THE BAILOUT LIST IS A HOAX -- BITATURE

(This is an interview that was run in the New Vision last month following the publication of a list of businesses seeking a bailout from government. The businessmen allegedly were arguing that the poor state of the economy was driving them under and to save their investments, jobs created etc government needed to come in to save the situation)

There has been much public outcry about a planned bailout by government of stressed business. Private Sector Foundation Uganda chairman in a recent interview with Paul Busharizi gave the Business Vision his thoughts on the matter.

QN. Is it true that you are leading an initiative to seek a government bailout of distressed companies? If so why?

Ans. As the chairman of PSFU (Private Sector Foundation of Uganda) I have the responsibility to engage with government in different matters pertaining to the Private Sector and economy in general.

I used to be chairman of UIA for over 6years and gained valuable experience and insights on matters which affect our investors both local & foreign and a better understanding of how government works in general.

For the record, I was not appointed Chairman of PSFU by government; I was elected by the shareholders of PSFU at an AGM. This responsibility means I have to engage on behalf of the private sector on cross cutting issues. I declare that I am a member of private sector with interests in a diversified portfolio.

QN Justify the bailout, why don’t you let those businesses that have been careless fail or close. Why do you want tax payer’s money to bailout especially the big ailing ones.  Would you do the same for small ones?

ANS. My agenda was not necessary to bailout a certain number of businesses. No I wanted a solutions for all businesses operating in Uganda because there was a change in the macroeconomic environment.

I wanted to be certain it had not been missed by the government regular “Antenna” or govt and agencies. When the economy is overheating or slowing down, you need to be sure before you prescribe the right medicine; and this must be scientific. A vigilante group had gone great length to establish with facts what had happened lately. To take the pulse of the economy.

This group had a formidable leader that brought this matter to my attention. As I listened carefully to several business owners and challenges that they were facing. I realized that the pressures we were facing in one sector were apparently affecting nearly all sectors across the economy, agriculture, construction hospitality, trade & distribution, manufacturing, FMCG, logistics, oil & gas sector.

This got my attention and I was keen to share this with the central bank and other government officials to see if they have similar concerns consequently I wrote a concept note for the attention of the PM and he very graciously gave me an appointment at short notice  despite his  very busy schedule.

The matter was not entirely new to his office and several meeting had been held at various levels.

"As a consequence of these several meetings 3 requests were made
1.      That domestic arrears owed to the private sector by government be paid. (the PM had already consulted H.E the president  and cabinet decision  had been made. There was a directive to the ministry of finance to priotise this with immediate effect but not later than August 2016.
2.     On the side of traders that had supplied  goods to south Sudan but had not been paid , the government empathized  and would  engage directly  on their behalf in due course with the government of South Sudan but his was little more complicated and we had to realistic about the priorities there. In recent weeks we have seen clearly that there were some more pressing matters and lives were at stake there. Nevertheless the government will commit human and financial resources to this matter within a legal frame work to find a lasting solution for the benefit of Ugandan traders.
 3.     The financially distressed companies that owed money to the banks....

The government is on record about the unusually high interests rates and was looking for ways to signal the commercial banks to bring down the interest rates.

The CBR (Central Bank Rate) has been reduced twice in space of 3months but there is a lag between CBR signal and actual commercial banks rates.

The government sets policies and the Bank of Uganda (BOU) will implement them with autonomy and independence of their understanding of these laws and regulations.  BOU cannot dictate to the commercial banks on interest rates in this liberalized free market model that was developed over the last 3 decades. It has helped Uganda maintain stable growth.

Any direct interference might have far reaching unintended consequences.

Notwithstanding the variance in CBR(monetary policy adjustments)and the Fiscal policy discipline instilled in the government lately, Government has further resolved and budgeted to capitalize Uganda Development Bank as a medium term measure to compete with commercial banks for development projects that require long term less commercially priced funds. Please do not see this as a bail out a bank to bail out ailing businesses. This is a process that the government and several government agencies are working on.

QN. So where did this list that has been floating on social media platforms come from.

Ans. There is no official list from the private sector that has been presented to government or the central bank.

How can we as PSFU or any other body for that matter be given the task of choosing who to bail out and who to leave out if there is no agreed transparent mechanism in the first place?

Let alone identifying a pool of funds that can be used after the budget 2016/2017 has already been passed.

QN. How would you make a list in a fair and transparent manner to bailout ailing companies?

Ans. Therein lies the biggest challenge. 

 Some have sighted US president (Barack) Obama's bail out of big companies in the USA and how he justified it this with taxpayers’ money.

Several other countries followed suite. Uganda’s economy today has indeed slowed down and the government agencies are monitoring closely what measures to use at their disposal to check this and get growth back on track.

Qn Is it true that your Simba Group wants sh210billion from government as bail out money

Ans. First of all that list that is going around on social media is a hoax or fake!Because there is no official list. The Board of PSFU, Executive Director and the management have not been involved in any way in making a list. I don’t think UMA or UNCCI has a list either. It has no author or signatory. I don’t know who is creating it and several people are now calling me to be included on the secret list. There is no list Period....

Debt is a relative thing better described as leverage in the corporate business world.

The bigger your business assets and cash flow the bigger the debt you can access. 

Banks employ very smart people to analyze your debt capacity and more often than not they get it right. You must remember that the banks have a much stronger responsibility to the depositors than to the lenders.

Simba's business with the banks is an internal matter for the banks and Simba group. If the borrower defaults then there is a clear process that makes the matter of public concern if necessary. By advertising in the newspapers or by going to court. So until such a time please let the legal private entity manage its affairs as it knows best. I don’t think Crane bank or any other bank as suggested will give one single customer shs200billion. Twenty billion maybe, but not 200B.

IGNORE COMMUNICATIONS TO YOUR OWN DETRIMENT

This week three events cemented in my already convinced mind that communications should not be taken for granted by people, companies or countries.

Last week state water minister Ronald Kibuule kicked up a storm for his alleged mistreatment of female security guard who deigned to search the minister on his way into a bank. If the social media crowd had their way the youthful minister would have been quartered and hung out to dry by now. Never mind that they did not have all the information about the incident.

While the minister was being “virtually” pummeled a court in Ireland ordered social media giant Facebook to reveal the identity of Tom Voltaire Okwalinga (TVO) to lawyer Fred Mwema, who is seeking to sue him for defamation.

And finally and even further afield online  retailer Amazon reported that it had sold stuff – books, clothes, CDs, DVDS, home appliances worth $59b in the quarter that ended in June. This figure is big enough in itself -- three times the size of the Uganda’s annual economic output, but was more telling was that this figure was six times the size of the next biggest retailers sales in the same period. Retailers like Walmart which employ 2.4 million around the world.

One might think it’s a stretch to have a minister’s woes in little Uganda placed alongside  Facebook’s woes and Amazon’s rising fortunes but the thread that runs through these events is power of communications or the storage, analysis and transmission of data and how it is taking, or has taken center stage in everything we do.

Down the ages the evolution of power has gone from being possessed by the strongest man in the cave to the man who could marshal the largest armies and now to the man who can leverage the flow of information.

But beyond possession of information is how a person, company or country leverages the networks that this information goes through.

Think about it if information is power the easier it is to tap into those networks where the information is the more powerful you become. So a person without a mobile phone today is worse of than a person with a 2G phone, who in turn is worse off than a person with a smart phone or other smart devices.

"The greater challenge with this new power is that it is not centralised like the traditional forms of power. It is complex and diffused which makes it difficult to control...

More recently see what happens when a message is taken over by social media and how it takes on a life of its own be it Zimbabwe’s  President Robert Mugabe stumbling or President Yoweri Museveni taking a call on the road side or even Usain Bolt smiling his way to another sprint win.

Two things are clear these networks while rallying people are around a cause are at the same time diffusing power over the message to thousands of clicking thumbs. As a result the old methods of repression or stifling revolution cannot work.

Kibuule’s woes, the need to muzzle the faceless TVO or the exponential rise of the online retailer 

Amazon are just a variation of the same theme and the question for all of us is how to operate in this brave new world which will celebrate you or chew you and spit you out on to the dung heap of history.