KCCA TRAIL BLAZING AGAIN

Last week it was announced that Kampala Capital City Authority (KCCA) had been given a clean bill of health to start issuing bonds to finance some of its projects.

The South African based Global Credit Ratings (GCR) has certified KCCA’s credit worthiness following a World Bank funded audit of KCCA.

At the bare minimum it means that KCCA has access to one other means of financing its operations, beyond government contributions, its own revenues, donor loans and grants.

"But beyond that, it means that KCCA’s management practices have met the bare minimum required for money managers to take an interest in it. To be cleared to issue bonds, which is borrow from the public, it means you have verifiable sources of income and a management that can put whatever monies lent to good use. That’s the bare minimum investors want...

This development may have passed unnoticed by the general public but it is a heartening vote of confidence in the three-year old authority.

It means that they have been vetted on an international standard the big money men know and appreciate. This means that KCCA now has access to massive pools of money, that if captured and used judiciously can transform the city beyond recognition.

Of course there is still a lot of work to do. KCCA needs to streamline its operations even further, collect all the money due to it and resolve the niggling political question surrounding the mayor’s seat.

No country ever developed without the prudent use of debt.

One of the reasons our countries, and individually, we fail to develop, is because of an uninformed fear of debt and the unempowering overreliance on cash. That being said it takes a superior financial intelligence to make debt work.

The best use of debt is to increase your capacity to earn and not your capacity to spend. So for instance the investment in markets may provide additional income for KCCA or the building of roads in the suburbs will increase property rates and therefore the ground rates the authority can charge on properties as would the building of schools, hospitals and other amenities that make it pleasant to live in the city.

However, splurging on a new fleet of 4WDs or on raising allowances for councilors  may show no return but would just ensure higher expenditures.

Essentially you want the activity for which the debt is committed to pay its own way.

"KCCA would do well to take a leaf from the Bank of Uganda issued treasury bills and bonds. What started off tentatively, in the late 1980s, as a mechanism to damp down inflation by mopping up excess cash from the economy, is now viewed with more confidence by local and international investors.  Beyond its anti-inflationary role, has in recent years helped finance the budget, especially when the donors threw a fit a few years ago about our corrupt practices and pulled the plug on their aid....

The government paper issues came under a lot of criticism initially when they were exclusively for managing money supply and at the cost of hundreds of billions of shillings to the tax payer, but its proponents argued that was the cost of maintaining macro-economic stability. Without that stability, the economy as we know it today – with all its limitations would not exist today.

One can expect that KCCA will start slowly one, because they need to build confidence in the markets and because their absorptive capacity of these funds may still be limited. But if their bond program is run well in a decade in two KCCA will be a power onto itself and hopefully will pull the rest of the country along with itself.

Other towns could follow suit.

One of the challenges of our societies is our low saving culture. This is a problem because it means compared to the money in circulation, we have not enough of it aggregated into meaningful sums for use by the productive sectors of society.

In the western economies for instance as little as ten percent of all money in circulation is physical cash or just hanging around in the pillows, pocket or under their mattresses. The largest percentage of the money is held in financial institutions.

In Uganda according to Bank of Uganda figures this was as high as 24 percent at the end of December 2013 is not in the formal financial system.

And finally KCCA is proving a truism in finance, that money follows good organisation or management. We do not have access on favourable terms to the large pools of cash sloshing around the world because we do not manage our affairs in such a way as to instill confidence in possible lenders or investors.

BARYAMUREEBA’S CANDIDATURE OWES A LOT TO NRM

This week Professor Venansius Baryamureeba threw his hat into the presidential race.

For those who know him, this has not come as a surprise. While on the face of it Baryamureeba is not a front runner, his action is an interesting one given our country’s political history.

This running on individual merit is a “creation” of this administration.

"When the NRM took power in 1986, while they were militarily credible they were politically thin on the ground. This is not to say that they did not have a lot of good will.

In order to redress this imbalance NRM suspended political party activity and introduced the individual merit phenomenon – where people need not be sponsored by a party to run for any political office...

This decision had two major effects.

One, it made it possible for thousands of people who were previously locked out of the existing party structures, to vie for office loosening their allegiance to existing parties.

Secondly and related to the above, it allowed the NRM to build up its political base with the new comers to politics and by coopting some of the existing political operators. The strategy was so successful, so much so that the NRM has been in power longer than all the previous governments before it combined.

A return to multi-partyism in 2006 however failed to make the break from this concept of individual merit causing much headache in the political parties and even the NRM.

In a multi-party set up the party’s agenda overshadows individual ambition. If one falls out of line, disciplinary measures by the party can be brought to bear on the culprit, which may very well lead to an end of a political career at worst or a stint in the political wilderness.

What this has done in more established democracies is to restrict political contest to a handful of parties, with independent candidates being an aberration.

Which brings us back nicely to Baryamureeba.

At the moment Baryamureeba’s candidature can best be seen as an announcement of his arrival on the political scene rather a credible challenge of President Yoweri Museveni’s three decade long tenure as the country’s CEO. Baryamureeba could only do that in a system like Uganda’s where independent candidature is common enough that it is not an anomaly.

Independent candidates are important in any political system because they are not burdened by the baggage of incumbency or the reputation as barefaced opportunists that opposition parties are often saddled with.

That being said the independents lack the networks that established parties have, making their chances not unlike casting ones bread upon the waters and hoping it comes back buttered.

In the last election Norbert Mao and Olara Otunu the flag bearers for the Democratic Party (DP) and the Uganda People’s Congress (UPC) between them failed to muster five percent of the vote in the presidential elections. Their party’s showing in the parliamentary polls was just as dismal.

The Forum for Democratic Change (FDC), managed 26 percent of the presidential vote and have the most seats in parliament of any opposition party. The FDC have grown due to the charisma of their flag bearer Kiiza Besigye in the last two elections and as seen as the home of the former NRM who see it as comfortable landing ground between the NRM and the traditional opposition parties.

"In the less than 12 months within which Baryamureeba has to muster a realistic challenge against Museveni, he needs to build a nationwide network and ratchet up his charisma quotient...

The latter is easier to do than the former, but heck! This Uganda give it a shot prof.