ON THE RIGHT WAY FOR GOVERNMENT INTERVENTIONS

It all seems very easy. If government is so keen on growing the economy why doesn’t it get into the business of doing business itself? After all it has sacks of money at its disposal?

If only life was so simple.

Last week President Yoweri Museveni commissioned a tomato processing plant in Nakaseke and launched a special economic zone in Kaweweta, also in Nakaseke. Almost at the same time the director of the Presidential Initiative on Banana Industrial Development (PIBID), Reverend Florence Muranga was being detained in parliament for not cooperating with the Public Accounts Committee (PAC), which was looking into the accounts of the project.

And in the letters page of the New Vision someone lamented the tax incentives BIDCO got to set up a palm oil industry on Kalangala island.

All these initiatives have two things in common they are all agro-based projects and they are being supported by government. What seems to determine the success rate is the nature of government involvement.

For two of the projects – the Nakaseke initiatives, it is too early to judge their results but for the banana project and BIDCO sufficient water has gone under the bridge to make a qualified assessment of their success or lack of thereof.

"With the PIBID government decided to go it alone, staffing the project, financing research and bankrolling production. Eight years down the road and our super market shelves are not overflowing with its products. Or maybe they are still in development or their communications people are not doing their job....

BIDCO on the other hand, while braving sniping from the environmental lobby are single handedly lifting Kalangala into the formal economy, introducing farmers on the island to a new cash crop, providing market for their produce and yes their products are on our shelves.

A decade into the project and BIDCO have invested $150m, brought 20,000 acres under the crop, provide employment for about 40,000 directly and indirectly and have brought in additional $21m in taxes.

Government support in the project is in way of access to land, infrastructure development and some tax incentives that reflect the long term nature of the project.

The difference is as plain as night and day.

Where the government has identified credible investors, negotiated the support they will lend projects have more or less succeeded. But where government has jumped into the fray itself and tried to develop an industry the results have been dismal.

The old economists taught that there were three factors of production – land, capital and labour. This have to be manipulated for production to take place. Later the role of entrepreneurship and management, distinct from labour, was recognised as the missing ingredient in the equation. 

One reason government attempts at business collapse is because they are manned by technocrats.

A technocrat, unlike an entrepreneur needs the resources to be in place in order to start working. 

Often the technocrat has no sense of making a return on the capital that is entrusted to him, after all if the enterprise collapses he will be transferred to another enterprise. The entrepreneur, while he learns some of his best lessons from failure, needs minimal resources to kick off and will do everything to ensure the enterprise succeeds.

The urgency for job creation and economic growth is clear and present. Government needs to be thinking in terms of the most efficient deployment of the resources at its disposal – mostly capital and land and matching it with entrepreneurial and managerial capacity to get the desired outcome.

"The model that seems to pip all the rest is for government to identify projects with long term and far reaching benefits to the economy, attract investors foreign and local to these investments, mitigate away as much of the risk as is justifiable and let them run with the project....

During the privatisation process of the 1990s, quite a few projects fell through because government in trying to appease the locals was unwilling to make the necessary concessions to allow credible businessmen to take some of our derelict companies.

A case in point was the Coffee Marketing Board (CMB) whose key asset apart from the land on, which it stood was the roasting plant that could handle Uganda’s entire export crop of four million bags at the time. Government wanted to flog half the company off, valuing its assets at about $30m. 

Two rounds of tendering saw the leading offer—both times by Swiss coffee trading giant Sucafina, plummet from $8m to $4m. The plant probably rusted and was sold for scrap and the buildings were home to the ill-fated Tri-Star Apparel project, which was also bedevilled by poor design and management.

Nothing is perfect as even the best designed projects can fail, but the odds seem strongly in favour of a hands off approach to its partnerships with the private sector, the two projects in Nakaseke may, with time, confirm or disprove this thesis.

GETTING TO THE BOTTOM OF THE ANTI-PORN LAW

This conversation happened recently at a place near you between people you probably know.

Tom: Kampala will never been the same again, what with this anti-pornography law

Dick: Ridiculous! Now we are going to have police measure skirt lengths … I should join the police

Harry: You are taking a rather narrow view of the law. The intention – and a noble one at that, was to restrict the publication of sexual explicit material, curtail sexual exhibitionism and in so doing prevent such crimes as human trafficking, prostitution and other related organised crimes.

Tom: Huh?

Dick: The classic case of trying to kill a fly with a hammer, machine gunning chicken or using a tent to safeguard ones decency …

Harry: Maybe but the issues of organised crime and illicit trade are not the proverbial fly and yes we need machine gun fire to stop it in its tracks and if we have to protect our children using tarpaulins so be it.

Tom: Huh?

Dick: That’s all very nice my complaint is with banning mini skirts .... so by banning mini skirts who is the law protecting? The women wearing the mini-skirts or the people – men and women watching the women in their mini skirts? Who is the victim?

Harry: As I said that’s a narrow view of the bill. But yes maybe the women need to be saved from themselves and the viewers – especially men need to be delivered from temptation.

Tom: Huh?

Dick: Are you listening to yourself. So the women know not what they are doing and the men are such brainless Neanderthals, with no control over their baser instincts that a show of flesh by the odd woman will set them off on a lustful rampage?

Harry: Well I wouldn’t put in such colourful terms but Yes, something like that …

Dick: You are speaking for yourself assume?

Harry: (Pause) First of all there is no explicit mention of miniskirts. People have their knickers in knots over the interpretation of pornography … means any representation through publication, exhibition, cinematography, indecent show, information technology or by whatever means, of a person engaged in real or stimulated (sic) explicit sexual activities or any representation of the sexual parts of a person for primarily sexual  excitement ….

Tom: Huh?

Dick: That is even worse than hunting mini-skirters … so now the full force of the law is going to bear on judging what is sexually titillating and whether the offender is doing it primarily to cause sexual excitement (shakes his head). So if for example I walk around in a vest and shorts flashing my biceps and calves – some women I hear swoon at the sight of these, I am in danger of breaking the law?

Harry: (with a straight face) Yes!

Tom: Huh?

Dick: This is incorrigible …

Tom: Huh?

Harry: Look it is important for public decency and order to be maintained beyond the precincts of the churches and mosques. Who is better suited to do this than the government?

Dick: You are in danger of me unfriending you, you might lower my IQ … So on a practical level you will have to find people who were sexually aroused to testify and then do we have to determine the extent of that sexual arousal?

Harry: As I said you are taking a narrow view of the law. The law also has provisions prohibiting child pornography and the transmission of porn on the internet, it actually strengthened an existing law …

Dick: Aha! So you are refining an existing law that was not being applied or enforced isn’t that the height or depth of redundancy?

Harry: No, this law has also created a committee which will police these issues …

Dick: Do you know how ridiculous that sounds? Is this a national priority that we should spend tax payers’ money legislating against, having our honourable members debate etc

Harry: Think what you may, at least the law is there and we can act against such transgressions.

Dick: Not to weep more than bereaved I started out thinking this was a law made by male chauvinists to keep women in their place but now I see it is worse than that, it is not even a law to safeguard public morality – after all it is unenforceable …

Harry: So are you saying because a law is unenforceable we should not have it?

Dick: That should be obvious …

Tom: Can I say something?

Harry: You arguing as if you are unaware of the great threat to the moral fiber of our society …

Dick: Women – and men dressed in sexy wear, mostly after dark, is threatening our moral fiber? More than the thieves who walk among us denying, babies of drugs, children of a future and the rest of us a chance to better ourselves… if the ministry of ethics really wanted to make an impact shouldn’t it focus there?

Harry: Now you are being melodramatic…

Tom: Me thinks this flurry of controversial bills before Christmas and presidential nominations is to divert our attention from more serious issues like what is going on in South Sudan!

THE BENEFITS OF EASING EAC TRAVEL ARE COUNTLESS

On Wednesday Kenyan President Uhuru Kenyatta and his Rwandan counterpart Paul Kagame used their national identity cards as travel documents to cross into enter Uganda.

Never mind that they did so at Entebbe airport – it would have been a more powerful statement if they did it at their respective borders with Uganda, but the symbolism of this gesture could not be lost on anyone.

The plan is that starting in January, citizens of the three countries will be able to use national IDs, voters’ cards and student cards to travel across their borders.

Accompanying this are initiatives are moves to make working in either of the countries easy for its citizens.

Of course the truth of the matter is that our border communities have been making border crossing without the use of a passport for ages. Not only that have gone to school, worked, started businesses and enjoyed the social services from across the border. They will be understandably surprised at what the big deal is about.

This is a classic example of how the political class is often way behind the people they claim to represent.

 Fourteen years after the reestablishment of the East African Community with the signing by the presidents of Kenya, Tanzania and Uganda it has progressed to a customs union is speeding along to becoming a monetary union with the final destination being a political federation.

All these plans are all very well on paper but they mean nothing without the free movement of people and capital across the region.

We take it for granted but movement of people and the increasing ease with which they do it has a dramatic impact on the economy. It is not just a cliché but time is money.

I have been told stories of how during the previous East African Community one could deposit money on their post office account in Mombasa, take the train and withdraw your money all the way across the region in Kasese using just your post office pass book. That may sound rather dated in this era of the ATM card but it was a big deal then and had implications for the economy at the time.

Just think the losses traders and individuals would make if they were to stop at every district border on a Kampala-Mbarara trip? A three hour journey would be stretched out into an overnight journey and the added costs that come with food and board. As it is now you can ferry fish from Masaka to Kampala on the back of pickups a feat which would not be possible with numerous delays along the way. The traders would have to invest in cooling vans which would raise the cost of production and the eventual cost of the fish on our menus.

The Schengen area in Europe is a step higher than what we are attempting in East Africa. The 22-member states that constitute this borderless region, have done away with border protocols among themselves. Research into the benefits of this have found that trade grows 0.1% a year between neighbouring states.

One can expect the proportion in growth in East Africa will be higher, if only because we are starting from a lower base of inter-country trade.

The researchers into the economic benefits to the Schengen found that the benefits came from the immigrants being ready markets for goods from their home countries, immigrants also reduced the risk in signing contracts or sourcing produce from their home countries.

Fast tracking the free movement not only of people but of labour across, the region will have incalculable benefits to the economies of the region and will make future efforts at monetary union and political federation more realistic.