MEASURE HAPPINESS NOT GDP

Uganda’s economy has grown at a steady clip over the last three decades or so.

So much so that the economy has grown five-fold during the same period. Aside from a rebooting of the economy, experts say the country can credit this fact to the low base from which we begun, but which results would have been so much better if, during the same period, the population had not doubled in size.

What is also clear, is that not everyone has benefited from these statistics. In fact the figures show that the benefits of this exponential economic growth are being enjoyed by a few and the majority are getting poorer.

Clearly something is wrong.

"To paraphrase the great teacher, “GDP was made for man, not man for GDP”...

The question then is are we measuring the wrong thing by emphasizing GDP growth?

They say what you focus on grows, which explains the growth in the economy in the last 30 years. We have really focused on that number.

Last week the World Economic Forum on its twitter handle, released five other measures that work better than GDP growth – good jobs, well-being, environment, fairness and health.

They are not the first. In 2011 the United Nations passed a resolution calling on member states to measure the happiness of the people as a way to guide policy.

Prior to that there was the Human Development Index, also by the UN, which measured individual countries ability to improve standards of living of their people by measuring against such things as infant mortality, life expectancy, literacy and access to water.

It is an interesting debate that has been thrashed out in the deepest annals of economic theory, but has only burst into the fore in recent years, as people have put the aid industry’s record under closer scrutiny, especially in Africa.

How is it that tens, even hundreds of billions of dollars have been poured into Africa over the last few decades with little or nothing to show for it in the way of the improved livelihoods for the continent’s people?

"The obvious answer seems to be that the overemphasis on growth, which wold inevitably trickle down to the masses, is a fallacy...

So maybe we should focus more on the improving the citizen’s well-being, which sounds like the obvious end product that politicians and planners strive for.  Then why didn’t it happen?

To paraphrase another former Kenyan president Jomo Kenyatta in responding to his Tanzanian counterpart Julius Nyerere’s call for a move towards socialism for the region, “So what are you going to distribute? Poverty”

The logic is irrefutable.

The trick clearly is to see GDP growth as a means to an end – improved well-being for everybody, and not an end in itself.

But what one can see how the technocrats got so enamored with GDP growth.

How is economic output and hence growth measured? It is the sum total of consumption, investment, government expenditure and the difference between exports and imports.

"So to move the GDP growth needle government can just spend more, like they are doing now on roads and dams and there will be a corresponding growth in the economy...

However imagine if our targets, which we tracked monthly or annually were such things as the social indicators listed above and celebrated them as widely and as much as we announce improvements in GDP growth, one would expect more dramatic improvements.

Interestingly all these targets are there but as has been mentioned we don’t trumpet them from the rooftops like our macroeconomic gains and secondly, and as a consequence of the first, we don’t place much emphasis on the outputs from investments in the things that will have an enduring effect on people’s living standards – health, education and other social services.

So we have statistics flowing out of our ears and noses on how inflation or monetary aggregates or balance of payments are progressing or not, but nothing comparable in terms of quality of the outputs of our education and health facilities. There we are content with such amorphous figures as enrollment, literacy and life expectancy and not quite into the finer details of curriculum relevance to the environment or preventative medicine.

Again what you focus on is what expands.

"The problem with focusing on the outputs – improved quality of life rather than input – classrooms or health center built, is that it is too hard. The interventions needed for example to increase academic achievement across the board, needs more interventions than form only the education ministry. You would have to rope in the works, health, energy and all other ministries at once to achieve meaningful progress....

So we take the short cut and focus on GDP and may the devil take the hindmost.

In the last three decades we have demystified growth. Our planners know what to do to keep the growth machine going even in their sleep. A legacy not to be frowned upon.

To cement their legacy they need to learn how to translate that growth into meaningful development for the majority.

In trying to do that they may even realise that five percent economic growth is nothing to write home about.

DEMOCRACY IS ALWAYS A WORK IN PROGRESS

Makerere’s Dr Stella Nyanzi dominated the headlines this last week.

The happenings around her and Professor Mahmood Mamdani would be fitting fodder for this week’s column. But we shall desist. If only because we think the people around the good doctor are doing her a disservice and would be best advised to seek professional help for her.

She may have provided much grist for the printing presses, material for our wagging tongues and itching whatsapping fingers, but we need to see it for what it is, a tragic meltdown being played out in full public view.

Our attention diverted we might have missed the New York Democratic Party primary on Tuesday.

The US is deep into nominating its presidential flag bearers for the Republican and Democratic parties. There are currently winding their way through the primaries and on Tuesday the state of New York was voting.

Hillary Clinton annihilated her rival Senator Bernie Sanders in an election that was marred by closed polling centers, missing voters on the register – 54,000 by some counts and broken voting machines, the equivalent of tampered ballot boxes here.

"It was interesting how the reporting on these incidents gave the electoral officials the benefit of doubt, reporting the incidents more as incompetence than a deliberate ploy to gift Clinton the victory. And no one blamed Clinton for the chaos...

At what point is it election rigging and at what point does it become unbiased incompetence or system malfunction or, even better, just bad luck?

And at what point do you decide that one person’s intentions were noble and the others not?

There was a lot of snickering on social media at this turn of events.

But the events in New York should have come as no surprise to long term observers of politics around the world.

The classic definition is that politics is the management of society, but in analysing politics we might be better served if we focused on power – the ability to influence events, people, the environment.

"Politicians strive for power and even the best of them are not averse to disregarding society’s moral code to attain power and once there to hang for as long as is possible under the law or even in total disregard of the law...

That probably explains why we look at all politicians with a jaundiced eye.

With a politician what you see in not necessarily what you get. There is always an angle, an ulterior motive, a hidden agenda.

So how is it that the failures of New York's electoral officials were not placed at Clinton’s feet? After all she is an establishment figure, well embedded with the power brokers of the Democratic Party. And there have been several allegations, all unproven of her sharp practices as a lawyer in her previous life and questionable decision making as the US’ top diplomat in Obama’s first administration.

It helped of course that Sanders slunk off once he determined how badly he had been trounced.

But what if he had gone to court and challenged the result – as is his right? Never mind that it is unlikely It would be overturned in his favour, but maybe he might have won a repeat of the election.

Or what if he just started a narrative that the vote has been stolen and he never had a chance anyway and kept shouting it from the rooftops and twitter?

You do not say these things in polite company but isn’t it that “These things don’t happen in the west” because the people would not allow it? Because their politicians are not like ours?

Mbu they are ethical politicians. An oxymoron if ever there was one.

SOMEBODY NEEDS TO REIN IN OUR MPS

Last week the honourable members of parliament passed a law which exempted their allowances from tax.

In 2013 a whistleblower sued the attorney general because the parliamentary commission was not paying tax on MPs allowances. In February the commercial court ruled that the MPs allowances should be taxed and that the parliamentary commission, which handles their payments, should remit taxes on these from 2004.

During the Kyankwnazi retreat a few weeks ago President Yoweri Museveni said there would be no salary increments for public servants including MPs.

Now usually reliable sources are warning that MPs are planning to amend the Income Tax act to place them among those group of workers listed there that are exempt from taxation on their incomes, like soldiers, who risk life and limb so we can live in peace.

"MPs have to have the best job in this country. Not only can they decide how much they will get paid but they can also decide that they need not pay taxes...

I would love to hear why the honourable members believe they are worthy of a tax exemption on their income.

Off the top of my head, you sue for tax exemption if you are going to create jobs, set up a totally new industry from scratch or going to boost economic activity in a remote area. There are many other reasons of course including that you are unable to be gainfully employed or in the old days,  you could be exempt from graduated tax if you were impotent.

This is an important discussion for this county on many fronts but two immediately leap to mind.

One of the slogans against colonialism was that there would be no taxation without representation. The agitators argued, and rightly so, that how could a group of people collect taxes and appropriate funds ostensibly in the people’s benefit, when the people have no say not only about the spending of the money, but also the taxes to be levied.

Never mind that the colonialist – many of whom were genuine dogooders, believed they knew what was best for the colonies.

Similarly these MPs who think they are above paying theirtaxes are not representing us. They could argue that they are representing the 80 percent of us not paying taxes but then again where would they be leading us. Retrogressively into the pre-industrial age or progressively into a more developed nation?

"Leading from that, have they forgotten that they are leaders? Okay it’s a bit hard to remember that when you are dozing during parliamentary sessions or heckling the front bench or just plain behaving dishonourably --- even us the onlookers, forget they are leaders, seeing as the evidence is often hard to come by...

Taxes are the cost we pay for development. Of course in countries like ours where grubby fingered, public servants help themselves to a disproportionate portion of our taxes it is a hard argument to make, but the principle still holds. And besides you do not fix the problem by not paying taxes altogether.

Taxes pay for security, physical and social infrastructure which goods allow us to generate more revenues to build more infrastructure --- a virtuous cycle, which if handled properly should lead to improvements in living standards for everybody.

So when MPs plot to abdicate their responsibility what are us mere mortals – who also happen to be their employers, supposed to do? The slippery slope of massive tax evasion beckons. And who will call us to book? The MPs?

Somebody needs to rein in the honourable ladies and gentlemen of parliament before the hurt themselves (which may not be a bad thing) but more importantly before they hurt us (if they are not already doing so).

For starters someone has to bell the cat.

Let us have an independent commission to determine MPs salaries. Unfortunately MPs may have to put this structure in place and we all know that monkeys are incapable of passing judgement on the forest.

Secondly, we need to cut the MP numbers. The fallacy that the MP is a benefit to his community has been demystified. MPs themselves after promising their electorate the 67 moons of Jupiter, then turn around and plead that bringing services to the people is not their job – by that time of course, they are pulling down sh20m a month and in the near future, God forbid, tax free income.

"It’s hard enough to build a nation with low revenue collections, an epidemic of corruption in the society and stone throwing allies doing so, from the comfort of their glass houses, without our very own MPs fighting for slobbering rights at the trough of the national treasury....

I know it’s a lost cause appealing to the MPs altruistic natures but somebody has to say it:

STOP! Honourables. In the name of all that is good and right, before you pull us all down into the mud with you.

THE CANCER MACHINE: HOW DID WE COME TO THIS?

The debacle of Mulago hospital’s radiotherapy machine, used in cancer treatment, has had Ugandans frothing at the mouth for a week now, and who can blame them.

To be worried about this country given these details would count as the biggest understatement of all time.

This story is wrong on so many levels all of which cannot be examined here.

Over the week it has emerged that the machine was in service long after it was supposed to be in operation. It had been chugging away for 21 years yet it should have been decommissioned a decade ago. That the hospital is trying to coax a few more months, years or even decades from the aging machine as they wait for the replacement, which according to health officials has already been paid for. That officials are lobbying government to release the sh30b needed to build a bunker to house the machine because questions have been raised about the current banker’s fitness to do the job. And finally that the earliest the new machine can go into service is in two years!

Meanwhile that there are more than 40,000 new referrals for cancer treatment annually, three in four of whom would need radio therapy.

I remember a book on my dad’s shelf many year’s ago whose title was “You have got to cry to laugh”.

The instances of irresponsibility, negligence and planlessness are hard to miss in that quick summary of the facts.

"How is it that when the machine was donated and we were aware that  it can only serve for 10 years that we are only just now – 10 years after it was supposed to be decommissioned, getting around to replacing it? How is it that with such a work load we still have one machine at Mulago and not at least 10 by now? How is it that we continued to operate a machine which most probably has been irradiating everybody within a 100 meters of itself and the people who were supposed to raise an alarm are only just doing so, almost five years after they new it?...

This story is infuriating and mind boggling in equal measure. As Ugandans we shouldn’t be surprised by this “circus” we have seen so many more cases of poor service delivery.

One of the sad things about these incidents is that no one, for a minute, thinks our public servants are incompetent or even out of their depth, the default position is that someone by letting things get out of hand is trying to make quick buck.

"As you can imagine with the public uproar over this machine the procurement manual will be thrown out of the window and no expense will be spared to alleviate the situation, always a recipe for overcosting and contracting dodgy suppliers...

How did we get to this point?

Where public officials run down public services safe in the knowledge that when they have a medical emergency they will be whisked off to Nairobi or Johannesburg or Chennai.

Cynical? Maybe but that is what we have come to expect and with a shrug of our shoulders we let it go on.

Public officials throw their hands up in the air and complain of poor funding “How can we serve meat when you gave us beans”, which is fair but which flies in the face of the money stolen annually – at last count at least sh500b annually, which would have gone quite a way had it been put to its intended use.

"Even sadder is that the beneficiaries of these inadequacies are not seating on their hands waiting to be picked off but are actively working to perpetuate the mess so they can continue stealing. In addition in entrenching themselves in position they are not only holding the government hostage but the very citizens of Uganda...

For now we shake our head and pray we do not contract any cancer. A sorry way to exist.

FOLLOWING KENYA BANK CRISIS, BANK OF UGANDA MOVES TO STRENGTHEN SECTOR

The Bank of Uganda has ordered banks to strengthen their balance sheets to improve their capacity to face up to any upheavals in the industry.

The move, while it has been three years in the making, comes at a time when across the border three Kenyan banks have folded under the weight of unregulated insider lending and general economic stress.

The collapse of several banks at the end of the last century, mostly due to an accumulation of bad debt, prompted the Bank of Uganda to raise minimum capital requirements to sh4b in 2005 from the previous one billion shillings for foreign banks and sh500m for local banks. This was further raised to sh25b in 2010.

The banks that folded included International Credit Bank (ICB), Greenland Bank, Cooperative Bank and Trust Bank. More recently the National Bank of Commerce and Global Trust Bank closed shop.

By raising minimum capital requirements allows the banks to absorb higher losses were the bank was to be distressed.

In the latest move the Bank of Uganda has ordered a minimum capital requirement of 10.5 percent of risk weighted assets – cash, loans and government securities from the previous eight percent. In addition banks will be required to provide for an additional 2.5 percentage points as a capital conservation buffer, bringing capital requirements to 13 percent of risk weighted assets.

"And for the big three banks which are judged to have huge systemic risks – what happens to them affects the whole industry, an additional 1 to 3.5 percent of risk weighted assets will be required depending on the central bank's discretion...

This counter cyclical buffer will apply to Stanbic, Standard Chartered and Crane Bank.

“The Banks are already informed and they should comply by the end of the financial year we expect,“ Deputy Governor Dr Louis Kasekende told Business Vision.

“Think of these actions as a longer term effort to strengthen our banking sector not triggered by anything happening here or abroad.”

Due to their unique financing structure, funded mostly by client deposits it is imperative that a bank’s capital keeps step with is growing operations. Bad debts can mean a bank failing to honour savings withdrawals and lead to its closure a bigger capital base means they can absorb more losses and keep the bank afloat.

According to the central bank documents deposits in the industry grew to sh13.2 trillion by the end of 2014 compared to sh1.04trillion in 1999. Industry assets also grew to sh19.6trillion from sh1.35trillion during the same period.

The Kenyan banking industry is reeling from the closure of Chase Bank last week, the third bank to collapse in the last six months. Imperial Bank was taken over by the regulators while Dubai Bank Kenya Ltd run out of money.

The banks have been plagued by bad debts but also improper lending to its shareholders and managers, which forced the lenders’ insolvency.

"The central bank’s regular adjustment of capital requirements and continued improvements in bank supervision has spared the industry much of the turmoil of the global financial crisis that started in 2008 and distressed many foreign banks....

Except for a spike in bad loans to about 5.6 percent in 2013 the industry has managed to contain the bad loans to under five percent, with the n umber coming in at 4.1 percent in 2014.

Industry sources said the changes have been a long time in coming.

“In 2015 bad debts have been rising, this is the central bank’s way of saying “Don’t take as much risk!” a senior banker said on condition of anonymity.

He said the increase in bad loan provisioning in 2015 suggests that banks continued to lend aggressively in a slowing economy and their clients are failing to honour their obligations.

The bigger banks have had it good for a while, accumulating billions in reserves and these new requirements shouldn’t cause much trouble, he said.

“The smaller banks may struggle especially if their head offices are under stress,” he said in reference with the goings on in Kenya.

The banks see the move as positive for the industry but also will be good for their clients.

“From the clients perspective the banks will be more resilient to external shocks so they will have additional comfort about the safety of their savings,” Stanchart’s finance director Kevin Musana told Business Vision.

For the bigger clients, he said, the bank will be able to lend them even more as the limits, currently not more than 25 percent of capital lent to a single client, will rise.

He agreed that it would be much easier to manage raising capital this way rather than fresh capital from the banks’ owners. However shareholders may have to take a cut on their annual dividends this year.

The local banks listed on the Uganda Securities Exchange include Stanbic, dfcu and Bank of Baroda, whose shareholders may be affected.

Banks are currently reporting annual results an exercise whose deadline is the end of April when a more clearer picture of how the industry did last year will emerge.

Seen against the historical issues of the sector the latest move by the central bank should be seen as an extension of previous moves aimed at strengthening the sector and hopefully making ot more competitive.

LESSONS FROM NIGERIA, ZAMBIA, ANGOLA RETURN TO IMF

In recent days it has been reported that Angola, Ghana, Nigeria and Zambia are making determined overtures to the International Monetary Fund (IMF) for assistance as they struggle in the face of falling commodity prices and slower economic growth.

This comes barely a decade since these countries, their economies boosted by natural resource revenues, were being feted as the drivers of the continent’s growth.

Albert Einstein’s definition of insanity is instructive at this point, “Doing the same thing over and over again hoping for a different outcome.”

"This is not the first time that countries on the continent, their revenues boosted by commodity booms, have thrown all economic prudence to the wind, bowing to populism by increasing recurrent instead of development, expenditures. And when the party came to a close they are left with nothing to show for it...

In the 1970s the frost in Brazil meant a collapse in coffee supplies worldwide and veritable party for coffee producers including our own country. Copper, for which Zambia was and still is a leading producer, also experienced such a boom and the government of the day splurged on food subsidies and high living.

As inevitably happened, commodity prices came crushing down and the beneficiary countries in order to stay afloat had to cut down on their extravagance --- with the prompting of the IMF and World Bank, and many of them were kicked out of power by an irate population unwilling to let go of their perks.

Fast forward to the beginning of this century and it was like déjà vu.

Driven by the insatiable demand of China, commodity prices once again went through the roof, and in classic illustration of the say, “That thing we learn from history is that we do not learn from history” commodity driven economies went on a spending binge.

There were some token attempts at shoring up infrastructure, which would have helped diversify their economies, but not nearly enough was done, given the huge deficits in infrastructure stock accumulated since the 1970s.

And as night follows day the commodity prices have crushed again as China’s economy has started cooling down and western economies are still in the doldrums.

So Angola which boats the richest woman in Africa, President Eduardo do Santos’ daughter or Ghana which was thumbing its nose at Uganda who it pipped to oil production or Nigeria, which continues to be one of the biggest oil producers on the continent or Zambia, whose copper mines had enjoyed a revival with renewed Chinese interest have been left to pick the pieces.

Angola, which relies on oil revenues for more than half its budget, has seen its reserves plummet to $22b from $32b and its currency shed more than a third of its value. Zambia, which is the second largest copper producer on the continent has seen its economy contract by three percent and Lusaka is biting its nails while thinking of how to painlessly shed $660m in fuel subsidies. Nigeria has seen its reserves fall by $30b and economic growth dwindle to 2.7 percent in 2015 compared to 6.3 percent in 2014. Ghana as part of the IMF conditionalities will have to cut its public service numbers down, who enjoyed a 50 percent jump in pay when oil started flowing.

And you can go on and on.

"Uganda knows the necessary but painful steps that come with IMF involvement in trying to resuscitate an economy. With oil and other minerals on the verge of being exploited, it’s clear what we should do, but most importantly what should not be done...

The continued emphasis on infrastructure development is key.

Improved energy, transport and communications infrastructure will not only lower business cost for existing businessmen abut will also open up new economic activities.

Investing in education, health and other social services will improve the quality of the Ugandan human resource --- all the dams, roads and railways will count for nothing if you don’t have the manpower to exploit them.

It is essential even critical, that we hold steady on this part. Shifting new revenues to consumption rather than investment will provide some short term relief but will end up in long term pain.

One of the stories of the last 30 years is how diversified the economy has become.

In 1986 coffee revenues accounted for almost all our exports and were second only to donor funds in financing our budget (we used to tax coffee exports!).

Now coffee exports account for less than one in five dollars of our export earnings and their contribution to the budget is next to nothing.

Last week the IMF said the country’s economy will grow by 5.5 percent in the next financial year compared to five percent this year, and we are operating the same environment as our less prudent brothers.

The model we can adopt to our own circumstances is Dubai, which has entered successfully into the logistics and tourism business to the point that oil as a proportion of GDP is down to under five percent today.

At the bare minimum let us be the ones who learn from history.

THE PANAMA PAPERS AND UGANDA

Earlier this week the publication of stories, implicating several world leaders – past and present, in secreting millions of dollars abroad, brought into the full public glare the issue of off shore tax havens and how the rich and powerful are playing by different rules than the rest of us.

The “Panama Papers” a treasure trove of documents, 11.5 million pages deep, that were leaked from a Panamanian law firm, Mossack Fonseca, which evidently has distinguished itself in secreting money away from the prying eyes of the public or the invasive fingers of governments.

Imagine you are a big fish who has “eaten” a big frog or multinational company that just thinks they should not pay all the tax due to them or an independent consultant, not only making tonnes of cash on the side but who is keen not to make the sources of those incomes known. You get in touch with a lawyer – in this case Mossack Fonseca and they create a shell company domiciled in any number of tax havens around the world through which you can receive payment or pay out of. In this way you can become an employee of your shell company and receive payments in amounts that will not raise eyebrows or buy assets as a foreign company.

So for instance I got paid $100,000 (I wish) for consultancy work I did in Switzerland, I would ask my employers to pay into my offshore account in the Bahamas, which account belongs to my company SmartBush Inc, which every so often may send me a check or gives me free use of its credit card or may buy property in Uganda or come in as an investor to buy privatised companies for a song.

URA will not be the wiser as to my new income and I can enrich myself to no end, tax free.

On the other hand if my employers had sent it straight to my account here URA may claim as much 40 percent of my sh350m pay check or sh140m!!!

Often times these shell companies are just a post office box on a sunny island in the Caribbean, administered by a law firm which makes sure it meets all statutory requirements in those jurisdictions.

The Tax havens have gained notoriety in recent years as revelations of how much money they are turning over as a proportion of their general economies are revealed.

Uganda only came up in the case of Heritage Oil & Gas, which tried to dodge a capital gains tax on the sale of its rights to concessions in western Uganda. Domiciled in the Bermuda they tried to shift to Mauritius – another tax haven, which has a double taxation treaty with Uganda.

A double taxation treaty shelters companies from suffering a double taxation on their earnings in two different countries.

"It’s not to say that our big fish are squeaky clean, it’s just that the leak has been in only one firm. There are hundreds maybe even thousands of firms around the world offering these services...

The supporters of the tax havens argue that they have legitimate uses in the protecting companies from bad regimes or as above prevent businesses from being taxed twice or several other arguments, which while they have a sound legal basis, they cannot stand up to higher moral or ethical scrutiny.

Recent campaigns have fingered these tax havens as one of the major reasons why wealth inequality is rising across the world. While us mere mortals pay taxes on our incomes the very rich pay much less in tax as a proportion of their income to the authorities, with the surplus used to enrich themselves further.

There is very little people can do about it as it seems everybody, who is anybody, is in on the action.

However, western governments are beginning to take the scourge seriously as they realise how much in revenue they lose annually to these tax blackholes, affecting their ability to provide services for their people.

And finally about the Panama Papers how come the prominent stories released are about Russian president Vladmir Putin and African despots?

THE GHOSTS OF KARUMA PROCUREMENT RETURN TO HAUNT PROJECT

The troubles that dogged the Karuma Hydropower project’s procurement continue to stalk the project threatening the multi-billion dollar dam’s future usefulness.

In the current spurt the Energy ministry and the Uganda Electricity Generation Company Ltd (UEGCL) are in a heated battle over the supervision of the Karuma and Isimba dams, with accusations and counter accusations being traded, a situation that has been brought to President Yoweri Museveni’s attention.

But first some background.

"The tendering of the contractors of the $1.6b Karuma power dam was mired in controversy where government officials disregarded due process, ignored caution from the procurement agency, the courts of Uganda, the IGG, the cabinet and for good measure tried to rope in the President into their scheme to force through their favoured candidate in an unparalleled show of impunity.....

Ministry officials seemed to favour China International Water & Electric Corporation (CWE) over eventual winner Sino Hydro Corporation, another Chinese firm.

In the process they delayed the 600 MW dam’s construction by almost two years. Construction finally started in 2014, two years beyond the initial timelines.

The process was so compromised that the cabinet was forced to cancel it on the advice of the IGG and not only did Museveni have to personally appeal to China to help build the dam but had to chair an evaluation committee which interviewed and vetted the short listed companies!

As a compromise CWE was offered the 183 MW Isimba dam project, when Sino Hydro Corporation was eventually awarded the contract to construct Karuma Dam.

First forward to the present and the two projects are fast heading towards a stalemate as the energy ministry and UEGCL fight to resolve the issue of who is responsible for the two projects construction.

At the beginning of the project, in December 2013 a memorandum of understanding (MOU) was drawn up between the energy ministry, UEGCL and Uganda Electricity Transmission Company Ltd (UETCL).

In that agreement UEGCL was appointed the implementing agency of the Karuma and Isimba power plants and UETCL was to implement the construction of the transmission lines from the dams to substations in Namanve, Luzira, Mukono and Iganga.

The MOU was signed after the ministry had already identified the contractors for the two dams, employed its own supervising engineers – Energy Infratec PVT Ltd (EIPL) of India and already obtained financing of $1.69b from the China Exim bank.

China Exim Bank’s funding – a loan stretching over 20 years with a five year grace period at between two percent and four percent annual interest, will account for 85 percent of the project costs with the government coming up with the other 15 percent.

The distribution of responsibility on the projects was reiterated in a ministerial policy direction that was gazetted in September 2014 where the energy minister Irene Muloni instructed that,

“Government has appointed UEGCL as its representative in overseeing the construction works and later as owner of the hydropower plants and also appointed UETCL to oversee the construction of the evacuation lines and related substations.”

However months into the project, UEGCL following monitoring reports on the Karuma dam  complained that there was non-compliance with the project works and requested an expert  to assist in the supervision.

Finance ministry permanent secretary Keith Muhakanizi to whom the request was made, while pointing out the strategic nature of Karuma Dam and raising concerns about that UEGCL does not seem to be in control of the project, which he pointed out had ultimate responsibility for delivering the project, wrote,

“You are hereby required to urgently put in place adequate measures to fulfil the requirement as the implementing agency of the project,” Muhakanizi wrote in a 6^th March 2015 letter to UEGCL boss Harrison Mutikanga and copied to energy ministry permanent secretary Kaliisa Kabagambe.

Kabagame in response communicated to the finance ministry on 11^th March and Muhakanizi responded saying he had earmarked sh30b for project supervision in 2015/16 by UEGCL.

UEGCL went ahead and contracted two firms – SMEC International and AF-Consult Switzerland Ltd.

However this was after Austrian firm, ILF Consulting Engineersn -- hired by UEGCL,  did an independent audit of the Karuma and Isimba projects issuing a damning report which pointed out among other things,

“The confusing project management organisation structure of the Employer and conflicting roles and responsibilities between MEMD (energy ministry) and UEGCL has hindered the project implementation process,” the firm’s Dr Kamal Gautam said.

“The employer’s current project management system is ineffective and unable to provide firm leadership in project implementation process…. Such a project management approach by the employer will further impair the quality, cost and progress of the projects.”

In his references to the employer, even he was not clear whether he was talking about the ministry or UEGCL or both.

"In addition the consultant pointed out that the two projects were short of money, questioned the competence of the supervising engineers contracted and recommended that the supervising engineers should be in daily contact with the contractor engineers...

The consultant warned that “Delays in rectification of the identified issues and lack of implementation of the recommendations may prolong the project completion dates, impair project quality and easily overrun the project budget.”

Some shuffling and ejection of key staff at EIPL happened between the issue of the consultant’s report in June last year and the end of 2015, but were still found wanting by UEGCL’s own project management consultants – SMEC and AF-Cosult.

In January this year UEGCL boss Harrison Mutikanga wrote to the energy ministry pointing out that the poor supervision of the two projects continues and suggested that EIPL address issues that were raised in the consultant’s report, clarify on the different roles of the ministry and UEGCL on the project and halt payment to EIPL for their failure to adequately supervise.

In responding a month later on February 10, 2016 the ministry’s accounting officer Paul Mubiru first put Mutikanga in his place by pointing out that, “I am neither answerable to you nor do I get instructions from you,” before chastising him for his style of correspondence  which he circulates “wholesale”.

Mubiru went on to point out that the criticism of EIPL was unfair and may have been prompted by a conflict of interest between UEGCL’s project management consultants who bid and lost to EIPL, in an earlier tendering process for project management consultant.

“I wish to reiterate that EIPL won the tenders for Owners’ engineer for the two projects competitively,” Mubiru wrote. “Any attempt to smuggle the PMC into Owner Engineer role through the back door using the tactics of wide dissemination of malicious allegations against EIPL will be both futile and very costly to the nation.”

Mubiru questioned why the UEGCL’s engineers were reluctant to present their findings in the presence of the onsite engineers and wondered about the integrity of the reports.

Mubiru also pointed out that the ministry has ultimate responsibility over the two projects, “There is no way MEMD can bury her head or hide under any entity as regards to success or failure of these projects … the role of any other entity in delivering those projects is supportive and peripheral.”

He also declined to halt payments to the supervising engineers “on hearsay or your instructions.”

When contacted for comment on the breakdown in cordiality between his office and the ministry, Mutikanga said,

“All we are after is the smooth implementation of the project. Because eventually if we don’t get good dams we will spend a lot on operations and maintenance jeopardising the viability of the projects and our ability to repay the loan, which we are contracted to repay,” Mutikanga said.

He denied that they were trying to smuggle their supervisory engineers to take over the project pointing out that they were tendered with the full knowledge of the board, on which Mubiru seats and under the advisement of the Public Procurement Disposal of Public Assets Authority (PPDA).

Museveni has instructed minister Muloni to get to the bottom of these turf wars and suspend work in need be on the dams’ construction so that remedial work can be done if they are deemed necessary.

 And parliament too has summoned the warring parties to appear before them to resolve the issue.

Attempts to contact ministry officials were futile.

The continued bickering surrounding the two dams does not augur well for our power situation. The commissioning of the 250 MW Bujagali dam in 2012, alleviated debilitating daily load shedding up to that point and savesd government hundreds of billions of shillings in subsidies to the thermo generation operators.

However further delays on Karuma, which was supposed to be commissioned by 2018 according to the earlier time line, may send the country back into the "dark ages".

FACE TO FACE WITH THE BIG MAN, KANU NWANKWO

Last week The Vision Group had the honour of hosting former Arsenal Football Club striker Kanu Nwankwo to lunch.

In the country as a brand ambassador for Star Times TV, the lanky forward was down to earth and genial. A member of the Arsenal ”invincibles” who went the 2003/04 season without a loss it is hard to begrudge him the honorific of legend, especially since he won almost every honour in Europe, with only the World Cup eluding him.

A key player for Arsenal at the height of his career, it is reported that he may be worth about $9m.

It is this number when I came across it that got me thinking, how does a team pay a single player upwards of £25,000 (sh125m) weekly?

Arsenal formed in 1886 was valued at $1.3b last year by Forbes magazine. The revenues from their home ground, Emirates Stadium came in at £100m last year which was about a third of total revenues.

The question then becomes how do you build such a company?

Longevity helps. The club will be 130 years this year but even better it has to be run as a commercial enterprise to unlock its value. The Club went bankrupt before the First World War, was relegated to the second division, before being taken over by a businessman.

I am sure if you go look for the company’s audited accounts they date back to 1886. Record keeping is key because you can learn what you are doing right and continue doing but more importantly you can see what you were doing wrong and put a stop to it. It does away with the guesswork that many companies indulge in for lack of information or inability to analyse the information available.

"Generally records serve as an objective measure of progress or lack of thereof. Objective decision making meant they moved away from the Highbury grounds to the Emirates Stadium in 2006. They put aside 93 years of history, tradition and passion to improve the business. With one fell swoop they double the match day crowds and the last I heard make one million pounds more than the larger Old Trafford stadium home of Manchester United...

Aside from a long tradition of good management it helps too, that up to the second world war England was the top economy in the world, with an empire on which the sun never set.

Essentially, by the time Kanu came along in 1999 the company was an already well-oiled money making machine.

Of course Kanu’s pay pales in comparison to the current crop of top earners, but that’s academic. If he had played now he most probably would be racking it in with the best.

The question would then be for our own current circumstances, which of our teams are best placed to emerge, backed by a powerful corporate structure, in a hundred years be a stand out team like Arsenal FC? The prospects look rather bleak.

And we should not thumb our noses at organisation. The English league is arguably the most organised soccer league in the world, which organisation is reflected in the teams there. It makes the most money for its stakeholders, never mind that it is neither the most enjoyable league to watch or have the most talent in the sport.

You can have talent but for lack of organisation, struggle, lose that same talent to more organised leagues -- see South America.

On the day that Kanu was at the New Vision the Uganda Cranes were getting ready to take Burkina Faso in a match they needed to win to all but guarantee their chances to participate in the African Cup of Nations next year.

Following a similar pattern we failed to come up with the goods, drawing with the West Africans. 

While there is still hope for us me made that much harder by not shutting the door on the Burkinabe.

Undiscerning observers blame our lack of talent. But that is erroneous as 16 of the 18 member squad ply their trade as professionals abroad –okay none of them is in the premier league, but so too Burkina Faso.

"Our underwhelming performance on the international scene is down to poor management of our local teams and the local governing body FUFA....

How does one explain that golf a sport with a handful of elite hackers, relative to soccer’s local fan base, is the darling of corporate sponsors? Sponsors are looking for efficiency in deploying their marketing spend.

Of course recent events at the world soccer governing body FIFA suggest that clearly the sport struggles with governance issues right from the top. But is too much to ask that our sports’ administration taken the path less travelled, get their houses in order and give us something to cheer about?

Back to Kanu. Nigeria where the lanky dribbler comes from, lost his talent to Europe. Is it inconceivable to think that a soccer mad country of a 100 million people can fail to find the money to sustain a world class soccer league? You tell me.

NOW THAT THE SUPREME COURT HAS SPOKEN …

By the time of writing this column we were still waiting for the justices of the Supreme Court to make an appearance. But by the time you read this the Supreme Court would have made its ruling on the Amama Mbabazi petition against President Yoweri Museveni’s February 18^th election.

From a communications point of view this has been a first-of-its-kind campaign the amount of resources in cash and time invested in shaping the candidates message has been unprecedented.

In my mind there were actually two elections, the elections in the media, particularly on social media and the election conducted by the Electoral Commission (EC).

There was dichotomy in the message. There were messages for and against a Museveni re-election.

The Museveni campaign found themselves caught on the back foot wherever they turned. Being the “defenders” so to speak, it was always going to be that the Museveni campaign was going to be  guilty until proven innocent.

"The anti-Museveni strategy seemed to have been a simple one – discredit the Electoral Commission, the police and all government institutions, promote the narrative that a rigged vote is in the making and then finally downplay the successes and highlight the deficiencies of the NRM administration...

They had a strong media presence fuelled by an urban, youthful elite, who have known nothing but the Museveni administration and are opposed to it by a combination of unmet expectations, disgust at endemic corruption and creeping feeling that change for change’s sake is an acceptable outcome and let the consequences take care of themselves.

The NRM, while trying to highlight the progress the country has made over the last three decades, seemed content to mobilise for the nearly 300 rallies their candidate addressed and have a talking presence on the popular talk shows on Radio and TV.

The net effect of these and all other strategies employed by the antagonists was a 60 percent victory for Museveni at the polls.

A return to the drawing board for the opposition is imperative – they can huff and puff about all manner of things, slander the EC, police, the courts and burglars all they want, but in the still of the night when all the chatter has gone down some hard thinking, specifically about messaging has to be confronted.

The NRM too know that they cannot rest on their laurels. They are no strangers to elections having battled through the last five. Things have changed since 20 years ago in 1996.

"For one, communication technologies and accessibility are improving at a remarkable rate. Secondly, according to the final census results released last week less than 50 percent of the population was of voting age. In the next elections this figure will jump to 55 percent. And finally, during the next election the urbanised population will have grown to about 26 percent from the current 20 percent, assuming urban populations continue to grow faster than the general population. Urban population grew at double the three percent national population growth between 1991 and 2014...

The implications are obvious. A more technologically savvy, more urbanised voting population will mean NRM will have to tailor its communication better for the towns, whose indifference they have been able to shrug off in each of the last three elections, because their numbers were in the rural areas.

Elections have always been about the message and the effectiveness of delivery. This election has shown, if not emphasised that, for a ruling party they cannot afford to waffle on their message, to do so means the holes will be exploited and filled by every hare-brained conspiracy theory under the sun.

"Relatedly and more worryingly, this election has made true the old say that the lie will be half way around the world before the truth can lace up its running shoes...