WE NEED TO GET OUT OF OUR WAY

Last week I had the privilege of interacting with exporters of agricultural produce and was pleasantly surprised to discover that there are people in this country who while they may have reservations about how the country is run or the economy is behaving, have decided they will make the best of the situation anyway.

One exporter told me he exports a ton a day of bananas – matooke, bogoya, gonja and ndizi, through Entebbe airport but estimates that at least two Fuso trucks of bananas fly out of Entebbe daily. A FUSO truck does about eight tonnes so that would be 16 tons daily.

Following the meeting I went to the Uganda Bureau of Statistics web page and found that in 2018 we exported 16,336 tons of bananas. This comes down to about 45 tons a day, assuming we are exporting every day of the week.

As I learnt at the event, “The Uganda-UK Agri-connect conference” organized by the Uganda Export Promotion Board (UEPB) and the UK’s Department for International Trade, that these numbers which have grown over the last two decades are in spite of huge challenges of policy and infrastructure faced by our people.

Banana exports are a good test case for us. Uganda is the largest producer of bananas in the world after India and the highest producer by a mile in Africa. Tanzania produces about three million tons to our 12 million tons. So we are exporting less than a percent of our production.

There is a worldwide demand for ndizi and bogoya as a fruit but who buys matooke and gonja abroad I wondered. I was duly informed by one exporter that apart from the Ugandan diaspora there is great demand from the Congolese, Rwandans, Burundians and West Africans.

So there may be scope of increasing exports by a factor of ten, to one percent of our production or 120,000 tons annually. The possibility is mind boggling.

Last year we earned $6.4m from the export of bananas.

Why the banana statistics caught my eyes is that these were being exported in quantities I never imagined, through Entebbe airport.

But a cursory look down the list of non-traditional exports shows the untapped potential of non-traditional agricultural exports. Fish led the pack bringing in $210m in export receipts, followed by maize, $147m, beans and legumes, $144m.

And as mentioned earlier this is in spite of this government’s inadequate support and sometimes obstruction of this progress.

"High freight charges out of Entebbe were a big issue, but officials of the logistics industry who were present in the conference pointed out that if there was as much freight coming in as was going out, for one, the rates would fall...

However, the greatest impediment to the long term development for the export of perishable agricultural products was the inadequacy of the cold storage facilities at the airport. Exporters complained of their consignments being held up for ours in the blazing sun because of the limited capacity of the cold rooms at the airport.

Exporters consignments are often rejected by their clients because he goods are spoilt when they arrive at their intended destinations. One exporter complained he had lost $30,000 just the previous week because his goods were rejected in Europe.

I came away from the event with two major learnings. That the cliché that we are not living up to our potential is true and obviously understated.

While challenges still remain in generating the quantities, up to the standards and quality required in markets, this can be easily surmounted with correct strategy and execution from the national to the farm level.

"But my biggest take away was reinforcement of the belief that the one of the greatest legacies of this government will be that they liberalized the economy. That an individual can see an opportunity and organize himself or herself to take advantage of it without recourse to higher authorities is what has spurred this exponential growth in non-traditional exports. None if any is driven by government agencies ....

Nontraditional exports overtook traditional exports – listed as coffee, cotton, tea and tobacco by UBOS in 2001 and have never looked back, to the point that last year we exported almost five times as much in non-traditional exports $3b than traditional exports of $659m.

Liberalizing the economy unlocked individual initiative which was stifled by the giant state marketing monopolies which were not even doing a decent job.

As an example I met a lady who is doing a rip roaring business exporting sugar cane to Germany! Shipping out a few tons a month to serve a juice bar chain in Hamburg.

UBOS has no entry for sugar cane exports in its official statistics.

That being said there is a lot more government can do in facilitating the whole agricultural value chain. Production needs to and can be pushed up several fold across everything we produce through improved farming methods, irrigation and improved post-harvest handling. Huge improvements are need in infrastructure to improve access to markets. Paved roads and improved feeder roads are good but a functioning railway to significantly reduce costs is critical. Export promotion and other support for exporters needs to be beefed up as many of these exporters cannot break into foreign markets unassisted. In the same vein we need to commit to some sort of agricultural financing model that does not use existing commercial banks as a delivery model.

Another impression I got is that apart from paying lip service to the fact that most of our people -- at least seven in ten Ugandans, derive a livelihood from agriculture, government is behaving as if we have all the time in the world to tap into this bounty. That it will always be there for us to exploit....

A case in point is the fact that the UK imported $1.8b in coffee products last year, Uganda’s share of that figure is $1.8m or less than a percent. If you think about it as the largest coffee exporter on the continent, Commonwealth member state, how can’t we manage at least five- or even ten percent of the UK market? It boggles the mind!

TO PRINT OR NOT TO PRINT, THAT IS THE QUESTION

All hell broke loose last week when social media came alight with the story that there was a high level investigation into the possibility that senior central bank officials may have printed excess currency for their own use.

If the social media narrative was to be believed these officials had a side deal with French currency printers Oberthur Fiduciare to print an extra sh90b – actually sh87.5b to be exact.

We are able to establish this because the 20 pallets that contained the “official” currency consignment had sh350b (this is not BOU information, so where did it come from?) so by simple arithmetic the “extra” five pallets had sh87.5b.

This is not your run of the mill conspiracy theorist who would get everything from spelling to punctuation wrong, they at least whipped out their calculators to make the story real.

To go further down the social media narrative, the officials then had the whole consignment flown to Uganda. But things begun to unfold for the officials at Entebbe Airport, in their very own backyard.

Some pesky official from URA or Security Aviation who, when they opened the cargo hold immediately noticed --- I imagine after doing a finger count, that there were five more pallets. Which puzzled him because he knew there were supposed to be 20.

The “officials” noticing that this airport official was brighter than normal, then cobbled a few dollars together among themselves, to try and help turn this officials head, make him look the other way.

"But the official would have none of it and woke the Bank of Uganda governor (he has him on speed dial?) from his bed to tell him about the mess...

So assuming each pallet had sh17.5b. Assume further that these had wads of sh50,000 exclusively, then each pallet had 3,500 wads of sh50,000 notes. Assuming these were batched ten across, ten high and 35 wads deep one would need a container truck or a Fuso to truck at least to get them out of the airport.

So somehow the bank officials managed to brush aside the peeping tom whistle blower, strong arm their way past customs,  airport security and loaded the five pallets into their truck and drove into the night to destinations unknown? Wow!

The social media narrative somehow also does not explain how they got extra currency to be printed off the books at the Oberthur Fiduciairie plant, where our notes were printed. How did it happen did one of our officials while bumming a cigarette from a printer at the plant, with a wink of the eye, convince him to add an additional something-something? That they haggled about whether he could do 20 or 10 before settling on five, which he could get away with? And what was the greasy handed (I imagine he also had ink under his nails) printer’s cut on the deal?

Once the sneaky French printer (again I imagine they would be Frenchmen) had done the deal they had to surreptitiously load the five pallets onto the truck for them to get away.

But wait. How heavy are these pallets? Can they be tossed around a factory, moved around when the supervisor turns his back or goes to the loo? Or maybe there was an organized loadshedding at the factory in France, blacked out all the lights and security cameras etc?

"Simple arithmetic suggests that each pallet would weigh 350kgs! Or seven bags of cement or 50kgs sack of sugar.

So this had to be a major operation involving cranes, trucks and not a few men – Frenchmen or not.

The Swahili say ”Hakuna siri ya watu wawili” directly translated there is no secret of two people. This five-pallet-conspiracy took six weeks to break. Six weeks?! In Kampala?

The central bank last week said they reported the incident because there was a discrepancy in the inventory on the plane.

We have since learnt that there were other people’s cargo that should not have been on what was thought to be an exclusive charter flight. How that came about security said, is the subject of investigation.

This missing-five-pallet theory has kept us entertained for the better part of this week, except the Bank of Uganda of course.

But it doesn’t stand up to even the most cursory scrutiny – as above. It was fun while it lasted but probably time to shut it down.

IT’S NOT ABOUT THE MONEY

We have patronized this Asian business for at least five years. It had been in operation at least two years before we happened upon it.

They have never displayed any signs of distress -- service falling off, creeping lapses in cleanliness or stocks running out. And then it struck me the other day, that I have never seen an advert by the business.

A friend I was with suggested that one thing the Asian businessman can do is withstand the initial losses for longer, up to four years he hazarded. Our business may not be capitalized enough to survive the first six months.

"While inadequate capital is cited in most studies of business failure, I think it shouldn’t be given that much prominence...

While it’s possible the business is well capitalized, a casual analysis of the Asian business also shows their customer service is consistently good – you will be surprised what a “Hello Paul” when you walk in and “See you next week” as you walk out makes a difference; their food is consistently good – nothing like ordering for the same meal and you get served a different taste every time; They treat their workers well or at least better than elsewhere – the waiters are the same for all the time I  have been there with an addition here and there.

The mistake we make is to think that business is the getting paid for the good or service we are peddling, but actually it is more than that, it is everything you do or have to do to get paid.

And because we are so fixated on getting paid we think the main problems of our business is lack of money or inadequate access to credit.

This same analysis I suspect informs government’s attempts to help business startups or the youth.

In his budget speech finance minister Matia Kasaija said he had committed to sh40b to be lent to Small and Medium Enterprises through the Microfinance Support Center. In addition he earmarked a total sh162b for a skills program for women and the youth.

Everything costs money, so the minister cannot be faulted for allocating money for such projects.

But what our entrepreneurs really need is education, training on how to run a business.

"I remember many years ago an engineer telling me that the one thing they did not learn at the technology faculty was how to run their firms. They knew the technical part inside out but could rarely run a firm profitably and sustainably for any given length of time. Again all the things one needed to get paid and once paid to keep the money coming in and the business open was the trouble.

By investing in training – not the kind where you are ticking the box, of the recipients of this money government would be helping to shorten the learning curve and make sure it is not so steep. Without this it will be like throwing good money after bad and even worse breed a generation that is dependent and useless to itself and society.

Government’s program Enterprise Uganda is one such program that could be rolled out much wider than it currently is.

For the last decade or so enterprise Uganda has been demystifying what it means to be an entrepreneur – especially cash as the starting point of the business. By now a few thousand youth have gone through their programs, mostly in and around Kampala.

It would be interesting to see a study of their methods and outcomes. I am willing to bet that he attrition rate of those who chose to be businessmen is much less than if people went out and started a business without prior information.

Money is always good. But I think government should be focusing on effectiveness and efficiency. A well oriented businessman would be a better bet than someone trying to wing it, to make it up as they go along. They may even be successful eventually but just think how much time, money and other resources they would save if they were properly oriented from the beginning.

This is important even critical because as the minister reported that 600,000 new workers enter the job market every year and that 4 in ten youth are unemployed.

The creating of business that are sustainable and growing is key. In more developed economies it is the SMEs creating jobs, fostering innovation and driving economic growth. There is no reason why this can’t be our reality.

But for that to happen government needs to stop thinking dishing out money is the way to go.

But then again maybe I am howling into the wind!

BLOCKCHAIN TECHNOLOGY AND THE SEARCH FOR TRUST

A study was done a few years ago which showed that the economies in which there was most trust the cost of doing business was lower allowing them to grow consistently or at least harness the dynamism of their citizens better.

I think that same study showed that almost all of the US output was determinant on trust. It makes sense there has to be trust to do business or to live together for that matter. Doing business takes trust and its businesses that create jobs and the wealth of economies.

Imagine trying to carry out a transaction, say buy sugar in an environment of little or no trust. You will not only have to go to the shop with your own trusted weighing scale but also you chemistry set and a machine to test for counterfeit notes. The shopkeeper will be operating behind burglar proofing or maybe through a small kamoli in his door.

"On a more advanced level it is the reason why one is unable to cash a check over the bank counter. An inconvenience which also has financial implications...

It’s clear that less trust only increases the costs of doing business. Efficiently functioning economies have overcome most of the trust issues through identification and technology. So for instance in more advanced economies credit is easily accessible not only because the financial system is deeper but also which is result of the trust built by identification systems and the ability to continuously track credit histories.

With improving technology getting credit has become quicker – one friend was boasting the other day that he rarely steps into the banks and from his mobile phone can access up to £25,000 (Sh120m) because his bank all the data they need to make the transaction remotely.

Interestingly they are moving to develop more and more trust within their communities to improve even further the ease off doing business.

Enter BlockChain technology.

According to Wikipedia, “A blockchain is a decentralized, distributed and public digital ledger that is used to record transactions across many computers so that any involved record cannot be altered retroactively, without the alteration of all subsequent blocks.”

"The value of this is immense and is key to taking trust to the next level. That transactions done in different geographies can be reflected in real time across a network in a secure system trusted by the parties to that transaction or anyone else looking in.

Key to the technology too, is the fact that this record cannot be altered by any of the parties to the deal leaving it as a permanent record of the transaction.

Blockchain is the technology that under pins the cryptocurrencies. And while the trouble with cryptocurrencies have been myriad they area poor reflection on the capabilities and potential of blockchain technologies.

Think about it the current land issues in Uganda with multiple land titles to a piece of land, alterations done by unauthorized people or even questions about the sequencing of some of these land transactions would be cured if blockchain technology was employed.

Because any transaction would have to be done by the bona fide parties to the deal, any changes to the record once approved would be reflected across the chain and any transaction would be instantaneous saving hours of bureaucratic process and a lot of money.

The same can be said for payments of any kind, validation of academic and other personal documents by anyone around the world and any number of issues in which credibility is key, which if you think about is everything.

The government recently inaugurated Fourth Industrial Revolution task force, which will be underpinned by such technologies as blockchain technologies. The taskforce’s job is to better appreciate these and see how to adopt them and if need be emerge on the cutting edge of this new era.

"This is critical because it is possible that a failure or reluctance to integrate these technologies will set us further back in world development than we already are. The speed with which this widening of the gap would happen would not even allow us to catch our breaths....

The Africa Blockchain Conference will be hosted in Kampala, July 3^rd  – 4^th  and should help keep us a abreast of the latest trends and how our neighbours are adopting.

The bottom line is that anything that increase the level of trust should be something we jump onto, given our history which set the economy back decades. Anything that can help us recover and thrive faster should always be welcome.

UGANDA IS HEADED DOWN A SLIPPERY SLOPE

What is Uganda’s main challenge? The continued growth of the economy and more importantly the equitable distribution of this growth.

If you think about it, once that second equation is solved everything, from democracy to population growth will fall in place.

You cannot have a democracy when your people are poor with little hope of coming out of poverty because the education, health and even security systems do not work as they are supposed to. We are poor because we are not productive, meaning given the inputs at our disposal – human resource, land and capital we only extract minimal value. To increase productivity, you need a better educated, healthier population.

I am always amused when I see people complaining about Uganda’s population growth rate being out of control – by the way, it has been falling consistently for about a decade. Population growth is a function of poverty, as ironic as that sounds...

The figures will show that Uganda’s poverty levels are down, the problem is the measure of poverty – people living on less than a dollar a day or more recently they have been a bit more charitable and put it at living on less than $2.25 a day or something.

In western economies that is not how they measure poverty. They get together a basic basket of goods and services – electricity, piped water, housing, high school education etc to determine poverty levels. 

Our dollar a day measure is derived from how much food it takes to sustain a person for a day.

So maybe for starters we too need to elevate what we consider the poverty line, in order to focus our minds on a higher goal – if lifting people above the poverty line is the reason for our existence.

That being said everyday we are reminded that even this minimalistic goal is not top of the agenda of our leaders.

Last week it was reported that MPs had bumped up their allowances by sh102b most, if not all went to beef up their mileage. They argued two things. That only MPs from far away constituencies benefitted from the existing mileage payouts and proposed an additional uniform rate that all MPs irrespective of how far their constituencies were would be paid. And secondly they justified the increment arguing that fuel prices had risen throughout the year so they passed that they be paid in arrears from July last year.

The actions of parliament often elicit a bad taste in the mouth. There is the issue of whether parliament in itself is value for money. But that is not unique to Uganda. But in our circumstances, a poor country where more serious priorities exist, than propping up an entitled elite, disgust is a very charitable word.

It reminds me of the book “Why nations fail” where the authors Daron Acemoglu and James A. 

Robinson, in seeking to explain why some countries are prosperous and others aren’t, drawing on historical record from as far back as the Maya empire, came to the conclusion that it is not climate or geography or genetics that dictates the fate of nations.

The answer lay in the politics – Surprise! Surprise! But particularly whether this politics promoted extraction by the elite or inclusion of everyone in sharing in the benefits that accrued from the economy.

"They made the case that everywhere countries rose to prosperity and then collapsed or even failed to take off all together, the common denominator was a ruling elite that sought to extract gain from the economy disproportionate to their contribution or usefulness....

That as night follows day the unsustainability of the way those societies were designed resulted often in destructive class struggles or environmental disasters or internal weaknesses that exposed them to external attack and invasion.

Our story cannot end well if we continue to be held hostage by a political class whose number one focus is not to ensure an improvement in the general standard of living, but instead are gorging themselves at the public trough with impunity and shameless disregard to everything happening around them.

Anyone who has eyes to see knows we have embarked on a very slippery slope.

A project I am undertaking shows there were massive sacrifices we all had to make in the 1980s and 90s to ensure we get to where we are now. But at every turn there have been those who thought they were more equal than the rest, but the collective need for sacrifice overrode their baser instincts. Now it seems that restraint has been thrown out the window and its now a free for all and god for us all.

It is hard to see a happy ending, assuming the current state of affairs.