THE FOURTH REVOLUTION AND WHAT IT MEANS FOR US

The Word Economic Forum closed at the weekend. The annual event held in Davos, Switzerland brings together the leading politicians, businessmen and intellectuals to discuss the world developments.

One of the themes this year was the Fourth Industrial revolution. In human history we have seen three eras that have seen human productivity achieving quantum leaps in technology and they seem to happen every 100 years.

From 1784 the harnessing of steam and water power to cause mechanical production was the first industrial revolution.  Division of labour, use of electricity and mass production starting in 1870 heralded the second industrial revolution. And then in 1969 with electronics, IT (Information Technologies) and automated production has brought us to where we are now.

Following on from our current circumstances thinkers see a world of “cyber physical systems” where not only will all our devices be connected but it is not inconceivable that we will be connected to our devices.

The possibilities are at once incredible and scary.

On the one hand imagine a situation where we would be able to tap much more easily than we do now,  into the data bases of the world, increasing collaboration and reducing the time between innovations. On the other hand there is the possibility of the creation of super smart robots, which raises apocalyptic visions of robots running amok and seek to exterminate the human race, a la Terminator.

"The key thing is that with greater access to information due to better connectivity, worldwide human productivity will increase and usher in the fourth industrial revolution...

About 30 years ago futuristic thinker Alvin Toffler talked about the evolution of power down human history. First it was the strongest man in the cave who was the leader. With the creation of money it soon became the man with the most money who led the society. Physical force is good for coercion but with money not only can you buy the means of coercion but you can actually induce behaviour to your liking by paying for it. And finally he said we were living in the third wave – with the first two trends being the first and second wave. In the third wave it is the man who can generate, store, process and disseminate data that will rule the world.

It is already happening. We talk of the wealth and income disparities in the world. Oxfam ahead of the Davos meet said one percent of the world’s population already control more wealth than the bottom half  combined. At the bottom of this material disparity is an even greater disparity in data generation, storage, processing and dissemination.

This disparity exemplified by the digital divide is what sustains the material inequalities.

However as we have seen with the mobile phone, this increasing connectivity if we adopt it with openness and foresight can help us leapfrog into the 21st century.

For example our challenge now is how we industrialise. People who should know argue that our best bet is to develop our agro based industries. However there are impediments to raising farm productivity, access to the cutting age biotechnologies, access to markets and even tapping into the billions of dollars in finance swirling around the world in search for a home.

Better communication will bring these things much closer to home for us than the Asians in the 1970s or the Europeans at the time of the agrarian revolution.

"With better communication being a landlocked country will not be death sentence as some old school economists have concluded...

But the rising up to this potential is not inevitable. We can miss the bus entirely by refusing to open our communications space to new technologies, drag our feet on rejigging our education system and generally failing to see that some concessions will have to be made now to see benefits well into the future.

Our post-independence governments made the error of stifling the private sector, frustrating capital growth and hoping in effect to distribute poverty. As a result the continent is lagging far behind the rest of the world on every measurable index.

We are on the cusp of a new era, where a break from the old thinking of carving out small spaces and defending the despite overwhelming evidence to the contrary, will make the difference between a better life for our people in the future or existing at sub-human levels , beaten down by poverty, disease and war.

We need to open ourselves to the consumption of these new technologies but also create the manpower to able to adopt these technologies to provide solutions to our own unique challenges.

UGANDA OPPOSITION CHALLENGING MUSEVENI NEEDS A RESET

A new poll, half way through the Uganda presidential campaign has provided cause for pause as the anticipated challenge to President Yoweri Museveni’s 30 year old stranglehold on power, seems to be running out of steam.
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HOW TO HANDLE THE WINDFALLS IN YOUR LIFE

You might have missed but the US is currently abuzz with news of a $1.5b (sh4,700b) lottery jackpot that was won last week. It turns out the money will be shared between three ticket holders in three different states – Tennessee, Florida and California.

History shows that these lottery winners often blow all the money they win, leaving them worse off than they were before the event. With such windfalls they go out and splurge on bigger houses, bigger cars, boats and so when the money runs out as it always does they find themselves deeper in the hole in trying to maintain their new lifestyle.

In the event that you land on the windfall of a life time what should you do.

1.       Adjust your thinking

Thankfully this is coming before your windfall. You need to adopt the attitude of the rich, which is that money is not for eating, it is for making more money. Just because you have a lot of money does not mean you will always have a lot of money, but by deliberate action you can not only stretch out your windfall but actually get to the point where it is working for you, throwing off more and more income into the future. One difference between the wealthy and the rest is that they consume less of their income than they invest, and the richer they get the less they consume in relation to their total income than they consume. To tell if you are a rich person or not when you get a windfall you will more likely think of all the good things you will buy and then once done will think of investing --- the truly wealthy think the other way around.

2.       Meet your tax obligations

Even if you win at the lottery the tax man’s obligations have to be met, however painful this is. Because even if you finish the money before they get to you they will hound you till you pay them, as they should. As it is now lottery earning attract a tax of at least 15 percent. Don’t try and be clever. As it is now if you buy any property of above Sh50m on transfer you will have to show how you got them money to buy and if you are not tax compliant they will slap you with a 30 percent tax on the cost of the property. So why not do away with the pain at the beginning, you might even pay less instead of suffering death to the taxman, by a thousand cuts!

3.       Park the money away

In case the windfall came out of the blue – like the three lottery winners in the US, park the money away. Either open a fixed deposit account (with that kind of money the banks will be falling over themselves to have you as a client) or buy government paper. This will not only allow you to start earning off your money but will also give you time to think or get sound advice on how to employ your monies.

4.       Don’t be a hero

We all like to have the ego satisfaction of saying that is my business, that you employ people, that your business makes money for you as you sleep. But business like every other worthwhile endeavour in life takes time to learn. Think of it this way, It does not mean because you have all the text books for P1 to P7 when you are in P1 that you know very thing. You have a head start yes but that’s all it is, you are going to have to bear down and learn the things in the books and that takes time. The worst thing that can happen to any businessman is to start off with a lot of money. Park the money and live off the interest and if your entrepreneurial itch persists use some of the interest to start experimenting on business, learning as you go. If you jump in with a lot of money you will soon find out that money is not the main ingredient in a successful business.

5.       Investing in yourself

Related to the above the smart thing to do is invest in yourself. And I am not talking about buying fancy clothes or fast cars or women, I am referring to learning. Buy a book, go to a seminar or pay a good advisor in the enterprise you may have set your sights on.  Inspirational speaker Robin Sharma says, “To earn more you must learn more.” He goes further to say, “To double your income you must triple your rate of learning.” The point is the difference between living happily ever after off your windfall or looking back on “the good old days” after falling back into destitution will depend on the content of your head.

Good luck to you!

WHAT WOULD HAPPEN IF WE DID NOT HAVE EXAMS?

There is an interesting illustration going around on the internet about the education system.

In the illustration a bird, monkey, penguin, elephant, fish in a fish bowl, seal and a dog are standing under a tree are lined up in front of a man seating behind a desk, who says,

“For a fair selection everyone has to take the same exam: please climb that tree.”

We need not have said more after that but under the illustration is a telling comment by Albert Einstein which goes, “Everybody is a genius but If you judge a fish on it’s ability to climb a tree it will live its whole life believing that its stupid.”

Einstein who in his later life was widely regarded as a genius could probably relate. As a child he never spoke until he was four, he was brilliant at maths but not much else and in his advanced studies he shunned science practicals for thought experiments. All his education life he was a square peg in a round hole.

This week PLE (Primary Leaving Exam) results were released with the usual fanfare. The results showed that whereas more pupils sat for the exams fewer pupils passed with division ones than last year. A simple analysis by the New Vision also showed that judging by percentage of division ones 19 of the top 20 districts in the country came from urban areas with the exception being Rubirizi district.

This disparities can be attributed mainly to greater private investment in schools in the urban than in the rural areas. These differences have far reaching repercussions into the future if as is well known education achievement is key ingredient in raising incomes.

But one wonders whether even the “bright” kids are really getting a head start in life.

Our educations system – despite all the best intentions, is geared towards testing the candidates’ ability to retain information, retentive memory, which is just one aspect of intelligence.

But one can see how this came about.

In a situation of scarce resources the exams are intended as an objective measure of separating those who are to go to the next level of education. For instance this year 600,868 kids sat for PLE but last year about 450,000 were admitted to secondary school a figure that may go up by a few thousand this year.

"So then the question, are we teaching our kids to become better more productive members of society? And if so are exams necessary? Or are we examining our kids because we cannot accommodate them all at higher levels so we need to find an “objective” way to sieve them?...

What would happen if we did not have exams? For many of us the knee jerk response is that we would have armies of kids getting out of school half-baked without a real grasp of the principles of their subjects. Is learning by rote the only way to learn the basic principles?

The truth is learning by rote is cheaper than learning by practical experience, where you learn the principles and employ them in practical situations. Science for example the amount of investment in labs and other props to teach science practically would swamp most schools and even the government.

Which probably explains why if parents can afford it they send their children to private schools (we tend to call them international schools here).

In a classic case of why the rich will get richer and the poor get poorer. These private schools while not neglecting retentive memory, place heavy emphasis on extra-curricular activities, which develop other facets of intelligence like musical, linguistic and interpersonal intelligence.

The real world is run by the people who beyond being intelligent or clever in the traditional sense and are able to build and sustain teams in pursuit of greater goals, people who have strong interpersonal intelligence. These teams may be businesses, political parties or charitable endeavours.

So while the poor continue to clamour for the four-in-four the rich have moved on training their kids to lead the poor “clever” kids in future.

A BUSINESSMAN'S SOLUTION TO UGANDA'S CURRENCY WOES

Uganda entrepreneur Andrew Rugasira on January 10^th launched Good African Chocolate to complement his existing line of Good African Coffees.

Rugasira is hoping to leverage his decade long experience in getting his coffee onto western retail shelves to do the same for his chocolates. He is under no illusion that he has set himself up for an uphill task as the same dynamics he had to butt his head against in exporting processed coffee are sure to recur with his chocolate endeavour.

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RUGASIRA ON COFFEE, CHOCOLATE AND EXPORTING TO THE WEST

 I prefer to seat upstairs at the Good African Coffee shop. But Andrew Rugasira had other ideas. We sat downstairs with a display of Good African’s various offerings as a backdrop to our conversation.

Rugasira is launching a line of chocolates to complement his company’s line of coffees, which project started a decade ago and took him from the foot hills of the Rwenzori Mountains to Buckingham palace to the rarefied heights of high finance in the business capitals of the world.

The whole grind is chronicled in his book “A Good African Story”. He assured me that more harrowing tales will be told in the sequel.

The new chocolate, Good African in its three flavours – dark chocolate (Orange pieces), milk chocolate and milk chocolate (hazel nut crunch) will be in supermarkets near you on January 10^th.

But our discussion veered away from this his newest pet project to the wider issues of what it takes to export to foreign markets, for which his experience has been painfully compressed into the last decade.

"Boosting exports is a pertinent subject at this time. The shilling lost almost 20 percent of its value in 2015 partly because while we seem to be exporting more and more by volume every year our receipts are not keeping step and in fact are falling back...

The Uganda Coffee Development Authority (UCDA) last week reported that despite the fact that we exported 10,000 bags more in the period December 2014 to November 2015 we made sh24b less!

Contrast this with Germany, which exported 11.9m bags in 2011/12 more coffee than all of Africa, which did 10m bags; Germany earned $3.6b and Africa? $2b!

Which brings us around to Rugasira’s experience and what he thinks this country needs to do to climb out of this vicious cycle.

Rugasira will employ for his cocoa project much of the same production processes he used for coffee, employing small holder farmers who have been helped to improve their productivity through better farming and post-harvest practices.

But on a macro level he thinks, “Government should have an industrial policy that allow infant industry’s to survive early stages of production. Within it would have access to credit, technology, skilling of staff, export promotion support, protective measures for these industries in the domestic markets, that’s how these other countries did it.”

He says governments too should not be afraid to attempt to pick winners, everybody does it.

“There is no country in the world that has no had problems picking winners. The notion that you can only pick winners and not lose money is a fallacy. Speak to any private equity firm and they will tell you that for every 13 firms they pick only one succeeds, but that one so far outweigh the losses that it makes economic sense,” he argues.

In between sips of his latte Rugasira said the barriers to entry in to western markets requires sustained, deliberate and systematic government help and there is no running away from that.

However in launching his chocolate he notes that the market has changed from when he first attempted to establish a presence on the shelves of the western supermarkets.

“Africa with a population of two billion and one billion potential consumers is becoming a massive market in itself. Exporting now is not so much about a European market but it is also a pan African market with significant purchasing power in some of these geographies,” he says...

And also the Ugandan market has changed with many more outlets from which to distribute, but also that the consumers are now more impulsive in their habits.

“We estimate the market for chocolate to be between $7 to $10m a year, there is a lot of potential here,” he thinks.

But going back to the subject of how government can help some of our industries extend their reach abroad, Rugasira is in no doubt that the commitment will have to made sooner than later.

He rues the fact that right now interventions have been politicised  “The pressure of jobs for our young people is so intense that government is going to have be absolutely intentional and committed to making whatever investments it has to make to address that issue. It is absolutely unsustainable as it is now.”

HALF WAY INTO THE CAMPAIGN, MORE OF THE SAME

We are half way into the presidential campaigns. Initial impressions have been confirmed or shown to be gross understatements or overstatements.

The three key candidates President Yoweri Museveni, Kizza Besigye and Amama Mbabazi have torn around the country garnering big crowds wherever they go. After the initial rallies in Kampala observers were forced to consider that the possibility of three way race.

Over the last two decades during which there has been a presidential election every five years, it has been a two horse race, with Museveni leading proceedings and one other – Besigye the last three outings, coming in a distant second before all other candidates tussled for the scraps at the bottom of the barrel.

From a purely journalistic point of view the possibility of a more competitive campaign, was mouth-watering enough, before you considered that more competition this time around may mean a run off.

According to our constitution if the leading candidate does not 50 percent –plus-one of the votes a run off will be called between the two leading candidates.

A poll released last month put a damper to those wishes when it showed that Museveni was past the 50 percent mark with Besigye coming in with about 20 percent and Mbabazi five percent.

The will be other polls in coming weeks and it will be interesting to see whether they confirm these results or earlier wishes for a three way race.

"That being said maybe we should not have been surprised by the poll and maybe we should have put down the perception of a more competitive race this time around to wishful thinking...

Museveni and Besigye have criss crossed this nation multiple times in the last two decades, in terms of pure face recognition no other politicians have such a national imprint. Secondly these two candidates have organisations behind them. In a campaign effort you need organisation to prepare the ground for you and after you have left to keep hope alive. If you have no organisation your campaign is really dead on arrival as some of the candidates have fast realised.

Some things have not changed – much.

In western democracy where the electronic media – TV and radio and now the internet, are more prevalent, public rallies help but the media keeps the candidate in the minds of the voters. In our poorer societies the candidates have to go out there and press the flesh and speak in the symbols the people can relate too.

"We arm chair critics may hear a campaign pledge whip out our calculators to see whether the proposal is feasible or wonder whether that pronouncement or the other meets the standards of public decency or whether this proposal or the other is taking into account the present day reality.  Call it what you want politicking or demagoguery or grandstanding it’s all communication tailored to specific audiences...

Running a natiowide campaign has definitely changed.

In 1996 when the first presidential poll under the current constitution was organised there were barely a thousand mobile phones that took away the cost of the airtime and data, major expenses in today’s campaigns. There was only one nationwide TV and radio station – both state owned, now arguably the candidates have multiple media platforms from which to project themselves. There were under 40 districts to canvas then compared to today’s 112, the country’s size hasn’t changed but presumably candidates at the end of the campaign would sleep easy knowing they have been to every district, then.

The complexity has definitely been ratcheted up a notch but one still needs to make a physical appearance in the most remote corners of the land and be backed by an ever present network, built up over months, years and even decades.

As the candidates hurtle around the country in coming weeks it will be interesting to see how much more the presidential campaign will change.

BURUNDI CHAOS THREATENS EAC CREDIBILITY

A meeting in Uganda at the end of 2015 to resolve the conflict in Burundi did little to bring hope to the violence ravaged East African nation, serving only to highlight the crisis as the region’s most pressing security issue in the coming year.

Last week on December 28 Uganda’s President Yoweri Museveni opened the latest round of  Burundi peace talks to stop months of fighting triggered in April by president Pierre Nkurunziza’s plans to seek a third term in office.

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LOOKING BACK ON THE MIXED BAG OF 2015

Another year has come and gone – don’t they seem to be passing by faster and faster these days?

Looking over the 40-odd Shillings & Cents column that have gone out during the year I dug up a few thoughts that would serve us well in the New Year and well in to the future. Below I excerpt some of these columns and the thoughts that should serve us well in the New Year.

1.      On Wealth inequalities …

At the beginning of the year UK based NGO Oxfam led by Winnie Byanyima, put out a damning report showing how world income and wealth inequalities were growing to unsustainable levels. The report pointed out that in a few years’ time one percent of the world’s population will own more than the rest of us combined.

Oxfam suggested that we break up the powerful interest groups that maintain the status quo.

Our suggestion?

“At the end of the day, the wider the wealth disparities are in a county is how inefficient the government is in creating wealth, through the encouragement of business on the one hand and redistributing this wealth through the building of infrastructure and improvement of the quality of the human resource...

2.    On government interventions in the market ….

In January the Swiss central bank had to give up trying to hold the Franc to a certain level against the Euro. A combination of factors that included uncertainity in the Euro zone due to the real possibility of Greece exiting and events in Russia which saw inflows to buy the safe haven currency, meant the peg was impossible to sustain. The Swiss spent $200b defending it over three years once again showing the following of trying to bet against the market for anyone even the most solid economies.

We wrote,

“The Swiss have suffered the very same fate they were trying to avoid. Their exports now will cost consumers up to 20% more than last week, which may not be good for sales. It’s never a good idea to bet against the market, even if you believe the market is wrong. As they say the market can remain irrational longer than you can remain liquid....

3.      On unlocking our wealth …

In April we marvelled at the progress Umeme had made in a decade.  The distribution wing of the former UEB was passed off to private investors and by one metric alone had more than doubles subscribers to the grid to 600,000 during the period, a feat which took the original owners more than 40 years.

What made the difference?, “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...

4.      On the rise of the Ugandan manager ….

Allen Kagina took over at the Uganda National Road Authority (UNRA) in May for which we said,

“But beyond her potential impact at UNRA and her wellworn record at URA, Kagina is a front runner in a new crop of parastatal manager that is debunking the notion that we lack effective managers among our number to run our most prized assets.”

And added,

“And finally Kagina’s recognition as a top manager but just importantly, as a woman manager, signals the acceptance of women as managers able of taking on the “tough” assignments society had decided belonged to men.”

Enough said.

5.      On fallen heroes ….

In May we lost Ivan Kyayonka long time boss at Shell and chairman of various boards. The loss of life is always tragic but Kyayonka’s loss will be particularly telling.

 "It is men like Kyayonka, sadly in short supply, who are badly needed to populate, our management suites, our public service and even lead our schools, so that we generate more of his kind to unlock the vast potential of our country. Because people are what make things happen and not the other way around...

6.      On how far we have come …

In June in a post-budget column, we reflected on how far we had comes as an economy. WE noted that in the 1986/87 budget government set out to spend $785m or about sh2.4 trillion at current prices which was a tenth of this year’s budget. We said the biggest contributor to this jump in revenues was the liberalisation of the economy and the privatisation of public companies.

However, we thought, “"But whereas we have done  a better than average job at rehabilitating our physical infrastructure, there is an urgent need now to get our soft infrastructure – laws and  institutions, to work for the benefit of the private individual and private sector.”

7.      On shopping malls …

Prompted by a typhoid outbreak in one of better known malls down town we wondered at the folly of the mushrooming new malls.

"It seems to be, that the sum total of our market research before we go into business, is to look around at what other people are doing and join the bandwagon,” going on to speculate that the money behind these malls maybe hot money looking for refuge. Only time will tell.

8.      On the legacy of the Idi Amin era ….

We were perturbed by attempts to revise history -- particularly of the eight years when Idi Amin held sway of our country, out of ignorance or out of a deep seated hatred for the current government.

“But the more you examine the period you realise that the breakdown in physical infrastructure was not the worst legacy of the era. The real tragedy was the break down in the spirit of a once proud people and the missed opportunities for development that cannot be recovered...

And we added,

"We celebrate the cronies of the state who businesses were dished to in 1971, but if you look for where they are now, you would be hard pressed to find a handful who parlayed those assets and the passing of the last 45 years into sizeable business with at least a national presence, live alone regional presence.”

9.      And finally we were at a loss to understand the justification for the white elephant that will envitably be the Kiira Motor Corporation,

"As a country we have neither the comparative advantage -- that we can make cars better than any other product, nor the competitive advantage -- that we can make cars better than other people, which is a red flag for the enterprise. Both conditions are not insurmountable but at great cost and without guarantee of success.”

There was more throughout the year but these were probably the choicest subjects.

Have a Happy New Year, people!

IN THE NEW YEAR MEASURE OUT PUT NOT INPUT

What is the difference between governments and business?

Businesses provide a good or service for the public just as government. Businesses employ people as does government. Businesses buy products from the market just as government.

The main difference – as they maybe many, is that business measures it success by output – profit, return on investment, market share while governments measures success by input – classrooms, health centers, kilometres of road built.

Some may argue that a road built is an output but imagine a businessman counting output as hotels built when he is barley doing 30 percent occupancy? The hotel as the road, is a means to an end.

If one were to argue that the businessman want to enrich himself and his partners, the same could be said about the government official, unfortunately his actions suggest his partners are not the people who employ him.

"This difference is at the heart of the reason why governments the world over are notoriously bad at business. Because their measure of success is not one that is suited to building business...

A businessman needs to pay attention to his return on investment, how much money he has got out for what he has put in, because it determines the very survival of his enterprise and also because you do not get rich by funnelling your money into a bottomless pit.

And because of that the businessman has to work out how to collect the most revenue with the least cost or at optimal cost. This means every coin has to count. US billionaire investor Warren Buffett says he worries when he hears a manager saying they will focus on control costs, to him it is like breathing you don’t go out there determined to breath you just do it in the normal course of getting about.

However the businessman can’t go around taking an axe to costs as he may hack off the muscle with the lard, they have to be systematic and not all costs should be cut some will rise while others fall, depending on how they will affect final output.

In addition a good businessman knows that his inputs have to be quality inputs otherwise he may cheat the market for a bit but it will soon catch up to his underhand markets and vote with its feet – away from him.

The naysayers will say but the businessman his selfish he does this all for his own enrichment. 

Maybe that’s why the quality of our businessmen is so wanting.

The good businessman will enrich himself only to the extent that more and more people partake of his goods or benefit from his service. By extension a businessman has to be selfless before he is selfish.

Which brings us squarely to what we wish government could start doing in the New Year.

Let us say the betterment of the people of Uganda is the bottom line and everything done will be done in the employ of this worthy goal.

So while building thousands of classrooms is admirable even desirable we want to measure the output from our schools. Inputs are good to measure for political purposes could it’s much easier to put up a school block than to churn out first grades.

If we dot the countryside with health centers do we have the staff and medicine to ensure they deliver quality health services? Do we see a corresponding drop in diseases with the setup of a health unit?

"Unfortunately political considerations colour judgement. Politicians often have to pander to certain constituencies for their survival, constituencies which are good for nothing other than to sponge off the state, it’s even doubtful that they deliver votes...

We are I a good place right now in Uganda to make that shift in government operations. Over the last 30 years we have built a usable institutional capacity, credible revenue collections and some success in addressing some of our pressing issues that can be replicated around the country.

The mind shift to measuring outputs versus slobbering over inputs is what I wish for Ugandan in the New Year.

Happy New Year to you all!