NO PAIN, NO GAIN

Incredible as it may sound today, inflation peaked at 215% in 1987.

Since inflation is caused by too much money chasing too few goods, to fight inflation you either increase the number of goods produced or you reduce the money in circulation.

Producing more is not enough, you need to produce what people will buy. It takes time even for the market to determine what people want and in what quantities.

It’s easier to reduce money in circulation, than it is to kick start production.

In the late 1980s early 1990s after government was done dabbling in arm chair socialist theories, they decided to bite the bullet and rein in inflation. So they cut government spending and operationalized the treasury bill auctions to suck money out of the economy.

I don’t remember the details but I remember the pain – my pocket money took a nose dive, but I remember more especially the talk – that the government wouldn’t last the year, that they did not know what they were doing and that they would have to reverse the decision to fight inflation.

When I look back I realize it was the speculators who were the chief grumblers – they would buy goods and hoard in anticipation of higher prices.

If we drew a line in the sand of history of our economy, that was the time the government decided to get serious about reviving the economy beyond the flowery language in the ten point program, which is still a vision worth persuing, by the way.

"Since then other tough decisions have been taken – liberalization, privatisation, UPE all of which have been greeted with sceptism and outright disdain by the interest groups who were seeing their meal ticket flying out the window....

This budget, Maria Kiwanuka’s third budget reading, also marked a new turning point. These turning points get progressively less dramatic, even if their effects are as far reaching as the earth shaking liberalization and privatisations moves of the 1980s and 1990s.

Many things were said in the budget but two things stood out for me, the announcement that URA, KCCA and the Uganda Registration Services Bureau are going to work together to collect more revenues and the decision to borrow from the public to finance our budget deficit.

As it is now there are thousands probably tens of thousands of businessmen with trading licenses, which they dutifully renew every year for fear of being shut down by KCCA. And that maybe the last official levy they pay to authorities –until renewal a year later. But many of these players are not bit players in the economy, racking hundreds of millions, even billions of shillings annually in undeclared revenue. Now they are going to have come clean on at least more of their income than they have been declaring.

Uganda’s revenue collections as a proportion of GDP has hovered around 13% for almost a decade, lower than the Sub-Saharan average or than Kenya and Tanzania’s statistics. The donor cut back on budget support, clearly was the trigger we needed to make this bold move.

It is not as if we did not know about this. For years we have lamented how only a few people and entities were shouldering the bulk of the taxes and yet their were people in the informal sector who were minting money, hand over fist and not paying their just dues.

But as long as government could fall back on the donors there was no incentive to work at widening the tax bases quicker...

Beyond the increased revenues a large population of our businessmen will get into the habit of paying taxes. Government can expect some sabre rattling from the traders just as they did with introduction of VAT, but they should expect little sympathy from the working classes who have paid their taxes while the traders lived it up.

Government has borrowed from the public using treasury bills and more recently treasury bonds for years, but that was mainly to mop up excess liquidity in the market and keep inflation under control. While everyone acknowledges the importance of this exercise, there has been some criticism of it, with critics arguing that it has been a waste of money sterilizing this money in the central bank’s vaults instead of doing something with it, build infrastructure for instance.

There is a place and time for everything, and the government paper’s roll in keeping inflation in check will always be there.

But this new initiative where we could see government borrowing from the public to finance roads, dams and other investments has been long overdue. We need to develop a culture of being able to call upon our people to finance major investments that will benefit the nation. We need to feel a sense of ownership for our roads, railways, bridges and dams.

Of course the detractors of this kind of initiative argue that borrowing from the Ugandan public is more expensive than borrowing from the World Bank which often gives 40 years loans, with a ten year grace period charging a small administrative fee for the trouble, but that is to ignore the priceless value that you can put on the ability to have a mechanism to borrow internally....

Donors will not always agree with us on our development priorities – they have frowned on building Karuma, UPE and our military spending in the past, even when we knew better. We have not been equals in that arrangement.

Let us not fool ourselves, there is pain that comes with nation building. If we are not willing to pay the price we should be prepared for those who are willing to pay to benefit more than we do.

What would have been icing on the cake for me would have been a more definite time table on the pension sector reform – another local resource mobilization move, but more especially an increase in mandatory savings for workers, maybe a percentage point more, employer contributions can be held to 10%.

But then again we cannot get all we wish for can we?

A FOOL AND HIS MONEY ARE SOON PARTED

 

Last week it was revealed that more than a 100 properties believed to belong to former city socialites Shanita Namuyimbwa (Bad Black) and Meddie Ssentongo had been ceased by court.

The seizure was ordered following a case last year in which the two former high fliers were convicted of fraud. They were sentenced to jail terms but also ordered to refund sh11b.

The properties include buildings and land in prime locations in Uganda, UK, US, cars and bank accounts.

The scope of the investments would be impressive by any standards, but it is even more so when you consider Meddie and Bad Black’s humble beginnings as barber and alleged lady of the night respectively.

"This pair has thrown the rule book of wealth creation out of the top floor window. In the space of less than five years they managed to accumulate billions of shillings in properties and by the look of it they paid cash!

To put this in perspective. A salary earner who grosses sh100m a year earns a monthly salary of about sh8m therefore to earn one billion a year you would therefore earn just under sh85m a month.

It is safe to say that you would be in the top five salary earners in this town with a salary like that; More than executives who have slogged through hours of classroom time, survived years of corporate politics, fended off numerous boardroom assaults on their position and are now looking forward to hundreds of millions of shillings in gratuity and pension from their decades of savings with NSSF and their in-house provident funds when they retire.

So these “kids” short circuited the process and in less than five years started, caught up and overtook all these venerable, hardworking and wisened executives? All the while leaving it up in our night clubs and bars on a daily basis, giving new meaning to the term burning the midnight oil.

But forget Bad Black and her side kick Meddie, they are actually just a figment of a larger problem in our society.

First of all serious questions have to be asked about Mr David Greenhalgh, what does he do? Where does he come from? What kind of business is he running that seems to have survived a $5m loss and is presumably still standing? And that he lost it to business associates – to use the term very loosely, with no prior experience in even running a one million shilling business ( I am probably understating the value of a barber shop or a ….!)?

That aside, so these billions were being funneled through our financial system with no questions asked by the industry or security?

To stretch the logic a bit further this, Uganda’s answer to Bonny and Clyde, judging by the way their property acquisitions were spread around the city may have been the single reason land speculation became such a hot potato in the last several years?

But okay, let’s take their story with a sack of salt, let’s try and conjure up a scenario where we could make the billions they have made in five years. What would we sell? Who would we sell it to? What would be our profit margins?

Think about it let’s say we sell a kabalagala at sh200 to the 1.4 billion Chinese, we would gross sh280b. Assuming an ambitious 5% profit margin that would net us sh14b! Even with such an incredulous hypothetical situation we would only just scrape through, with a few billions to spare!

Jokes aside, what does this say about our society and country?

To begin with because their ostentatious display of wealth Black and Meddie become the role models for impressionable youth in the night spots that they patronized. We will have an army of kids who think being “shrewd” beats being honest, that the quick buck is better than the honest shilling made from hard and diligent work and investment over years, that life is to be leaved at 100 kph rather than at a more staid speed, which is sustainable and replicable...

Forget the youth, this cancer would soon co-opt other age groups, who for fear of being laughed out of this town for not getting with the program, would join the band wagon.

You have to wonder about a country that allows such shenanigans to blossom and flourish in full sight of everybody. Where the earnings from organized crime are celebrated and the villains turn heros.

But then again maybe I am just a grumpy old man, stuck in an older time who cannot handle the pace of modern day living, maybe?

OUR LEADERS SHOULD GET OUT OF THE EAC’S WAY

There was a time when there was one shilling as the currency of Kenya, Tanzania and Uganda; There was a time when after school you would as likely work in Dar es Salaam as Nairobi or Entebbe; there was a time when depositing money on your post office account in Mombasa and withdraw it within hours in Kasese, using just your pass book.

This was true until about 40 years ago.

Over the last two weeks the East African Legislative Assembly (EALA) has had a special seating in Kampala.

Every year EALA, which conducts its business in Arusha, Tanzania, has a special seating in one of the four other countries as a way to bring the assembly’s business closer to the people.

This is part of a 12 year effort to revive the East African Community, which interestingly the European Union took some pointers from.

The truth of the matter though is that for the border communities of these five nations the political boundaries are a line on someone else’s map, with their everyday reality having transcended the se colonially imposed borders.

It cannot get any better than the case of former Kenyan Vice President Moody Awori and his younger brother Aggrey, former Ugandan ICT minister. By some quirk of fate their father who was a Ugandan missionary settled in Kenya but many of his children still attended school in eastern Uganda. They  have risen to prominence in their respective countries and one can bet they hope across the border every so often without recourse to the official immigration procedures.

A classic case of the citizens being a head of their leaders.

It is commendable that EAC, sees the wisdom of having EALA seatings in regional capital every so often, the logic being that if the everyday man can see it in action they can better embrace the endeavour. After all the generation that saw a fully functioning community are in the minority.

The quickest way to encourage the organic uptake of this project is to improve the transport and communication infrastructure in the region.

Already the telecommunication companies are way ahead on this one. It has been for some time now that you can use your phone number in any of the east African nations bar Burundi. They still need to do something about the charges.

There has been an almost uninterrupted bus transport service for years, but the consistency of road quality across borders leaves a lot to be desired. The passenger rail transport across the region is non-existent and the cargo services continue to lurch along but not fast enough for our liking.

The air travel is probably the worst.  To visit Kisumu from Entebbe one would have to fly first to Nairobi and the track back to Kisumu in western Kenya. The same for Mwanza on Lake Victoria in Tanzania.

The better the communications the more the region’s citizens can move around and be in touch. The more his happens the more interdependence will be created and the more sustainable the project will be.

It is not by accident that political events in Kenya are monitored keenly in Uganda. Kenya’s importance to us lies in that 1200 km ribbon of patchy tarmac between Kampala and Mombasa. Similar intensity of sentiment is not felt for Tanzania.

Sentimentality is all very nice but the regional block will be cemented by commercial self interest. 

We have come a long way from 12 years ago when the current attempt to revive the community was launched. We travel around the region we greater ease to work, to visit, to study to do business but we are at the tip of the iceberg.

Imagine the explosion in movement if the passenger railway was not only reopened between Mombasa and Kasese, but this was also extended to Dar es salaam, Kigali and Bujumbura for starters? Of that our water transport on Lake victoria can make a non stop trip from Lugazi to Kisumu possible? Or that I wouldn’t have to indulge in complex vectors in flying from Entebbe to Eldoret or Nairobi to Tororo?

Interestingly because of the cross boundary investments required to bring these investments to fruition, it is inevitable that a political federation will be an inevitable necessity.

The truth be told the barrier to an east african union be it economic, political otherwise are not the citizens of the region --  you are preaching to the converted, it is our elite in our capitals, after all they are the ones who shut down the original east african community in 1976!

UGANDA BLOOD SHORTAGES ARE A SCANDAL

 

The Country is in the throes of a sever blood shortage.

According to health officials we need 300,000 units of safe blood annually, which would be managed by collecting at least 350,000. As it is we are collecting only 250,000 units.

To the lay man the first reaction would be to recommend that we have a blood collection drive, that people are not donating enough blood. As it turns out Ugandans are more than willing, but apparently we do not have enough testing kits to process the blood.

The Uganda Blood Transfusion Service (UBTS) budget is sh18b but only received sh7b, just a third of their requirement and as day follows night we have a full scale crisis.

As if that is not enough the categories most often in need of blood are pregnant mothers and children.

To state the obvious, you don’t need blood until you need it and by that time the situation is often life threatening.

The budget reading is next week. And the health ministry is expected to remain one of the highest votes. But for all the hundreds of billions of shillings allocated to the sector annually it still remains insufficient, and this is before you factor in the thieves and robbers of public funds.

According to the World Health Organisation (WHO) the health expenditure per person in Uganda is about $124 a year way below the international average of the $1200 in 2011.

Our budget has come under strain in recent months.

Last year donors pulled the plug on up to $300m in budget support and one can expect that lack of funds to buy the testing kits is a direct consequence of this action.

If ever there was a direct connection between official corruption and the lives of ordinary Ugandans this is it. That a handful of individuals help themselves to public funds and as a result jeopardise the thousands of lives goes beyond a scandal, it’s criminal.

That being said the time has come, maybe long overdue when we determine that certain things we shall finance with our own resources and leave the crumbs to the donors and well-wishers.

We might not finance the whole health budget but surely we can find the odd billion shillings to ensure that our blood banks are fully stocked at least. Just as we ring fenced money for roads or for dams we should do the same for priority areas like our blood bank.

In the greater scheme of things the sh18b required by the blood transfusion services is a drop in the ocean compared to the monies that went missing in the public service and prime minister’s office, some of which we refunded to the donors.

Let us not fool ourselves.

We can build all the roads, dams and railways in the world but if our human capital is inadequate for lack of education or good health the benefits of these investments will not accrue to Ugandans.

This may seem like commonsense but clearly the budgeting process follows a logic all its own, a logic which clearly needs to be realigned with the needs of the Ugandan public.

KCCA PROGRESSING SLOWLY BUT SURELY

Anyone who drives through Nakasero can’t help but noticing the working being done on and around the roads.

Lumumba Avenue and Nakasero Road, previously death traps for your car’s shocks are now a smooth ride, but in addition there is a lot of work happening on the drainage systems around those areas.

KCCA says this is part of an sh18b project.

Quietly too our city is much cleaner and greener than it was a two years ago.

Many years ago someone in the financial sector told me how KCC – as it was known at the time, would never lack for funding if they did a few things right.

If they did nothing else and just verify their revenue sources they would have the world at their feet.

At the time KCC would lay claim to revenues from market dues, ground rents and trading licenses but there was no clear record of how much was due to the authority and therefore how much they should collect.

KCCA has done a commendable job of roping in more and more of what is due to itself.  So far authorities say they have collected in the region of sh51b up almost 70% from last year’s sh31b.

They are looking for more. They have now installed an automated revenue management system that will help track revenue from all sources.

As a first step this is commendable but it has far reaching repercussions as well. Our natural instinct is to pay for things with cash, but to finance the major infrastructure and social services required in the city debt will be required.

In other parts local governments issue municipal bonds, essentially they borrow from the public, to finance such investments.

In my mind there are two long term benefits to this.

One, that KCCA will develop the capacity to not only collect but ferret out all possible sources of revenue due to it, important for the long term health of our city. Secondly, KCCA will subject itself to more rigorous scrutiny of its operations making it more efficient in service delivery for the benefit of its citizens.

And one may also add that you expose yourself o the limitless pool of financing sloshing around the world in search of a home.

Last month Rwanda issued a Euro bond, essentially borrowed from the open market. They were looking for $400m but the interest in the offer was more than eight times what they were looking for. It goes to show that there are investors out there that are not cynical about Africa’s prospects and have a sufficiently long term view to put their money where their mouths are at, all they need is the right instruments for them to concretize their interest.

In the world of high finance anything can be bankrolled it’s how you package it that will do the trick.

The detractors will argue that why should we borrow money at market rates when we have donor money that is going for a pittance with longer repayment periods?

Inexpensive money is always welcome but free things, or cheap things in this case, often turn out to be more expensive than they seem. By failing to wean ourselves off the cheap donor money we are failing to mobilise our own resources to fund our own priorities. Apart from keeping us addicted to the indignity of always going around begging bowl in hand it also doesn’t help our democratic processes – we end up more accountable to the donors than our own Ugandans.

If we have to extract more and more taxes from Ugandans we would have to show results in the way of improved service delivery, if not we run the risk of angering the population and in danger of them refusing to pay taxes. Such a government would be forced to negotiate with its people to raise revenue.

You have to like the trajectory KCCA is on, which makes you wonder about the people trying to throw spanners into the works at every turn.  But that shouldn’t be a mystery the chaos that was KCC benefited some people and that clique cannot be amused at the regularization of its operations. A straightening out of its activities will inevitably lead to a loss of revenue or leverage for these individuals and hence their heckling and sniping.

KCCA needs to be supported if only to stand out as an example that what was previously thought to be impossible can be achieved. Who knows their example may spread out to the rest of the country and to the central government …. But no! I am getting ahead of myself!