BESIGYE EXIT POINTS TO POLITICAL SHIFT

Weekend reports that Kiiza Besigye is stepping down from the helm of FDC will predictably weaken the party in the short run as they adopt to changing political priorities.

Besigye, who in the last ten years has come through as the most credible challenger to President Yoweri Museveni, it was reported was taking the action to give his successor sufficient time to plant roots ahead of the 2016 elections.

However according to the FDC constitution the party’s leader need not be its flag bearer in a presidential election, so one cannot count out a fourth bid at the presidency for Besigye.

But the alternative, that the pugnacious doctor from Rukungiri has thrown in the towel and moved on, makes for more interesting speculation.

Speculation has already turned to who will replace Besigye as the de facto leader of the opposition. The usual suspects have already come up for mention; the genial Major General Mugisha Muntu, the reinvigorated Nandala Mafabi and even a few dark horses like the irrepressible Salamu Musumba have enjoyed a passing mention.

"The major pitfall for the opposition can be found in the constitution or more specifically in the way we carry out elections in this country...

Unlike in the UK but like in the US, our presidents are elected directly. In the UK the electorate votes for the party and its leader becomes prime minister. This system as has been shown in the US, means that the electorate is wont to vote for personalities over policy, and therefore likable, well known personalities are likely to be successful as opposed to technocratic, doers with wooden personalities.

This is an important distinction that should not be overlooked.

When asked at the end of her husband’s term in office why a woman has never been US president while UK has already had a female prime minster, Hillary Clinton said in the UK a woman can propel herself to the top of her party and during election time the party machinery will ensure she is elected while in the US presidential candidates – while helped by the party, find that they are running more on personal merit.

Over the last 25 years no one comes closer to near universal face recognition in this country than Museveni and that gives him a few yards over his challengers in any electoral campaign.

"So by bowing out, Besigye has with one hand given a chance for renewal while with the other taking away arguably, the only other politician with a national profile...

In the run up to the last election some members of his FDC party grumbled that Besigye was so seduced by the possibility of making it to state house as leader of a badly cobbled opposition alliance, he paid little heed to building his own party structures.

The dissenters argued even then, that a win was impossible because there was no impetus behind his race from the party, beyond the feel good anticipation of an opposition alliance. The rest as they say is history.

But there too lies another problem. In building parties around personalities, the party structures – if there are any, are subjugated to the leading personality of the day to the detriment of long term sustainability of the party.

As a result we can expect to see infighting in the FDC as the contenders jostle for power without credible party structures to moderate tempers and mediate between contending factions.

"The Honourable Ronald Reagan Okumu fired the first salvo, declaring shortly after the polls, that no “westerner” will succeed Besigye as the leader of the FDC. This ourtburst was triggered by the frustration felt by a fringe element in the FDC who felt that Besigye, a “westerner” was in the way of their plans of ethnicising the last campaigns, which they felt was their best hope of a smash-and-grab victory against Museveni...

One can expect ethnic undertones will continue to colour the debate in FDC for some time to come.

But that could be a mistake if the last election were anything to go by.

Observers were convinced ahead of the last election that with the northern war over for all practical purposes, the main issue will be Museveni’s record and more specifically his government’s perceived tolerance of corruption.

However the opposition were caught flatfooted when the Museveni team made the campaign about the future, read the youth and less about the past – textbook tactics for a running incumbent.

Besigye recognized this probably a bit too late, as evidenced by his championing of the walk-to-work demonstrations earlier this year.

Barring any accidents expect subsequent elections in this country to be about cross cutting issues, namely the economy and less and less about tribe or religion.

"So if Besigye’s exit sharpens ethnic lines within the party, expect that FDC and the leader who will emerge to be less of a threat to the NRM in 2016...

2011: THE PERFECT ECONOMIC STORM

According to the statistics the year started on a rather benign note.

Inflation in December last year was 3.1%, the more than doubling of the rate from November’s 1.4% could explained away easily as due to the festive season. Petrol was selling for less than sh3,000 a liter and unsecured lending rates were just about 20%. Foreign exchange reserves stood at 5.2 months of imports.

Fast forward to today. Inflation in November slipped to 29% from a record high 30.4% in the previous month. Petrol is on the verge of touching sh4000 a liter at the pump and lending rates are now up to more than 30%. Foreign reserves have plummeted to 3.7 months of imports in October. To put that in perspective we shed about $500m or sh1.5trillion in reserves between December and October this year.

The more reserves a country holds the better a government can cope by battling inflation and stabilizing prices and smoothing out currency fluctuations, both of which if left unchecked can sink economies.

We might have to go back ten years or more to find a time when our reserves were less than four months of the imported goods and services.

But for the man on the street he did not need official statistics to tell him something was badly wrong.

"When sugar became scarce for the first time in more than 20 years, alarm bells went off. Sugar scarcity is a throwback to a time an older generation would rather forget and an inconceivable occurrence for a younger generation. As a symbol of things gone bad, few things beat sugar shortages in this country...

It is safe to say that no one saw this coming, and for good reason.

A perfect storm is used to describe the coincidence of adverse events to make an already bad situation worse.

Regional drought and famine that stressed local food stocks, an election year, with its attendant fiscal loosening, a deepening Euro crisis, which caused a dollar appreciation, dampened demand in our traditional export markets, reduced foreign direct investment and remittances from Ugandans abroad, all conspired to create our perfect storm.

Uganda’s predominantly subsistence agriculture sector has failed to respond adequately to growing regional demand. This was made worse by failed harvests in the Kenyan rift valley due to drought in the early part of the year. This was important because not only did we start feeding western Kenya but food demand, which was previously covered by our eastern neighbor, from Southern Sudan shifted to Uganda.

When food prices, which constitute the biggest single component of how we calculate inflation, rise general prices follow suit.

According to official statistics the food price increases peaked in March before beginning to slide starting in May.

The presidential and parliamentary campaigns not only served to cause more money to come into circulation but also caused some uncertainty, which held back inflows as investors adopted a-wait-and-see attitude – a now traditional occurrence ahead of the last three elections.

Diminished hard currency inflows put the shilling under pressure forcing import costs higher, most especially for fuel. Fuel prices are an important component of all product prices on our shelves or services we consume.

In a related incident the Euro crisis seemed to come to a climax this year with real fears that the Eurozone was likely to break up and the short lived Euro currency in its final days.

The crisis which has its roots in the global financial crisis that kicked off in 2008 saw the weaker European states – Portugal, Ireland, Greece, Spain and more recently Italy straining the Eurozone’s resolve to remain afloat. Massive bailouts of Greece, Portugal and Italy have cause uncertainty which has served to further strengthen the dollar.

It has been reported that as a result of our remittances have never recovered to the pre-global financial crisis $1b as our relatives in the diaspora tighten their belts in anticipation of tougher times.

All this also fed into our power situation with government being forced to make the choice between the discomfort of loadshedding or paying out billions of shillings to subsidise the expensive thermal power generators. The lifesaving hydroelectric power expected from the Bujagali power dam missed deadline after deadline and is now expected to come on line by the end of April next year.

But finance officials believe we have got over the worst part and barring any other shocks inflation should return to single digits next year, while the exchange rates have already begun to slide following determined and consistent action from the central bank all year long.

As we wind up the year there is evidence that export earnings are picking up, with export figures for September up more than 50% from the same month last year.

"The main lesson from 2011 seems to be that we need to shore up out food production. The reality is that as the East African Community takes hold and the continued free moment of goods and services gets entrenched we will not be producing for our own consumption any more. This will require a reorientation of our farming methods and a determined push into agro-industry...

With the Eurozone crisis far from resolved, the ever unpredictable weather patterns it would be full hardy to make any predictions going into 2012.

UGANDA LESSON 2011; FOCUS ON THE PRODUCERS

Aga Sekalala Senior is easily Uganda’s largest agro-industrialist.

Over more than 30 years of deliberate, painstaking work Sekalala has built a multi-million dollar operation that processes animal feeds, chicken, fish, vanilla and its derivatives and extracts plant oils.

Tucked away in Namulonge, off the Gayaza-Zirobwe road, his industrial estate employs more than a hundred people while providing income for hundreds more local out growers, suppliers and retailers.

But the reclusive Sekalala, more likely to be found overseeing his enterprise in overalls and gum boots than decked out in a power suit and poring over revenue projections, is not a happy camper these days...

In the space of two months the shilling has appreciated nearly 20% from the September low of sh2,900 to the dollar, threatening to decimate his margins and forcing him to wonder aloud about the priorities of the country’s economic planners.

People respond to incentives -- factors that enable or motivate a particular course of action, or counts as a reason for preferring one choice to the alternatives. That is as much an economic truth as a universal truth.

This year’s economic crisis – a delayed reaction to the global meltdown that kicked off in 2008, should force us to take a hard look at our own economy and the incentives we provide.

Inheriting empty coffers in 1986 the National Resistance Movement, under pressure to generate revenues fell in line with the World Bank, IMF-led donor community.

This entailed reining in government spending, privatizing inefficient public enterprises and allowing the free flow of capital into and out of the country.

Subsidies for production were frowned upon under tightly prescribed spending plans, which were flaunted at the risk of losing regime-propping aid.

"The net effect of this is an economy, which subsidises the urban elite at the expense of the rural masses by cutting government spending in agricultural extension, health and education to a bare minimum while keep exchange rates stable, allowing for importation of luxury goods to stoke the insatiable appetite of the urban wannabes...

In all fairness, that is the price we as a country had to pay to stabilize the economy up to this point.

Now that we are generating up to a thousand times more revenue than we did in 1986 a rethink of the way we do things is long overdue.

A budgetary shift away from consumption towards production would be welcome. Support for big agricultural concerns that incorporate local farmers in their plans, in the way of tax breaks, infrastructural aid, concessional loans, a focus on research and marketing assistance for exports would be useful.

I shudder to suggest a discretionary process overseen by our local technocrats because it can easily succumb to corruption, politicking and mismanagement, but the point is government needs to step up its game if we are to become a middle income country in our life time.

It has taken 25 years to stabilize the economy, we can expect that a properly designed and executed incentive program for our productive sectors will probably take just as long and cost as much to show sustainable results.

This year government has ear marked about sh350b in interest payments, largely to service its treasury bill and bond obligations, which are issued to manage inflation. So the cost of supporting our industries is not one we would be unfamiliar with.

The point is that if Sekalala and company identify an opportunity to produce fish feeds say, because local and regional markets demand them, he should be able to go to government with a well prepared business plan and government formulates a way to meet him part way.

"As it is now when entrepreneurial spirits have an idea, their last port of call is the government. Government technocrats are clueless about what it takes to do business (forget their little village ranches subsidised by office imprest) and worse still a request for concessions is always viewed with a jaundiced eye....

It is a no-brainer. Supporting agro-industry has the greatest potential to raise rural incomes, mobilise savings and jump start another surge in tax revenue growth.

This is all text book economics with numerous case studies in western economies, Asia and even on the continent. So why aren’t these things happening?

One, because as suggested earlier the government technocrat is not wired to create wealth but to allocate already present resources, the diametrically opposite mindset to that of an entrepreneur.

And secondly, our industrial base is still small and disunited – with each businessman suing for his own selfish interest, oftentimes subverting the general good.

Regardless, the writing is on the wall the sustainability of future growth and the very existence of our nascent producers will depend on whether we starting paying more than lip service to the producers of our economy or not.

UGANDA SHILLING GAINS HURTING EXPORTER PROFITS

Exporters are gnashing their teeth in frustration at the gains the Uganda shilling has made against the US dollar in the last two months.

A combination of pre-election jitters, uncertainty in the Euro zone and less than usual export receipts at the beginning of this year conspired to push the Uganda shilling to historic lows against the dollar and other major currencies.

At the beginning of September the shilling touched crossed the sh2,900 on the inter-bank market and the actually touched in sh3,500 at some forex bureau. Since then the shilling has gained dramatically against the dollar to just over sh2,400 in the inter-bank market on Monday and sh2,450 in forex bureau around Kampala.

The double digit appreciation has placated importers, who had protested vehemently against the earlier loss of value by the local currency so much so that they suggested that the central bank fix the rate at more favourable level.

At the time President Yoweri Museveni shooed off the importers, declaring that a weaker shilling is good for exporters and his government was not going to deliberately try to redress the shilling’s slide.

However inflation too was hitting record highs – topping off at 30.4% in October the highest since early 1993, fuelled by higher food prices, campaign related spending and as a result of the shillings depreciation, fuel prices rose with the attendant upward ripple effect on other prices.

In scrambling to rein in inflation, which is too much money chasing too few goods, Bank of Uganda started aggressive efforts to mop up excess cash by stepping up its treasury bill and bond auction and by raising the Central Bank Rate to reduce borrowing and therefore money in circulation.

The newly introduced Central Bank Rate (CBR) is an indicative rate commercial banks use to determine their own lending rates.

As a result of this the yields on treasury bills and bonds have more than doubled since the same time last year. The benchmark 91-Day treasury at last week’s auction averaged 23.39% compared to 8.1% average in December last year.

The attractive yields – the best in the region compared to Kenya’s 17% and Tanzania’s 12.4%, has attracted foreign investors, which new demand for shillings has been the main cause of the local currency’s gains in recent weeks.

“The preferred situation for my exporters is that there be predictable conditions and preferably favourable to us compared to our export markets,” said Uganda Export Promotions Board boss Florence Kata.

“The current appreciation on the shilling only makes sense to exporters on their imported inputs, but the shillings he is getting for his products are less, inflation is high, bank lending rates are through the roof … I know a few who have rolled back their production they are adopting a wait-and-see attitude,” she said.

Other challenges are that Europe has had a longer summer and therefore some of their exports which can still be sourced in southern Europe have not seen the seasonal kick in prices that comes with onset of autumn in October.

On a more individual basis exporters are complaining that they are in the red.

“Look I bought inputs when the dollar was at 2,900 and now I am having to sell at 2500, I am running at a loss,” said a major exporter, who chose anonymity for fear of being misunderstood.

“This country really has to decide what it wants, do we want to support producers, job creaters, tax payers or do we want to subsidise consumers…. We talk one thing and our actions point in the other direction,” the visibly irritated exporter said.

The central bank tasked with maintaining price stability, acknowledged the difficulties the exporters are facing, but argues that not to have taken the action they had taken would have buried those very same exporters.

“We knew that this is the price we would have to pay but letting inflation gain momentum is not an option we can consider,” deputy Bank of Uganda Dr Louis Kasekende said.

He said that the tools the central bank has at its disposal are short term in their action and that we would have to take a harder look at our economy and explore more medium to long term interventions.

While brushing aside talk that the Ugandan economy has been shown up to be more style than substance like Goloola Moses, Kasekende suggested areas our planners should seriously look into.

“To begin with we may need to rethink how much national reserves we should be holding. If we did not have credible reserves we might not have been able to fight off inflation. So maybe we should focus on targeting more than the four month’s worth of imports we are currently operating under,” he said.

In addition he suggested that we may want to review our manufacturing subsidies and realign them with our natural comparative advantages and also boost support to the agriculture sector, seeing how a shock to food security in the region can have a ripple effect through the economy.

“This global financial crisis has forced a rethink of quite a few economic theories we have been operating under. It cannot be business as usual after this,” Kasekende said.

UGANDA MINISTER'S RESIGNATION; AN UNCOMFORTABLE PRECEDENT FOR COLLEAGUES

The Minister of the presidency Kabakumba Masiko tendered in her resignation yesterday in a move that may, salvage the wreckage of her political career, make other ministers shift uneasily in their seats and galvanise the NRM rebel MPs.

A police investigation into the minister’s complicity in the alleged theft of a transmitter from UBC by the Kingdom Broadcasting Services (KBS), which the minister controls, was broken by the New Vision two weeks ago.

Subsequently she has come under pressure from parliament, her party and her fellow cabinet ministers to step down.

It was always a matter of time before the honourable member from Bujenje county, Masindi county either jumped or was pushed. Not since the resignation of Kirunda Kivejinja in 1999 has there been such damning physical evidence of wrong doing against a serving minster.

Kivejinja opted to resign rather than suffer parliamentary censure on evidence that he, as transport & communications minister had diverted 2000 liters of fuel from Uganda Railways Corporation to aid his re-election campaign.

"For better or for worse, in politics perception is everything, so much so that facts tend to bend to fit the perception...

Whether she was involved with the actual appropriation of the transmitter is really immaterial in these particular circumstances, a point that was totally lost on the minister when she attempted a rebuttal in parliament.

Indications were that she was willing to fight on, but saner – or maybe self-interested, minds prevailed upon her to step aside. And it maybe the best thing she could have done if she hopes to bounce back into the cabinet at a later date.

"To have tried to fight a censure motion would have been akin to death by a thousand cuts, as MPs of all political shades would have taken pot shots at her under the cover of parliamentary immunity shredding her credibility – or what was left of it, in the process...

But the greater concern will be for other ministers currently facing the threat of censure or future ministers who will inevitably follow.

It seems, given the Kabakumba and Kivejinja’s precedents, that resignation becomes an option when there is physical evidence adduced against you and when there is a real threat of parliamentary censure.

Leaks from within the NRM caucus meeting on Monday suggest that a clear distinction was made between her case and that of Prime Minister Amama Mbabazi and Internal Affairs minister Hilary Onek.

Allegations have been brought against the two ministers and foreign minister Sam Kuteesa alleging they have received bribes from oil companies. The ministers have declined to resign.

Independent investigations have however revealed that the basis of the allegations – bank statements from banks in the UK, cannot be authenticated.

With the demise of Kabakumba the pressure on the minsters to step down may mount uncomfortably in coming weeks, though it is unlikely to trigger a domino effect of resignations.

But the real “winners” of this sordid affair are the NRM “rebel” MPs who are cutting out a niche for themselves as public defenders.

A throw back to the Young Parliamentary Association of the late 1990s, which spearheaded the censure of Kuteesa, and the then primary education minister Jim Muhwezi, the rebels, have forced the party hierarchy to seat up and grudgingly take notice of them.

The group whose most public faces are Theodore Sekikuubo and Meddie Nsereko, while breaking with party ranks have in effect hijacked a project that ideally would be sustained by an opposition party.

"Though cause for much looking-over-the-shoulder by NRM big wigs the rebels may serve a useful purpose in lending credibility to the party as one that is concerned about corruption.

To badly paraphrase former US president Lyndon Johnson, the NRM probably figures it's probably better to have them inside the tent pissing out, than outside the tent pissing in...

Kabakumba’s action is bound to send reverberations through the political establishment least of all because it makes a minister’s resignation a real possibility again.

IS UGANDA'S ANTI-CORRUPTION FIGHT GAINING TRACTION?

On Friday was the International Anti- Corruption Day. One has to wonder about the timing of certain revelations of high corruption in recent weeks and the commemoration of the day last week.

According to the Inspector General of (IGG) Raphael Baku his offce is not only getting more reports to investigate but is piling up a commendable win –loss ratio against the “forces of darkness” . This year 109 arrests have been made, 45 cases concluded and 28 convictions obtained, a far cry from the 2009 record of 12 arrests, seven cases concluded and two convictions obtained.

The spike in activity has something to do with the passing of two new pieces of
legislation – Whistle Blowers Act and Anti-Corruption Act, 2009.

The Whistle Blowers act allows members of the public to report incidents of corruption, provides for their protection and a percentage of the illicit funds in question. It has its problems but is a critical step in the fight against corruption. More about that later.

Despite these gains against the vice the public perception is that, on the contrary corruption is galloping out of control and the cases we seeing being brought to court are the low hanging fruit on the tree. That there is selective prosecution with the biggest perpetrators getting away.

That maybe true but the nature of the crime lends itself to this kind of scenario.
Unlike murder or even outright theft, in corruption cases, bribery for instance both parties are guilty of a crime, witnesses are hard to come by and paper trails can be obscured. The aggrieved party is a faceless government or a far removed public neither of whom maybe aware a crime had been committed or an unable to do anything about it for legal or bureaucratic reasons.

Like a borehole pump which takes time to get going as the airlock is worked out I would like to believe that once momentum has kicked in corruption will be worked out of our system with time. The cynics argue that corruption is too well entrenched to be worked out and believe the normal judicial processes are incapable of making a dent in the cancer.

I on the other hand think that the fight against corruption will find its greatest ally in the business community – the supposed beneficiaries of this ill.
This is the reality facing the Ugandan businessman; He either grows, merges with international players or get swept away by new regional and international competitors. It’s happening already.

Formalising business processes will give owners a better picture of their business, allow them to maximize their strengths and minimize their weaknesses, allow generational transitions and in a globalised world make them more attractive to potential partners or buyers.

To ensure longevity businesses will have to document their process and adhere to the law – including pay taxes due. In this ever evolving scenario the space for corruption will narrow. In addition foreign players who are already steeped in best practice will insist on the same for their local partners, not to do so may be worth billions in lost revenues.

On the flip side, what may end up happening is that squeezed out of the business sector, our businessmen will go to work for government and perpetuate corruption there. The corrupt elements will then attempt to take government hostage failing that will seek to disrupt events, so that chaos can thrive and they can resurrect themselves.

This is the ever present challenge of governments. It is the corrupt cliques that have the greatest incentive to frustrate the private sector from being a credible counter to government, because a strong private sector can call government to order.

For our subsistence businessmen, with no ambitions beyond big 4X4 cars and a harem of little brown girls, and for our governments with less than a short term view of the their countries destiny, corruption may serve current purposes but it is not sustainable.

Unsustainable because governments need more and more revenues to service growing populations, which revenues come from the private sector, and businesses need to grow as a survival strategy.

Corruption is everywhere the challenge is to relegate it to the fringes of our daily lives, current evidence suggests we maybe on our way.

CORRUPTION IS INEVITABLE?

The press has been awash with the tales of corruption and the corrupt -- the botched ID project, the shenanigans around the UBC land and masts and our government’s inability to import a few dozen bicycles for village officials.

It does not help that these stories are coming out when inflation has hit historic highs, loadshedding is getting on our nerves and the rains have washed away the few roads we had left.

The way our officials are snorting at the trough, it all just leaves a bad taste in our mouths.

But then there is a logical – however unpalatable, explanation to all this

The development of human society has followed a well charted path.

Society start as small bands of under 100 people often speaking one language, related by blood and with an egalitarian or consensus leadership. Through birth or assimilation of other bands this grows into a tribe with hundreds of people still one ethnicity and often characterized by fixed settlements. The next stage is chiefdoms with thousands of people and at this point we begin to see centralized oftentimes hereditary rule.

In addition to or as a consequence of this centralized power, we see the emergence of the kleptocratic state, defined as one, which through corruption, enriches its supporters and sustains itself. This it does by monopolising the instruments of violence and conflict resolution, keeping the population happy by redistributing tribute (taxes) and more controversially promoting ideology to justify the continued kleptocracy.

How else can you organize large populations, spread over vast territories without centralizing power and violence? How else can you sustain that power without extracting revenues from the people and distributing it to the elite? And once in power how do you guard against your supporters running amok, plundering resources with increasing impunity?

US President Barak Obama, UK Premier David Cameron and German Chancellor Angela Merkel governments grapple with the same question. These governments are all kleptocracies only varying in degrees.

By logic and description all governments are kleptocratic.

It is futile to think otherwise. And it is with this understanding that we may have a chance of addressing the challenge.

MAKING OF A BUSINESSMAN

Businessman Patrick Bitature identifies the real turning point of his business career as the time he determined to go formal. Years ago a consignment of mobile phones was smuggled out of Entebbe airport by his workers. 

Thinking they had done good by him they told their boss what they had done. “It was a challenge to smuggle them back into the airport so that we could pay taxes on the consignment,” said Bitature of the event that marked the turnaround in his business career. The long overdue confirmation of his transition from informal to formal businessman came two weeks ago with the East Africa’s emerging entrepreneur of the year Ernst & Young award...

 The award which has been running for 25 years and held in 50 countries worldwide is recognized as the premier event of its kind. The judges drawn from eminent people in society -- this year included Justice Geoffrey Kiryabwire, head of our commercial court, take the nominees through a rigorous vetting process that tests the entrepreneur’s vision, knowledge of his business and grasp of the enterprise’s strategic direction. 

 “It was a very enlightening process that clarified a lot of things to me about my business and the way forward, not only in speaking with the judges but also in interacting with other nominees in the region,” Bitature said. 

Bitature known for his flagship Simba Telecom, which deals in airtime and mobile phones with branches in Kenya, Tanzania and Nigeria, also has interests in real estate, insurance, power generation and following his entrance into radio years ago has now added Television broadcasting with his interest in pay TV company, Zuku television. 

It all started with this father, Paul a businessman in his own right, who gave Patrick and his siblings pocket money at the beginning of every holiday and insisted on seeing who had grown his money most. Selling sweets to neighbours, grew into selling clothes to schoolmates and then owning night clubs – he sold the wildly successful Ange Noire club to current owner Charlie Lubega, eventually owning an MTN airtime selling franchise from which all his other interests seem to have spawned. 

This has all come to pass because of a change of mindset. “I made a lot of money before I got formalized but I have little to show for it, by formalizing my business I have made more money than I imagined,” said Bitature, who estimates his companies which employ at least 1000 people, turns over more than $100m annually. He doubts he would have been able to partner with credible international firms in his business and retain their trust is he had not formalized. Bitature acknowledges there is a lot of work to be done on his businesses, but says he is now on an irreversible path in that direction. 

In his seminal book “The Mystery of Capital”, Hernando de Soto argues that the reason capitalism only seems to work in western economies is for lack of formalization in the rest of world. He looked beyond the systematization of business processes to the nature of property rights. Property rights are the bed rock of capitalism, if you cannot show proof of ownership you cannot extract maximum value from of a property and therefore frustrating wealth creation. De Soto found that the cost of formalizing property rights was so onerous in many underdeveloped counties that many people chose to remain informal in their practices, putting a cap on a country’s development. A country develops because its citizens develop. 

 But as Bitature’s story shows for the few who make the thousand mile journey the benefits can be innumerable. “The seduction of being informal is that it seems like you are savings costs not registering, not paying taxes, dodging debtors, not keeping books properly, operating in cash … but it limits your growth and in which arena you can play,” Bitature said on the sidelines of another event last week in Kampala to honour his achievement. “You cannot grow to be big a tree without a mindset shift, without that (mindset change) you will remain a shrub,” he said.