UGANDA COOPERATIVES NEED HELP! BUT THE RIGHT KIND OF HELP

The cooperative movement while undergoing a resurgence in recent years is staggering along for lack of proper management compromising the movement's poverty alleviation potential, a report out last week said.

The report, "The cooperative movement and the challenge of development", singled out

defunct boards, poor leadership, riddled with corruption and poor foundation as the main problems bedeviling the movement....

The cooperative movement used to be a force for good in the  1960s and early 1970s. Bringing farmers, businessmen and savers together to pool their resources and benefit from economies of scale in accessing markets and credit.

The dismantling of the produce marketing boards in the 1990s dealt a body blow to some of the cooperative societies whose inefficiencies were exposed when they came up against private sector competition.

Under the marketing boards government was the sole buyer of produce, setting prices -- often a miserable fraction of world prices, and paying farmers at leisure.

"Once this monopoly was broken and farmers were free to sell their produce to anyone, the cooperatives, to whom government inefficiencies had been transmitted, didn't have a chance....

The recent study however shows that some of the bigger more credible cooperatives continue to thrive or at least exist, despite the tribulations of the last three decades.

About 3,000 cooperatives exist according to the trade ministry.

In fact the savings cooperatives are experiencing a comeback with savings up to sh280b. They still have a way to go when compared to collections of sh2.3b in the 1960s, about sh500b in today's prices...

The Kenyan savings cooperatives, which have suffered relatively little upheavals, have at least $2b in savings.

As part of the recommendations the reports authors suggest that government should intervene in the cooperatives to set interest rates and oversee governance issues so as to prevent the coops takeover by powerful individuals.

The researchers are right and wrong.

Right that government should, must, is obligated to strengthen its regulatory function, ensuring that the cooperatives are run according to the act and therefore preventing the capture of these groups by greedy individuals.

In addition government will do well to help these cooperatives improve their capacity to manage themselves -- proper book keeping has to be top of the agenda.

The high interest rates some of the cooperatives are offering are more a function of poor business acumen than outright extortion, but the way to bring them under control is not via government control.

"Interest rates should be left to the devices of the market, governments are not sensitive to these forces and by controlling them would only serve to accentuate the inefficiencies in the movement...

For example during the recent inflationary spike for political reasons government may have kept interest rates low. This would have been disastrous because the likely reaction of the market would be to borrow more, increasing money in circulation and making an already bad inflationary situation worse. And that is only one probable negative effect of politically set interest rates.

Maybe as a way to prompt the market to lower interest rates is to find a way to encourage better managed cooperatives to set up or to expand into areas where mismanaged cooperatives exists. The competition will do the needful.

The importance of a robust cooperative movement can not be overemphasized. 

"As a mechanism for growing productivity in the rural areas a well run cooperative that will provide, inputs on credit, a ready market and the benefit of a collective bargaining power, there is little around to match it....

In addition it can provide a spring board for the greater commercialisation of agriculture, raising agriculture's share in the economic output of the country and by extension raise rural incomes.

Yes government should be involved in the cooperative movement but only as far as creating an enabling environment for the movement to thrive.

SOUTH SUDAN'S SHOOT OUT LONG IN COMING

It started out rather innocently, for South Sudan, with some sporadic gunfire over the weekend. By the time Tuesday came around there was full scale shoot out in Juba, with media reporting upto 500 killed in the fighting.

The fact that there was some confusion as to whether this was a coup attempt or just factionalized fighting between competing ethnic groups within the ruling SPLA, suggests a constant state of uncertainty in one of the world's newest states.

The SPLA leadership insists it was a coup that was put down, but fighting spread and on Thursday the SPLA announced they had lost control of Bor; former Vice President Riak Machar said he was being framed for the attempted coup and was on the run and president Salva Kiir said he was open to talks with his nemesis, Machar and his coup plotters.

"Coups even the most swiftly executed can be messy business...

What is clear to every one watching is that there is an armed contestation. The coup attempt was clearly foiled but was not put down summarily, seeing as the plotters seem to have fallen back and as a bargaining chip are threatening civil war.

As with many of these conflicts they have as their background deep seated grievances, which come to the fore when a universal danger, which pushed these tensions into the background, has been overcome.

The marginalization of the southern Sudan has a long history and triggered the second civil war that led to the split of Sudan and independence for the south in 2011. A mutiny by south Sudan army officers in 1983 triggered the civil war and with support from Ethiopia, under Haile Mengistu, the SPLA controlled large swathes of the southern Sudan except for the strategic town of Juba.

Ethiopia supported the SPLA in revenge for Khartoum's support of Eritrean rebels.

The fall of Mengistu in 1991 came with a split within the SPLA with then leader John Garang's authority being challenged by Machar and others. Khartoum took advantage of this confusion to make serious gains against the fractious rebel group winning back several crucial towns.

With much regional support the SPLA regrouped, its leaders putting aside their egos to further their cause for a secular Sudan.

But clearly these rivalries have continued to fester under the surface, popping up intermittently over the last decade or so before the full scale explosion in the last week.

It's an old and familiar script.

A rebellion erupts, various parties aggrieved by the center are cobbled together, they oust their joint enemy before turning on each other in a duel to the death.

South Sudan's case is not helped by the new country's oil reserves.

"Oil exports only resumed in April after a year's suspension of production over a dispute on pipeline fees due to Khartoum from south Sudan. This suspension may have proved the tipping point for the fragile coalition in Juba...

The oil money, which accounted for almost the entire south Sudan budget, was being used to buy time for Juba, to pay off varying members of the coalition. Many of these factions have their basis in ethnic loyalties without crosscutting support, but potent nevertheless because they controlled armed groups and at worst can prove a nuisance.

While the government borrowed to stay afloat it was inevitable that in a situation of more finite resources some political realignments were inevitable and probably much faster than Kiir and his allies may have hoped for.

Official statistics showed that at least $1.3b in oil sales were made between April and October but one can assume the political damage had been done by this time, suspicion had been sown and the coalition's cracks had widened into fissures.

The events of the last week point to the difficulty of building post conflict societies.

The shortfalls in capacity -- physical and human, governments built on coalitions of convenience rather than ideology and rampant poverty will always be a recipe of disaster whose explosion is more a matter of when rather than if.

"It is not likely that this situation will be resolved to the satisfaction of everyone any time soon, if only because there are parties outside the confusion with interests in keeping the country in a state of confusion -- not least of all Joseph Kony and those that bankroll him...

South Sudan has always been a heartbeat away from chaos. Of course we will be glad if this analysis is wrong and they sort their issues with a click of a finger. That will be the true miracle of this half of the century.

UGANDA NEEDS TO MAKE THESE TOURISM MILLIONS COUNT

This week the tourism ministry will be seeking to have a $25m (sh65b) loan approved. The loan is meant to boost the country's tourism potential through boosting hospitality training, the ministry's internal capacity and for marketing the country abroad.

"In the global tourism picture Uganda is one of the world's best kept secrets....

According to tourism evangelist Amos Wekesa we as the source of the river Nile are earning next to nothing compared to Egypt's $3b; one in three tourists last year left home in search of good weather, Uganda's location on the equator tempered by our average height above sea level means we have the ideal weather for tourism; we have five of the top ten highest peaks on the continent and a recent National Geographic survey had the Rwenzoris as one of the top 15 hikes globally and the only one in Africa.

And we haven't even started talking about the national parks with all their game, bird varieties and natural attractions.

It shouldn't come as a surprise maybe. We have invested very little in the industry probably because we are so well endowed we take it for granted.

So in terms of the pushing Uganda to its rightful place at the head of leading tourist destinations in the world, the money will come in handy.

But as with all good news in Uganda there is always is a catch. 

Of the $25m loan, $12m is earmarked for boosting the Crested Crane Tourism training school in Jinja, $3m is for boosting the ministry's capacity to do its job and $10m is for marketing Uganda abroad.

Experience dictates that all these expenditures should be gone over with a fine comb -- before, during and after they have been made, but there is reason to believe that the usual suspects are sharpening their knives to get at $10m marketing budget, school is not as specific as the other two votes.

Wekesa on his Facebook page raised the alarm last week that some private players in the industry want to appropriate all this money for their own needs, arguing that Uganda Tourist Board (UTB) the official marketing agency lacks capacity to utilize the money optimally.

First off,

these connected officials should be stopped from getting their grubby fingers on the loot by whatever means necessary....

There are competing needs for these funds but the best use of this money would be in kicking off a sustainable , self propelling marketing drive, which at the bare minimum will raise awareness about what Uganda has to offer.

Whereas we have severe limitations in infrastructure near or in our major attractions -- we have 1500 beds in our national parks compared to 7000 in a single Kenyan park, the Masai Mara, once the tourist numbers start to roll in investments by the private sector will follow.

Out reaches to media houses in the countries of major tourist origin -- including China, would be a good start. Putting our country on the radars of some of the major tour agencies that serve Africa can follow. The early adopters would soon follow, before the groundswell follows years evens decade later -- the point is we have to start somewhere and now.

One can understand the seduction of million dollar ad space on a major international media house but nothing beats word-of-mouth marketing or third party endorsement to sell the gospel abroad.

"It is amazing that we have ignored tourism all this time especially given its ripple effect through the economy, in terms of jobs created, boost to production and foreign exchange earnings, for the relatively small investment required...

And despite this our tourism numbers have continued to inch up -- we now have 70,000 tourists wheezing around on boda bodas annually.

But it's as they say, God gives meat to those who don't have teeth.

THE WORLD BANK, UGANDA EVOLVING RELATIONSHIP

This week the World Bank commemorated its 50th anniversary in Uganda, a relationship that has been sometimes tense, many times cordial but always with an eye to a better future.

"The Bank, originally formed to aid in the reconstruction of war torn Europe, has extended its mandate around the world, it's history a treasure trove of experience of how-to, but mostly how-not-to intervene in economies...

The Ugandan experience has had it's ups and downs but when the balance sheet is tallied there will be net positive in the half-century long relationship, with most of the benefits accruing in the last three decades or so.

And that last point is important because accumulating evidence shows that aid works only to the extent that it is handled well by the recipient government in meeting the limited goals that it is targeted at.

The Bank has been critical in the rehabilitation of infrastructure, bolstering the financial sector, boosting social services among other things since 1986 and improvements in these sectors are there for all to see.

One of the unique things about the relationship between the Bank and Uganda's relationship has been the political class' adoption of the Bank and other donors' prescriptions as their own.

This made sense since most of the recommendations were good economics anyway -- keeping inflation down, unshackling the private sector and focusing on infrastructure development.

"Both sides have not always had the same appreciation for the challenges of the day -- universal primary education and the rapid development of our hydropower generation capacity leap to mind, but through reason and negotiation a happy mean has been established....

The net result has been a relationship that has evolved from one tinged with suspicion and wariness to one today of respect and symbiosis. In addition this relationship has demystified the issue of generating economic growth as the country has managed 26 years of consecutive growth.

Looking to the future the relationship may serve as a case study of how countries can go from reconstruction to transformation.

But not just yet.

The history of the aid industry and the Bank, is patchy at best, with no country --at least on the continent, having transformed itself employing the aid.

Part of the problem being a failure to stick to good economic policy by the relevant governments, signing onto the prescriptions but jettisoning them when the going got hard and politically expensive.

But also

there are inherent flaws in the aid industry, which has laboured under the thinking that the challenge of the underdeveloped world is one of lack of money, rather than an unfair trade environment or poor governance and have funneled billions of dollars with an embarrassingly low return on investment if at all....

In addition the Bank and its counterparts, many of them bureaucracies, which pay more credence to inputs rather than outputs, are still grappling with the challenge of turning economic growth into widespread improvements in living standards -- development.

The politics of a country has direct bearing on whether economic growth and by extension development happens or not.

"It is undesirable that the Bank gets involved in the politics of its clients, but inevitable....

By bridging government budget deficits to help them build infrastructure or provide health and education lowers the incentive for those governments to collect taxes. For governments to collect taxes they need a legitimacy, which will allow it to tax it's productive sectors to generate funds to bankroll public goods --security, social services and infrastructure, that will drive the economy. A virtuous cycle that is at the heart of not only development but the democratization process as well.

This is the challenge going into the next half century and will make the difference between us seeing economy's transformation or not.

MANDELA, THE TOUGH CHOICES THAT MAKE A LEADER

By the time you read this it may very well be that former South African leader, Nelson Mandela has been finally laid to rest.

The grief of the last week was tempered by the many months he has been on the brink of giving up the ghost, but this did not take away from the outpouring of emotion on his death. The largest congregation of leaders at a funeral the world has ever seen, only served to cement the high regard in which many held the former freedom fighter.

His place in history was won the hard way -- standing up to the apartheid regime, one of the most brutal regimes the world has ever seen and coming out the other side victorious.

His stature driven by a western media machine, as if relieved that Mandela did not bow to popular sentiment and seek revenge on his former oppressors, will ensure that his legacy will remain largely unsullied.

"Serving as a worrying undercurrent during the last week's ceremonies was the disturbing question, that now that the conscience of the nation has passed on what will happen to the revolution he helped birth?

In the teeming townships, as the everyday man continues to grapple with the poverty, he can't help but feel --much like most of post independence Africa, that the benefits of the hard fought political freedom have not been seen in his economic circumstance.

The doubts increase with the emergence of a new class of super rich blacks,  who have leveraged a better education or their connectedness to the high ups in the ruling African National Congress (ANC), to pad their nests.

To their credit the ANC has built millions of housing units, increased school enrollment for blacks, laid hundreds of road into the countryside and provided health services where the were none to speak of. It is testament to the diabolical effectiveness of the apartheid regime's racist policies that the inequalities in the rainbow nation persist 20 years after Mandela became president.

There are many examples of Mandela's leadership in steering the country as president and as the conscience of the nation in later years. 

But negotiating with the racist regime to allow its backers maintain their property rights -- property which had its roots in illegal acquisitions, violent confiscations and outright treachery and to go a step further to prevail on his supporters to take the deal, even when having endured decades of oppression and reduced to second class citizens in their own land, their instincts were to drive the oppressors into the sea or at the bare minimum give them a taste of their own medicine, is what all those standing ovations for Madiba have been about...

They say what is popular is not always right and what is right is not always popular.

Mandela, as a leader was looking beyond the symbolism of winning political power, to the pressing questions of how to improve his people's welfare.

He needed his former adversary's capital, but more importantly the expertise to keep generating more and more wealth, if he was to help alleviate poverty among his people. Hence the pact with the "devil".

What choice did he have?

Well he could have succumbed to the groundswell of emotion at the time and look to win some cheap political points by trying some crude redistribution of wealth -- wealth which black South Africa have a historical right to, become wildly popular for a time before the economy came falling around his ears.

He would not have been the first or the only one to be seduced by the pull of cheap popularity, Idi Amin and Robert Mugabe leap to mind.

By choosing the former rather than last remedy South Africa has a chance to eradicate poverty in our lifetime.

Of course this story may not end happily ever after. 

"The political class in South Africa seem intent on perpetuating the stereotype of Africans as corrupt, squandering and blundering buffoons, which could have far reaching ramifications for the war on poverty...

South Africa whose income inequalities measure worse than Uganda's should be concerned, a failure to get a grip on it will lead to social strife, strangling the economy and hurting any efforts to improve the collective lot.

Mandela took the rainbow nation as far as he could. He leaves behind almost insurmountable challenges that will require great feats of leadership, more than might. Arguably his legacy and place in history have been cemented, but a Zimbabwe-like collapse may threaten even that.