AID SUSPENSION: DON’T CRY FOR ME UGANDA

A host of countries have suspended aid to Uganda following the unearthing of a scam that saw billions of shillings go missing in the Office of Prime Minister(OPM).

If you have not been around, officials in the OPM helped themselves to billions of shillings in monies meant for the reconstruction of northern Uganda, in a scheme amazing in its simplicity, that it makes you wonder how come it went undetected for so long.

The long and short of it, operations officials' accounts were credited with more monies than were necessary to carry out projects with the surplus being paid back to senior officials. That the ministry was crediting personal account for official work was enough to raise eyebrows, but was explained away as due to the lack of banking services in the Karamoja area of the country.

A good case to subsidise a bank branch in the area to funnel government aid, if ever there was one.

And that is how the aid suspension came about.

Theft is wrong and you cannot fault the donors on pulling the plug. The money they give us is their own tax payers' money and the donor governments' inaction following such revelations of theft can cause them quite a bit of discomfort from their constituencies.

"The suspension was  prompted more by the repercussions that may come from their electorate’s concern than that the people of northern Uganda were not benefiting from their charity...

Harsh yes, but the world of geopolitics pays little heed to moral issues unless there are political consequences.

It is no surprise that corruption runs rampant in Uganda, any aid bureaucrat who has been here six months can’t have failed to come up against it. In fact a few years ago there was a report that estimated that up to sh300b a year goes unaccounted for. So any aid cuts were long overdue, so why didn’t they happen sooner?

Uganda has systematically scaled back its aid dependency over the last two decades, donor budget support accounts for about a quarter of the budget.

The fact that all the money is not put up by one government does not diminish the leverage that comes with these handouts.

But also because there are multiple donors their priorities differ and therefore its unusual to see concerted effort. As often happens if one donor pulls out, the hole can often be filled up by other donors.

That the donors are looking to achieve other aims other than lifting the down trodden of the world is obvious when you look at aid from the EU. Not only does the EU provide support but its individual nations do so as well. The logical thing would for the EU countries to pool all the money they have individually earmarked for aid and disperse as one, getting more bang for their buck, but no it does not happen like that.

"They argue that individual governments have their own pet projects and therefore retain the right to run parallel aid programs. But isn’t it that each donor government wants to be able to exert its own influence on governments and therefore the sometimes uncoordinated troop movements?...

Each government panders to its own constituents – businessmen, pressure groups and even the vaguely quantified “national interest”. These other interests often over ride concerns over the theft of a few million dollars.

The truth be told, Uganda has not been a particularly “bad boy”.

Tearing their hair out at the extent of corruption in the Daniel arap Moi government in neighbouring Kenya,  one diplomat once lamented that corrupt officials there were “eating like gluttons” and “vomiting on the shoes” of donors. 

In private they express similar sentiments about Uganda but they are not so exasperated that they unleash the sentiment for the world cameras – yet.

Again there are greater considerations that inform the actions of governments than moral shortfalls.

"Going by the same logic, the recent aid suspensions amount to a slap on the wrist and one can expect we will be back to business as usual by this time next year.
This is not thumbing our noses at the donors, it’s just the way the world works...

It is bad enough that we continue to rely on donors to cover our budget shortfalls. But it is bad upbringing to expect the donors to come in and clear out our mess.

Government puts more energy into presentations to western capitals for aid than it does in deciding our taxes – a hangover from a time when donors carried more than 50% of the budget.

That needs to change.

Government needs to come around to the fact that Ugandans provide three in every four shillings to the budget and in the wake of newly found donor moral indignation – however tainted, they need to take Ugandans more seriously.

How this can happen is a story for another day.

UGANDA'S KARUMA DAM A STUDY IN IMPUNITY

The energy ministry must be glad for the current media focus on the Office of the Prime Minister and the public service ministry.

The daily revelations about the massive hemorrhaging of tax payers’ money into the pockets of a handful of officials had us all riveted that we missed the ruling two weeks ago by the civil division of the high court.

The issue was the ruling on an application for a judicial review of the tendering process to construct the 700 MW Karuma power dam in northern Uganda.

In October, frustrated by the tender process and suspicious that the energy ministry officials had contrived to award the contract to another bidder China International Water & Electric Corporation (CWE), Salini S.p.A applied for a judicial review of the process.

So on November 16^th high court justice Eldad Mwangusya delivered his ruling.

But first some background.

The $2.2b Karuma Dam is going to be the biggest single investment project in the country’s history. Bids were opened in November last year and according to the time line the winning contractor was to take possession of the site in March. The project was supposed to take six years to completion.

Inexplicably the evaluation process took long, bursting the original timelines. Then rumours begun to fly of money changing hands and that the process had been short circuited and the contract awarded anyway to the CWE.

Several of the bidders called for an administrative review of the process – which entails going over the way the process had been handled, but realizing that energy ministry officials were hell bent on the awarding the contract they resorted to the courts.

In the application for a judicial review Salini sought to have the court pronounce itself on eight issues whose net effect was to find that procurement rules had been flouted and to hold the attorney general and the executive director of the government’s procurement agency (PPDA) responsible, to call for a reevaluation of the bids by independent evaluators.

Short and long of it Justice Mwangusya ruled in Salini’s favour on all but one ground.

This of course further delays the Karuma further and at the rate at which we are going it will be a miracle if construction begins before the next budget.

But the most jaw breaking part of the ruling was in reference to a letter written by the attorney general to the CWE General manager.

The letter “Stated among other things that the bidder should state the terms and conditions that should be included in the contract. This actually means that the contract has already been awarded to this bidder yet the procurement process is still ongoing,” Mwangusya said.

He said this was contrary to the PPDA act adding that, “The very essence of the statute has been frustrated by the persons that are mandated to safeguard it.”

The background to this letter to CWE was a meeting that was held with President Yoweri Museveni on August 14 where the energy minister Irene Muloni, her junior minister Simon D’Ujunga, the ministry’s permanent secretary Kaliisa Kabagambe, Attorney General Peter Nyombi presented CWE officials to Museveni.

In the meeting it was agreed that CWE presents guarantees from its parent company China Three Gorges Corporation in order to get the contract, a request that was irregular in that no other bidder was asked for a guarantee. Why it was necessary for CWE to provide a guarantee is another story.

A lot of deals have gone down in this town, many of which we have never been privy to, but August 14^th will have pride of place as one of the darkest days in Uganda’s history.

What was happening in this meeting? Was the president made aware that the meeting with a bidder in an ongoing process was a flouting regulations? Did he know that the meeting in offering remedies to CWE’s bid would be detrimental to the process? What did the relevant ministers and technocrats seating in the meeting advise?

“It is trite law that an illegality once brought to the attention of the court cannot be ignored,” Justice Mwangusya said in reaction to the letter that came as a result of that meeting.

The addition of Bujagali’s power onto the grid earlier this year has removed the urgency for more power to alleviate loadshedding. However it is expected that new demand will suck up all his new power within the next 18 months sending us back to the days of loadshedding.

Officials have been heard to mutter that it is bidders running to court that are frustrating the process, but on the other hand if such blatant disregard of procedure were not there what grounds would there be for appeal. This is not the first tender we are doing in this country.

In more cultured society somebody should be stepping down, getting fired or worse, but then again what do I know?

UGANDA AIRLINES? HOW CAN WE TRUST PUBLIC OFFICIALS

The recent spate of revelations about stolen government monies blew away the argument that government does not have enough money to improve education and health services or build roads or dams or any of those things we badly need.

But more importantly it cemented my belief that the best thing this government did for us in the 1990s was to privatize all our state owned enterprises.

Can you imagine what would happen if Uganda Posts & Telecommunications still had a monopoly or Uganda Commercial Bank still straddled the financial or UEB was in charge of our power sector or …. We would still be in the Stone Age.

This may or may not be an indictment on the managers who run those companies, but the truth is government agencies have little or no incentive to be efficient never mind what the politicians say.

A government’s main pre-occupation is to hold on to power. How a government does that depends on the peculiarities of that society but is often a combination of improving service delivery and doling out patronage.

The need to improve service delivery in itself is the stuff successful companies are made off but when you include rewarding political supporters, service delivery becomes badly compromised.

That’s how services are concentrated in certain places and denied others, certain people have their debts to the company waived or certain people get jobs in that company and not others. And when government’s change it is out with the old and in with the new. Not the ideal business model to ensure sustainable success.

Given the above it goes without saying, government is not the most efficient allocator of resources. That’s why the world over governments indulge in projects with questionable universal benefits, white elephants, diverting much needed resources from more important services to massage constituencies and personal egos.

Which brings me to the issue of the reviving Uganda Airlines. Some MPs were in Kigali recently and came back singing praises about the Rwanda Air, their national carrier. The airline which is 10 years old flies to all the EAC capitals as well as South Africa, Dubai, Nigeria, Gabon and Congo Brazaville.

This was the cue for other interested parties to offer their two cents on the matter.

That as Ugandans we are embarrassed because we don’t have a national airline. That a national airline would make it easier to develop Entebbe Airport into a hub.  That there is now enough traffic to make a national carrier viable.

Is American pride hurt by its lack of a national airline?

An airport becomes a hub because of its location, infrastructure and the traffic going through it. Do you need and a national airline to become a hub?

The airline does not make your airport a hub but people wanting to come to your country or transit through your airport is what makes it a hub.

If the government really wanted to develop Uganda into a hub they would have done it as part of a wider strategy to improve tourism numbers or promote high value exports.

The billions of dollars that will be required to set up the airline and baby seat it to profitability will be better spent expanding and revamping Entebbe airport, improving infrastructure generally and to the tourist sites in particular, financing and executing a well thought out marketing plan for the country. Those actions will get us the much desired hub.

The way I see it we have more pressing matters than opening up more avenues for a handful of elite to rip off our taxes.

Some people argue that an airline will make the government money. I manage to fall off my chair every time this one comes up. Government would benefit from an airline if it was profitable so they can collect corporation tax and earn a dividend. The operative word there is profitable.

To be profitable the airline will have to capture a sizeable share of the several hundreds of thousands of passengers flying through Entebbe airport. To do this it will have to offer a competitive service at a good price or government would have to institute some protectionist measures against other airlines. In the first instance government would be tempted to subsidise the company’s operations or make service in and out of Entebbe suffer in the case of the second course of action.

Returning to the issue of governments seeking to perpetuate itself in power – service delivery and patronage, connections out of Entebbe  are good so should we think that calls for a new airline are just a way to widen the surface area for “eating” in government?

TRADE THE KEY TO POVERTY ERADICATION

Our nations are at their most productive when they are discussion economic issues.

Last week Uganda hosted the 16^th Common market for East & Southern Africa (COMESA) summit.

COMESA came into existence in 1993, succeeding the Preferential Trade Area (PTA), as an attempt by member states to increase trade within the region that now stretches from Zimbabwe to Libya.

The region has a population of about 500 million and an economy of $700b a huge market by any measure.

However if the continent’s statistics are anything to go by – only a tenth of the continents trade is done with itself.

As most of the region’s exports are raw materials, this means that a lot of the value in processing, marketing, distribution and other intermediary services – as much as 90% of the value, is being captured off the continent.

As President Yoweri Museveni likes to say, we are donating jobs to the west.

The challenge is that the individual economies of the region are too small to sustain huge concerns, manufacturing or otherwise, while the barriers to trade between our own countries do not make it feasible to situate plants in one country and feed them from the region.

What a framework like COMESA can make happen is to create those exploitable economies of scale so that the huge investments needed to maximize the value of our natural resources can be situated on the continent.

Think about it if Uganda’s 100+ districts had border restrictions how difficult and therefore expensive it would be to move people, goods and services around the region.

The cattle keepers of the western Uganda can grow their herds to their hearts’ delight because they know that they can transport them to butchers in Mbarara on to Kampala and now to Southern Sudan, with little added expense beyond transport costs.

Now imagine how your costs would skyrocket to get our cow from Ntungamo to Kampala. The added costs, which would be loaded onto the final price, would not only depress consumer demand but would also discourage production. This would mean fewer cow herds, veterinary doctors, butchers, transporters and all along the value chain of the beef industry.

Similarly by retaining barriers to trade on the continent we are stifling production and the development of local industry.

The more immediate benefit is job creation but also associated industries will spring up and locally specific innovation will take root.

The analogy of the body and blood circulation maybe more apt.

Poor diet (policies) and inadequate exercise (poor implementation) causes the build up of cholesterol (artificial impediments) in our blood vessels. This restricts the flow of blood starving parts of the body of blood. When the buildup is too much then the engine of circulation the heart (producers) begins to overstrain and eventually gives up and the body dies.

To stick with the analogy, the whole body cannot be well if circulation is restricted to one part of the body.

But beyond administrative barriers there are such non-tariff barriers as poor infrastructure. It makes no sense for Kenya to have the finest four-lane highways crisscrossing it when Uganda’s roads are potholed and rutted.

At the beginning of this month African Development bank president Donald Kaberuka said it is estimated Africa needs to invest $100b a year on its roads to bring coverage to an acceptable level in the near future.

The scope of these projects are such that they can’t be done by individual states and a common market framework would make these investments much easier to make.

The point is that a large part of our poverty as nations and peoples is that we do not do enough trade among ourselves. We don’t trade among ourselves because we cling to artificial political boundaries imposed on us by historical accident. This inadequate trade also  provides little incentive for increased production, which means we continue to wallow in our poverty.

WE NEED McDONALD'S TO BRING PEACE TO THE REGION

In his book “The Lexus and the olive tree” author Thomas Friedman suggested “The Golden Arches Theory of Conflict Prevention” which stated that, "No two countries that both had McDonald's had fought a war against each other since each got its McDonald's."

That was in 1996 and the theory has held true except for Russia’s attack of Georgia in 2008, which maybe written off as the exception to the rule.

"The underlying logic is that by the time a country can sustain a McDonald’s restaurant, it has a critical mass of middle class. The middle class would rather resolve conflict by civil means than resort to violence. Violence is indiscriminate in its effect and for the middle class who own assets, this is not a good thing as one cannot guarantee the safety of property in a war....

It provides some explanation for why Africa, with more than half its population living on less than a dollar day, is so conflict prone.

Earlier this week rebel group M23 took over the eastern Congolese town of Goma. The M23 are part of a rebel group that was incorporated into the national army in 2009, but mutineed this year complaining that Kinshasa was not living up to the peace agreement.

The DRC counts as one of the poorest countries going by the classical measures of the GDP per capita and the Human Development Index (HDI).

Decades of mismanagement of the state and more recently the last  fifteen years of conflict after the departure of Cold War relic Mobutu Sese Seko, has meant that the infrastructure --  both physical and institutional, fell apart and with it the ability to effect welfare improvements for everyone.

As a result the hunter-gatherer is alive and kicking, with populations living off the land – snakes and monkey are delicacies, suggesting how far the country’s economy has regressed beyond subsistence.

The solution to the region and by extension the continents’ problems is improved incomes for all and a narrowing of the wealth gap.

Easier said than done.

But given how the lawlessness in eastern Congo has become a petridish for formenting rebellion not only in DRC, but also for its neighbours as well, the issues of development have to be tacked regionally. One nation cannot prosper alone and think it will be insulated from the chaos around it.

There are colonial legacies that the continent is finding hard to shake off. Communication between the old Francophone and Anglophone parts of the continent is very troublesome, with telecommunication and even flight connections in some instances still being routed through Europe. This has had the net effect of ensuring that regional trade is only a fraction of the trade the continent does with Europe.

Initiatives like the East African Community (EAC) and the Common Market for Eastern and Southern (COMESA) are attempts to reverse this pattern, helping to retain more and more of the continent’s wealth within its shores.

There is no getting away from it.

The troubles in the Congo are a symptom of a larger malaise.

"We may sign all the protocals we want, have enemies wear plastic smiles and indulge in limpid handshakes for the cameras, but as long as the fundamental problem of poverty on the continent is not tackled we shall continue to be the market of the developed world’s military industrial complex....

Peace would be better served if we had business delegations criss-crossing the region and inter-governmental infrastructural collaborations so that money can circulate, enriching all our societies and accentuating the mutual benefits of regional security.