THE SILLY SEASON IS HERE, HANG ON TO YOUR INTELLIGENCE

About 12 months for now we will be deep in the throes of the election season, understandably the politicians cannot wait that long to jump into action.

To begin with there will be the primaries, where every party will choose its flag bearer in the individual constituencies and of course for the presidency.

Due to certain quirks of our history our politicians will be shoring up their popularity by appealing to our baser instincts to win our vote.

Some people who every four years are enthralled by the US presidential elections, yearn for a day when elections will be “issue based” and away from the parochial morass of our local scene. My advice to them: don’t hold your breath.

"It’s being elitist to believe that the politics of sugar and salt is not issue based. For the majority of our people that is the only issue that exercises their minds daily...

Secondly, what does it take for a society to begin to appreciate “the issues” – democracy and its freedoms, government transparency and service delivery, the economy and improving living standards?

We appreciate all these issues in our own individual way. We may not appreciate them in the neat academic compartments that our US-poll-groupies do, but we do.

But let us say this elitist appreciation of issues is the ideal we should strive for, how do enough of us get there so as to swing the tone of our campaigns in that direction?

Before electoral politics western societies first grouped themselves into bigger groupings under one central authority for security and economic reasons. The monarchs however begun to lose their grip on the people with the increase in literacy and the creation of new economic players, who were not beholden to the ruling landlord elite but wanted a say in how their countries were governed.

This was important because if the land owners were the only ones making the rules, the industrialists would not have their interests reflected in new laws.

So they insisted that beyond leadership being bestowed by God, the people to be led must have a say hence the slogan, “the voice of the people is the voice of God” of course the monarchs and the landed gentry fought these changes, I mean who wanted to be pressing the flesh with unwashed masses in search for votes when it was already agreed that one was the ruler and his sons will continue after him without question?

The more obstinate ones paid the ultimate price like in France and Russia, but the rest were forced to compromise and survived that gruesome end.

So the elite of the various sectors of the economy then continued to sell their respective message to the public. It is a fallacy to believe that the average voter in the west is a better quality individual who understands the “issues”, it’s too much work educating them so the political elite even there appeal to their baser instincts -- bread and butter issues, to get themselves elected...

The difference is that the political elite in the west are better organised around recognised economic interests.

So back to our own primitive background. What is the dominant economic grouping in our countries? 

The peasant, the poor small subsistence farmer. Easily four in five Ugandans can be described as this. 

And even if their contribution to the economy continues to fall with the rise of construction, manufacturing and services, they are the overwhelming majority and politics is about numbers.

“The issues” do not drop from heaven. They are derived from the situation of the people. You may like it or not but that is the way things are.

So clearly for better politics there has to be transformation of these “peasants”. You do that by providing universal education, affordable health services, better infrastructure and of course general security. The hope is that as the population gets educated, remains healthy and employ the infrastructure to take advantage of the opportunities around, the quality of their lives will improve and their needs and demands on the government will improve too.

Some transformation is already under way. Every year thousands break away from their dependence on the land to join the workforce, the manufacturing and service industry. Going by history however the transformation takes time.

The smart politician takes advantage of the situation as it is and not as they wish it to be.

So if you in your air conditioned seating room, flipping between international news channels and surfing the net on your tablet want to see the change you want in your life time,you might want to start lobbying for better social service delivery, better infrastructure and national stability instead of heckling at your local bar.

I wish I had better news for you but that is as it is.

UNLOCKING OUR WEALTH, UMEME SHOWS US THE WAY

Why is it that despite our reported abundance of resources – the most arable land, most surface water area, favourable climates, mineral wealth, the wide variety of our flora and fauna, we are among the poorest people in the world?

It is because we cannot unlock or activate the wealth that surrounds us.

The question is how do you do this?

Power distributor Umeme may give some useful pointers.

When Umeme Holdings Ltd took over the concession to run the distribution arm of Uganda Electricity Board (UEB) in 2005, they found a company operating way below its potential – servicing only 292,000 clients, collecting eight in ten shillings that they billed and losing another 40 percent of power they distributed through commercial and technical losses. As a result the old managers were collecting less than sh200b in revenue annually.

"Today Umeme services more than 600, 000 customers, collect up to 100 percent of all billings and have cut losses by half to about 20 percent, as a result revenue has risen more than five times topping out at about sh1,000b in 2013...

Of course Umeme has benefited from the coming on line of power from the 250 megawatt Bujagali power dam, but  it doesn’t take away from the fact that they are able to collect almost all the money that is due to them.

So they set about turning around the organisation by, revamping the derelict network, reducing technical losses and making sure consumers paid for the power they used, reorganising their manpower – cleaning out the dead weight and bringing in fresh blood in many instances and focusing their efforts on customer service.

Essentially they had an asset, albeit a badly tarnished one and they went about polishing it by making investments where they would most get an impact. They invested in, revamping the network rather than sink money in a building plush new office buildings, improving staff response times rather than buy management flashy cars and improved their credit rating rather than rest on their laurels with all the money they were collecting.

Clearly the leadership or management has to be capable and focussed on the right things.

Actis, the original owners of the concession, a private equity firm is focussed on Return On Investment (ROI). They had a 20 year contract during which they would invest in the system, run it and hope to get back all the money they had ploughed in and more in a finite period.

"To get an optimal return or result one has to focus on three broad areas the quality of human resource, making operations increasingly efficient and having an effective strategic processes....

In our personal lives, in our societies and country failure on one of these three fronts and it guaranteed that you may have all the assets in the world but you will be unable of unlocking their full potential.

Think of Manchester United after the departure of long time manager Sir Alex Ferguson they may have had an abundance of talent but because their operations came unstuck and their strategy was clearly wanting they floundered badly in the last two seasons.

Last week we heard that telecommunications company UTL maybe technically insolvent. They may have good people and even a credible strategic process but for lack of funds their operations are hobbled and therefore cannot live up to its full potential.

And of course if you have bad people your operations will stink and your strategy will be non-existent, I am sure there are many companies or organisations like that but one did not jump immediately to mind.

There is such a thing as being asset rich and cash poor, in such a situation is all very good bragging at the bar that you have acres of land somewhere in the village when you are tapping every other person for a beer.

There is one thing Umeme has done over the last six years that it would be worth emulating for the rest of us – they have made a conscious effort to improve their credit rating with the financiers. By cleaning up their accounts and strengthening their balance sheet they have become a more bankable proposition. Meaning among other things they are increasingly able to borrow cheaper for longer durations of time.

It has a nice ring to it when a businessman says he has built his enterprise up without taking out a coin of debt. But what it also says is that with judicious use of outside financing the same business would have been much bigger or more successful.

In a world of increasing competition businessmen cannot be complacent, they need to grow their businesses as fast as possible, first, as a survival mechanism – there is no standing still in business you either expand or contract and secondly, so they can raise the barrier to entry for other firms entering the market and by employing economies of scale be better able to compete against existing players.

And that is at the heart of Umeme’s success up to this point – the ability to improve their credibility with their clients, their suppliers, their financiers and their investors.

Building trust is a key component in unlocking the value of your assets.

THE MARKET DOESN'T HAVE ALL THE ANSWERS

One doesn't have to come to the US to come to the conclusion that while the market might be the best creator of wealth known to man, it cannot claim the same premier position in distributing it.

In fact left to its own devices the market -- the combination of actors going about their own business in search of profit (never mind what they claim), the market tends to concentrate wealth rather than distribute it. 

We talk about China today, but the original winning development model belonged to the US. In the 20th century the average family income more than tripled. The US economy has grown to the point that it's is about equal to the sum of the next three leading economies -- China, Japan and Germany, combined.

A combination of stable internal politics that anchored strong property rights and attracted immigrants from all over the world, fueled this economic miracle which, for better or worse is the US we know today.

While this is true, the US is unfortunately the most unequal society in the developed world. Countries ranked according to the Ginii coefficient, a measure for income distributions, puts the world's leading economy at number 28, behind countries like Greece, Israel and the Czech Republic.

And it's not difficult to see why this is so.

The founding fathers of America, being businessmen, were committed to private sector led growth. It was a messy process but that commitment ensured that the sanctity of private property is indisputable -- never mind that this once included slaves, their innovations in finance have left everyone else in the dust -- even if this happened literally and figuratively, during the recent global financial crisis and finally created an environment for the the greatest minds in all endeavors to flourish and make their contribution to this economic experiment.

The results are their for all to see. 

From the huge amounts of money required to sustain the political class in Washington and around the country, to the huge outlays of capital it took to build the concrete jungles of New York and any number of major urban centers around the country and to the fantastic innovations being thought up in hundreds of universities, universities of such quality as to leave any other pretenders far in their wake.

In this same free market where it is understood that everyone has a chance, but also that not every one will make it, for those that do the rewards have been abundant. However every one is not made equal and in any human endeavor only a small minority can excel, leaving the rest to their own fate is not only inhumane, but makes the whole system unsustainable.

One can safely say that the majority of Americans recognize this. Unfortunately the minority who have the resources to maneuver though the US' political system -- a system designed specifically to guard against the concentration of power, sees a more equitable distribution of wealth detrimental to their own business interests.

"The US has an advanced system of internal conflict resolution and its unlikely that it will succumb to coups or nationwide instability, we however do not have that luxury...

The rest of us may think this is America's problems and if they want to go on blundering down that road they will reap the fruits of their own folly, but the reality is that when America gets a cold the rest of us can get Ebola.

However all is not lost. A strong push from the myriad civil society organizations is beginning to make an impression. The Internet and its offspring, social media is beginning to chip away at the influence of the powerful Interest groups at the helm so change is coming. It's inevitable and the momentum is irreversible.

For the rest of us while we allow the markets to direct economic growth, we should not abrogate our responsibility to ensure the spoils are distributed equitably by beefing up our social services, infrastructure and political processes. This cannot happen by accident.

The US may have an advanced system of internal conflict resolution and its unlikely that it will succumb to coups or nationwide instability, we however do not have that luxury.

EDUCATION IS KEY ...DUH!!

The state of Massachusetts, legalized universal primary education -- well they called it compulsory school attendance, in 1852 so by now its safe to say they have universal literacy. But they went further and now have more than 100 colleges.

Harvard and the Massachusetts Institute of Technology (MIT) lead the pack as centers of education but more importantly as leading research institutions.

Understandably Massachusetts is considered a center of high education, not only in the US but globally.

The state started off as a settler colony in 1620, the state's economy has been totally transformed to the point that agriculture is not one of the major contributors to the overall economy.

"The high concentration on education means the economy is graduated up the value chain. Higher education, biotechnology, finance, health sciences and tourism now account for most of the state's $400b GDP, about twenty times the size of Uganda's economy or four times the economy of the East African Community...

As if more proof was needed while the export of goods from the state comes in at $28b state officials think export of services more than doubles that figure. They say its too difficult to track service exports so they rely on educated gueses.

Its obvious. 

If we want to have long term sustainable development we need to invest more and attract more investment into the education sector. UPE and USE are a good start but beyond higher education a more determined push into research and development is critical.

MIT, which is on the cutting edge of technological development, gets more than half a billion dollars in research .grants annually from the government. The university earns more than $100m a year from the more than 500 patents and technologies they license.

It is in the text books, improve the quality of your human resource -- through education or increasing capital utilization in your work processes, and you raise incomes and the general economy.

But even more interestingly it can be argued that there need not be any major attempts to direct this human resource to one particular direction or another. Beyond creating an enabling environment for it to grow and thrive, the US shows that it will find its own level and work for the betterment of the general society.

An enabling environment will have at its center an ability of this improved labour force's ability to be gainfully employed otherwise it will take it services elsewhere.

As it is now the US is recovering from the global crisis, creating new jobs at a prodigious rate. But observers note that the jobs that were lost during the crisis are not the ones being replaced. The jobs being created are either at the very low end of the scale or the most specialized ones -- they say there is no problem finding jobs for PhD holders.

But even at the lower end they are needing less and less hands to do the same amount of work as before....

At one restaurant in La Guardia airport-New York two waiters serve hundreds of clients a shift. Back breaking work, but made easier by the fact that the waiters don't have to take orders. Patrons order straight from their seats using tablets, pay for the meal using their cards and the first time they meet the waiter is when they get served. This innovation alone cuts fixed costs significantly according to the shift manager.

While it will be harder to get a job the US worker will be more productive coming out of the crisis than when he went in, but bare minimum what ever you do you better be able to use a computer.

Strangely while raising the society's output, increased use of technology could be increasing wealth inequalities in the US. It will be interesting to see how they handle it in coming years.

The fear of course is that left to capital's hands, labour will get the short end of the stick. Left to labour they would love to sue for more pay and fewer hours, which would do nothing for business.

It's a dilemma they need to resolve sooner than later.

TWO DEVELOPMENT MODELS, DIFFERENT OUTCOMES?

Last week Singapore's founding leader Lee Kuan Yew passed away.

In the same week across the world, Brazilian private equity firm 3G made a $49b or twice the GDP of Uganda, for foods giant Kraft Foods Group. About the bid later.

Yew's place in history was long been cemented with his stewardship of a small city nation that went from third world to first in one generation. The journey is well documented in his book "the Singapore story" arguably a template for how under developed country's should go about their own development processes.

Of course the context of the time meant Yew could do somethings it would probably be hard to do now among them his crackdown on communist parties, which would now be read as harassment of the opposition, but he grappled with security threats, abject poverty, disease and ignorance like all his contemporaries.

What probably gave the whole project a chance was the vision he had his contemporaries had to see Singapore attain per capita GDP equivalent to that in the UK. They then went about reverse engineering the results and voila, half a century later Singapore is the envy of the third world and has been accepted at the high table of the first world.

It wouldn't be a big deal had the dozens of third world countries especially on our continent made a similar leap -- especially since Singapore was worse off than, say Uganda, when Yew started his mission in 1965.

"There really are no excuses for why Singapore is where it is and where we are now....

People argue that Singapore is strategically located in key shipping channel, but that was the case even before Yew came along. People argue that Singapore did not have to grapple with security threats and instability as we did but they had to live with the real threat of being swallowed up by Malaysia from whom they had broken away from. Diplomatic finesses coupled with political pragmatism averted that event but committed a lot of resources which would otherwise be used to push development. People even argue that the Cold War and the decision to align with the free market made the difference but a study of the development of Singapore shows they used what they could from both sides of the ideological divide to achieve what they did.

Yew was not a saint -- no politician is, but his leadership in helping raise the standard of living of his people cannot be taken away from him. However his example means there is no excuse for leaders anywhere in the world not to lift their populations out of poverty.

Which brings us back to the multi-billion dollar bid for Kraft foods.

This bid audacious in its execution is more noteworthy, in my mind in what it says about the US development experiment.

Unlike Singapore, which had a somewhat centralized planning system, the US has developed over the last two centuries not by design but organically, the people going about making it happen by responding to the circumstances as they arose.

Given what the US has achieved it comes as a surprise that they do not have a planning ministry, neither have they dabbled in five-, ten- or even 100-year development plans along the way.

So how did they pull this off, without everyone pulling in different directions and making the whole experiment collapse on itself in a mess of civil war, competing political egos and general chaos?

Political gridlock is not unusual in Washington and people who work with the system are often frustrated at how long things take to get done, however when things are agreed they often stay that way or don't divert much from the mean because wide agreement has been attained, assuring business a level of predictability that can not be enjoyed in many places around the world.

Maybe the US development process is the best case of Adam Smith's invisible hand, that individuals working in their self interest advance the well being of the society in general.

"The one thing that is clear in both development models, is the identification of a vision to aim at. On one hand championed by determined individuals while on the other driven by societal consensus...

The danger with the former is that once the individuals move aside can the momentum be sustained? While the US biggest contradiction is that their development process, which suggest widespread agreement, has the highest wealth inequalities in the developed world, meaning more and more people are being left behind.

The suggestion is that big business and other powerful interests have gamed the system to ensure the rich get richer and the poor get poorer, a possible cause for future implosion. Who knows ?