Tuesday, October 22, 2019

POOR GOVERNANCE, THE ROOT OF ALL BUSINESS’ PROBLEMS


A few days I ago I had a heated on line discussion with workers’ unionists about the board representation at the National Social Security Fund (NSSF).

But first some background.

The Bank of Uganda recently made its representation to parliament on the proposed amendments to the NSSF act. Among the things the central bank commented on and which was captured by the press was their objection to mid-term withdrawal of member savings.

The online discussion was prompted by senior unionist who on seeing the headline commented that BOU should stop trying to think for everybody.

The central bank among other things is responsible of money in circulation in the economy. NSSF is the biggest financial institution in this country and while BOU does not regulate it, it keeps a keen eye on it. Among other things the Fund owns about 40 percent of government debt issued by the central bank in the form of Treasury Bonds and Bills.

So as custodian of the country’s monetary policy BOU has a right, no, an obligation to have more than a passing interest in NSSF.

I responded to the unionist by pointing out too, that they unionists should stop thinking for us in NSSF when they control barely five percent of the savings in the institution. I was later corrected, union workers actually control six percent of the savings pool at NSSF...

NSSF all told has assets of about sh11trillion.

Despite their low participation, the unionists have two board seats and the other workers who contribute 95% of the savings have none.

The unionists on the forum alleged my facts were wrong –in fact MP Sam Lyomwoki hazarded that union workers account for 50 percent of all NSSF savings, and they tried to brow beat me into standing down on my stand that their representation on the board was not justified.

In a classic case of “If the facts are against you argue the law, if the law is against you argue the facts, if the law and the facts are against you pound the table and yell like hell.” The unionists accused me of, being an agent of the liberalisers who wanted to steal workers money (liberalization of the sector had not come up for discussion), being insensitive to the plight of poor workers (I did not say they should not be represented) and not being saver in NSSF (I have been all my working life which cannot be said for the honourable Lyomoki nor NOTU boss Usher Wilson Uwere).

But eventually the unionists won the day, when one of them angrily declared that the unions shall represent the workers at NSSF and there is nothing I could do about it.

The major problem of our country was captured in that discussion that night. While politicians swear that they are the true representatives of the people, all that is forgotten once in position and the self-interest takes over...

When a reexamination of the status quo is broached, the beneficiaries jump up and down, try to intimidate the person raising the issue, bamboozle everyone with bluster and bombast and hope to maintain the status quo.

It our insensitivity to governance issues in our businesses that makes it, difficult to operate, expand and lead eventually to failure. And when our businesses do fail, we blame everyone else but ourselves for the collapse.

The Ugandan economy is not an ideal environment to operate. But there are businesses that do operate here and not only survive year after year but thrive through a combination of financial discipline and prudent business practice.

Beyond getting their business models right, that they sell for profit something the market demands, all of them have invested heavily in governance and the systems that ensure their smooth running regardless of who is at the helm.

"Good governance does not come automatically. It can be forced on you by market reality, but in places where it works there is a deliberate and conscious effort to improve governance. People used to informal operations see the rules and obligations that come with good governance as detrimental to initiative and creativity – not necessarily, but good governance structures can make the difference between selling a product for sh5,000 not sh1,000 or for the value of the company being worth sh100m more or less.

The value of good governance can be see in the products or services you deliver because you are able to bring to the market day in, day out a certain quality and quantity in a timely manner. It doesn’t happen by accident.

Good governance can mean raise the value of the company because it means a partner or buyer knows it can work with or without its original owners. If good governance was suspended to cater for the owner’s whims, what happens when he gets hit by a bus? He dies with a significant part of the company’s value.

Thankfully the unions don’t run NSSF. But it’s still something to think about. Good governance does not begin when you are in char5ge of a business but in the way you think about creating and living in a rules based society.

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