productive lives. Also considerable improvement was registered in eastern Uganda.

To begin with I would change the emphasis away from poverty eradication to wealth creation, because what you focus on expands.

First let us understand the various levels of economic health.

At the bottom of the ladder are the poor who consume more than they earn, then the financially independent, these can sustain themselves on their income but are often a pay check away from poverty, then the financially secure who in addition to a regular income have assets throwing off income that would sustain them without a job and then finally the rich who assets throw of so much income as to guarantee financial security for generations to come.

So the challenge of my presidency would be to get the poor jobs. Encourage a sound banking system in which the financially independent can save their money and low lending rates so they can borrow more to invest in productive assets. The financially secure and the rich would benefit from lowering the cost of doing business by reducing corruption, improved infrastructure and a better quality human resource, so they can see a better return for their investments.

Of course all this will be anchored by continued stability in the country and a commitment to widespread financial literacy so people can graduate from one level to the next level of financial health.

I think the $1 a day definition of poverty is too low and easy to achieve what I am proposing is a more ambitious plan that will create a bigger middle class.

The middle class is the anchor on which more developed economies and democracies are built.

The middle class are the biggest guarantors of stability since they have a real stake in their respective countries, beyond the fuzzy, sentimental pitch about nationalism and patriotism politicians sell.

And because of this real interest in the country – in the way of investments, the middle class are loath to resolve issues through violence and are more likely to look for civil solutions to conflict, this attitude is the bed-rock on which all enduring democracies are built.

Hate them all you want but the colonial government built up a network of social services – education and health, which elevated our previously poor, rural leaders to their current levels of exaltation today. The colonial government could do this because there was little pilfering of tax payers money, schools and health facilities got constructed and manned, roads got built and maintained and things worked as they were supposed to.

Poverty is not a natural condition (whatever our religious leaders tell us), it is a failure of political leadership and mapped by geographical boundaries.

It is true what they say, the rich are different. Their interests go beyond transient racial, religious or ethnic boundaries. James Mulwana’s milk is not restricted to the Baganda or MTN does not do business with the people from Charles Mbire’s tribesmates or Sudhir Ruparaelia’s does not open his banking hall to only his Asian brethren.

We are teethering on the cusp of social unrest and political implosion because we do not have enough rich people among us.

So I can assure you as your president I will lead a determined push for a middle and rich class and relegate to the dustbin of history this patronizing $1-a-day rubbish.

CAN’T SEE THE FOREST FOR THE TREES

Sometimes we are in danger of not seeing the forest for the trees, meaning we are so caught up in the day-to-day grind that we fail to see the big picture. Many times it takes a new pair of eyes to give you an alternative perspective. This week I came across a report on Africa’s future prospects as an investment destination. The report, by the McKinsey Global Institute paints a picture of Africa – despites it chaos, disease and political uncertainties, on the verge of take off albeit with many challenges none of which the report thinks are insurmountable.

"A snap shot of the Africa of the future shows a continent with a collective GDP of $2.6 trillion, a consumer expenditure of $1.4 trillion, 128 million households with discretionary spending – an annual income of $5000 or more and a more urbanized population with 50% of Africans living in towns. All this by 2020....

. Over the last few years Africa’s economy continued to grow despite the global economic slowdown and this was due to more than higher commodity prices. The report titled “Lions on Move: The progress and potential of African economies”, was therefore prompted by an endevour to identify the continent’s sources of economic growth and whether this growth is sustainable. To begin with the growth since the nineties has come from improved political and economic stability and adoption of policies to kick start markets. Uganda’s experience with macro-economic stabilization, trade liberlisation and privatization illustrates this point in real terms for us. Looking ahead the report’s authors suggest that growth will be sustained by increased demand for natural resources, greater urbanization, the rise of the middle-class consumer and expanding labour force, which will be larger than that of India or China in 10 years. However the exploitation of these factors will not be uniform across the continent. Dividing Africa’s nations into pre-transition, transition, oil and diversified exporters the report shows that differing development paths will be necessary. Uganda was categorized as a transition economy where per capita incomes are largely below $1000, agriculture and resource sectors account for a third of GDP and two-thirds of exports but have fast growing economies. Assuming the compounded average rate of economic growth for the first eight years of the decade of eight percent, Uganda’s economy would double every nine years.

To sustain this rate Uganda – as a transition country, will have to beef up its infrastructure, increase the productivity of its oagricultural sector and improve the quality of its human resource.

 

In this respect the challenges are enormous. Africa’s average power usage is less than half of the emerging markets of Brazil, Russia, India and China whose road and rail networks are five and two times denser than our own. The World Bank estimates the continent needs to invest $118b a year to address the shortfall, which $46b more than is currently being laid out on infrastructure development. For agriculture to be a greater growth driver – and this can apply specifically to Uganda, opening u p new lands, increasing yields through use of better technologies and a shift to high value crops, will be critical. And of course it goes with out saying that beyond increasing school enrollment the quality of our education will need to improve substantially. Two things struck me about the report. Firstly, that it talked about Africa as one big continent, not homogenous but as if as one country and that is the way we need to be thinking in order to harness our potential. In registering the trend towards greater urbanization and the emergence of the middle class I was surprised the report paid short shrift to the political upheavals that these two trends signal.

With greater urbanization and improved incomes the clamour for more inclusive and transparent politics – read democracy, will mount and depending how it is handled will either slow growth on the continent or halt it all together for indeterminate stretches of time

. The report’s tone seemed to be regardless of our lack of planning, corruption and poor infrastructure the continent is on the move, governments will be best advised to stabilize the environment – political and economic and get out of the way.

OF JIGGERS, ILLITERACY AND DEVELOPMENT ECONOMICS

Jiggers were discussed during a cabinet meeting. It would be hilarious were it not for the irritation and pain this little creatures can inflict on the human body and spirit.

It reminds me of a book written in the seventies, “You have got to cry to laugh” and it too I believe was about the African condition.

My holding to the conventional wisdom that jigger infestations are about a lack of hygiene were shaken this week when someone asked “So what about all the beggars, street kids on the streets of Kampala, how come they do not have jiggers?”

Yes. In the 21st century we have been reduced to discussing jiggers.

But then again as President Yoweri Museveni told us more than more than 20 years ago we are backward and we better acknowledge that and do something about it.

Just because we have layered ourselves in bad English, cheap suits, counterfeit black berry’s and second hand cars does not mean we have ascended into the league of developed nations or peoples.

But maybe its not our fault. Recently economist Bill Easterly wrote about the findings of a research he participated in which showed that, on the whole, countries which had not attained certain basic technological advancements by 1500 AD – oceangoing ships, paper, printing, firearms, the magnetic compass and steel, remain underdeveloped to this day.

Even more worrying is that these stratification occurred much earlier.

Luckily we are not doomed to perpetual poverty and underdevelopement, as North America , Australia and New Zealand has shown. Technology can travel.

But as the history China has shown, to resist technology transfer can be detrimental to your world standing. In the 15th century China was ahead of western Europe in technological advancement, but a series of paranoid ruling dynasties closed China off form the outside world, purged its scientists and thinkers and allowed the western world to overtake them.

In just over 30 years by opening up to the outside world and encouraging technology and innovation China’s is taking back its place as a leading world power.

And why is technology so important? Because technology is a building block of future innovation which in t urn drives economic growth.

But for technology to take hold or to be transferred you need an educated people. Education allows for technology transfer.

So it was with much shock that I read this week about a survey of the efficiency of our education system.

The survey done by the Uganda National NGO Forum showed that despite our reported high enrollment figures the quality of the product walking out of our school gates is shockingly bad.

Eight of ten children between six and 16 who were tested on a P2 math paper failed while 19% of the P3 students tested in the 27 districts surveyed could not read the alphabet.

If you can not read or count your educational foundations are fundamentally flawed and your chances of advancement economically or careerwise are seriously hampered, but more importantly for the nation is that the adoption of new technologies will be more laboured, putting a ceiling on economic development.

Technology is not only about machines but in the broader sense is about the way things are done.

At the end of the day the people of the jigger infested areas have only themselves to blame, no government or authority figure can rid them of jiggers if they are comfortable living with them.

But an epidemic of jiggers is a very manifest sign of underdevelopment not only of the infested but of the whole country. It points to a technological backwardness that does not augur well for future economic growth.

But since apportioning blame is a favourite past time in this country here is what Easterly wrote on his blog this week,

“What the history of technology tells us …Top-down development programs simply don't work. In fact, the principal beneficiaries of Western largesse today -- African autocrats and dysfunctional regimes -- are themselves the main obstacles to development. If there's anything that "must be done" to spur future development, it's to create the conditions necessary to empower the ordinary individuals who will create new and unforeseen technologies out of old ones.”

SALVATION IS IN THE SMALL COMPANY

Did you know that, of the ten biggest economies in the world six of them are companies? Today US, China, Japan and Germany are joined in the top ten by Walmart, Royal Dutch Shell, Exxon Mobil, Toyota and Japan Post Holdings all with revenues last year of more than $200b.

It boggles the mind.

A few years ago during a visit to the Johannesburg Stock Exchange, I noticed that the top companies listed on the exchange, were valued at more than the GDP of the East African Community.

“Some of us are really pretending to be countries, we should just be taken over by some of these companies and stop the charade,” a Kenyan colleague suggested, when faced with the fact of how puny our economies are.

If it is any consolation every big company was first a small company.

Last week the Uganda Securities Exchange and accounting firm Ernst & Young sponsored a workshop for Small and Medium-sized Enterprises (SMEs) to moot the idea of selling shares to the public through the exchange.

Going public has its benefits and challenges but if planned well the advantages far outweigh the disadvantages.

Listing on the exchange allows a company to raise relatively cheap capital but more importantly improves the companies’ processes, making it more competitive in an increasingly competitive world.

The main sticking point I gathered from the workshop participants was the loss of control that comes with selling to outsiders a part of your company or variations of the same theme.

A few years ago a report showed that Uganda was the most entrepreneurial country in the world. However Uganda’s businessmen were overwhelmingly necessity entrepreneurs, setting up businesses to sustain themselves and their families, as opposed to opportunity entrepreneurs, who identify gaps in the market, set up and grow companies to fill those gaps.

Invariably the vision of the respective entrepreneurs will differ with the necessity entrepreneur having a narrower, shorter term vision compared to his counterpart.

If for nothing else preparing to list one’s company on the exchange extends the owners’ vision. A business can only grow as big as the owner’s vision.
This is important for Ugandan business because of the changing economic landscape they are increasingly finding themselves up against.

With the coming into effect of the East African common market in July, goods, services and labour can now cross our regional boundaries free of most encumbrances than previously. What this means is that Uganda companies and their products find themselves in direct competition with the regional companies – a euphemism for Kenyan companies.

Our landlockedness has it disadvantages in terms of the cost of doing business here and the relative maturity of the Kenyan companies is such that they can command scales of economy – among other things, thus lowering their production costs to the disadvantage of our operators.

The global momentum is towards freer trade, it is unlikely that our government can shield our businessmen from this post-cold war impetus. It’s up to our businessmen to step up their games if they are to have a chance at survival.

The exchange has two listing avenues the Main Investment Market Segment(MIMS), whose conditions for listing are more onerous and suited to the larger business concerns, and the Alternative Investment Market Segment (AIMS).

A lot of our businesses would be candidates for a listing on the AIMS with an eventual upgrade to the MIMS.

One of our biggest challenges as country is our failure to aggregate our resources, be they financial, management, talent and other human resources or even land to expand output.

Listing on the exchange would help in this direction.

Seating in the workshop my sense was that our businessmen are too wed to their businesses and the thought of sharing ownership is a fearful one. The way I see it the alternative are much more dire. One’s company maybe in seeming good health today but tomorrow competition from leaner, meaner opposition will bury even the little our business owners are trying to cling onto.

It is a cliché but it’s truly the survival of the fittest and our businesses are going to be forced to be more open minded to new ideas if they are to extend their legacies beyond current generations.

Published in New Vision on 9th October 2010

UNLOCK UGANDA'S TREASURE CHEST

It came around the corner to face us head on. There was no room on the road for both of us, so one of us had to give way. Our guide was very helpful, providing the detail that in the Murchison Falls National park, the biggest elephants weigh up to 10 tonnes!

My natural instinct was to shift the mini-van into reverse and move as far away from the lumbering hulk as I could.

Our guide and driver counseled that it would be suicide and proceeded to stop the van and rev the engine. After about a minute or two, which seemed like hours, the elephant stopped in its tracks and veered off into the bush.

At some point in the 60s and 70s, there were more than 16,000 elephants in the Murchison Falls National Park alone. The instability of the last 30 years, however, saw that figure fall to below half - but is now recovering.

Hippo, buffalo, giraffe, zebra and a variety of other game abound. The Madhvani Group is looking to take advantage of this revitalisation of Uganda’s largest national park with the opening of their new Chobe Safari Lodge, a $13m investment along the River Nile. It joins Para Lodge and Mweya in Queen Elizabeth as part of the group’s portfolio.

“A fusion of local materials blended with modernity has created a signature luxury safari style that is unique to Chobe Lodge. We are confident this will become the gem in Uganda’s tourism crown and one of East Africa’s top holiday destinations,” said the group’s director of tourism operations, Mani Khan.

On a boat ride up the Murchison falls, one could not help but wonder at how under-exploited our natural resources are. The Government’s role in the realisation of our full potential needs to be re-examined.

Through the privatisation of state enterprises and liberalisation of the economy, it was hoped we would be able to attract private capital and unlock local entrepreneurship.

The policy has worked in the context of the circumstances in which it was applied, but given that we continue to sleep on billions of dollars of unexploited natural potential, one has to wonder whether we have not hit a ceiling with that policy.

A U-turn to the day when the Government was involved in business in ways we knew should be discouraged.

That leaves us with the challenge of understanding the investor mind and providing the enabling environment that will attract them.

Nirvana for the businessman is a low cost environment with a growing market for their products and services.
By keeping costs low, profitability is almost certain an ever-increasing demand coming with the promise of business growth. The Government has a critical role in making both these conditions come through.

Lowering costs would involve guaranteeing safety of life and property, eliminating corruption, improving transport, energy, education and health infrastructure.

There also has to be extra efforts to market the country beyond sending delegations abroad and hoping for good press.

The quality of the people will increase their capacity to earn, and therefore, improve the effective demand of our market.

By focusing on lowering the cost of doing business, enterprises will thrive, jobs will be created, taxes collected and these, directed back into lowering the cost of doing business. All very obvious textbook stuff, you say.

The development of nations follows a simple formula: that your expenditure should shift increasingly towards investment and away from consumption.

It cost us sh500b at last count, to host CHOGM, a four-day event that benefited a small group of people and therefore a loss to the nation. That same money would have had wide reaching benefits if we had for instance, offered to carry the exchange risk of our industries and service providers.

As a country, we are not unlike the poor man who sleeps on a chest of gold, refusing or unwilling to open it because of some strange fixation with it remaining closed.