THE COVID WAR IS TAKING NO PRISONERS BUT ....

The COVID-19 pandemic forced the lockdown in March – the restriction of movement and congregation, which ground the economy to a near a halt. 

For the first time since the second world war, the effect was felt globally, nobody was spared.

In Uganda economic growth contracted in the first half of the year, after growing about seven percent in the last half of last year. As a result the economy grew by 3.1 percent in the financial year that ended in June. For the whole of 2020 we will be lucky to make three percent growth.

But those are the big numbers. The smaller numbers, which add up to the bigger numbers, are beginning to trickle in to confirm the anecdotal evidence all around us.

As far as James Ngetich was concerned 2020 was going to be his year. He had secured land in eastern  Uganda on which he was growing to grow barley and sorghum, key inputs in the beer industry. He had been preparing with the local agent to go in aggressively – he was going to put just under 10  acres, under grain hoping to scale up in coming seasons to 50 acres available to him.

"When he toasted to the new year, Ngetich was seeing only dollar signs, well into the future...

He was not alone. Easily another hundred farmers around the village were also throwing in their lot with the project or were already actively involved.

Then Covid-19 happened. The hospitality industry – bars, restaurants hotels and concerts were shut down. The breweries demand for his and his friends crop evaporated and literally collapsed the economy of the county.

People dug up their fields and replaced their crop with maize and beans. This whole event left a bad taste in their mouth.

The partial lifting of the lock down in June did not salvage the situation. 

The events of the last week, with the hosting of an illegal concert and the arrest and release of the Nigerian highlighters, only served to accentuate the pain the hospitality industry is going through.

Using the beer industry as a proxy the effect up and down the industry has been nothing short of devastating.

"While the bar owners have been the loudest in advocating for a reopening of the sector, with good cause, as they are the biggest employers along the value chain, millions are licking their wounds in relative silence....

Grain farmers like Ngetich saw their revenues plummet sh19b from the pre-Covid figure of sh76b. And that is an average figure some farmers suffered a total loss of income as their harvests were not taken up or they didn’t bother planting.

The numbers while dramatic belie a greater suffering than they can capture.

Oguttu who found work as a turn boy loading and offloading beer crates off distributor trucks in Kampala, was laid off unceremoniously and this meant more than loss of income. 

His sh7500 daily income – lunch was provided, allowed him to propose to his girlfriend with the Kwanjula set for June. With the loss of work in February, his girlfriend got tired of endless stories and drew the line on  postponing the Kwanjula. He is now single, searching and trying hard to get back on his feet...

Oguttu's earnings, while merger are life changing to him, can be counted among the sh1.7trillion lost in the distribution arm of the beer value chain.

"Bar" owner Mama boy in a Kampala suburb is thankful too that schools were closed otherwise she doesn’t know how she would have paid for her six  school going children – two are her own and the other four are nephews and nieces.

As the “manager” of a bar, whose whole furniture component is two benches, outside her friend’s shop she has seen a total collapse in her take home, even despite the June secret reopening of her bar – everyone has to buy at least a samosa before they can buy a beer, to justify the addition of restaurant to the establishment’s name.

She maybe one of the smaller ones but bars have seen their revenues more than halved to sh1.1trillion from sh2.8 trillion according to industry numbers.

And  the bleeding goes on and on wherever you look.

"Its hard to be sympathetic to the breweries, revenues are down by  sh416b  from the pre-COVID number of about sh900b, but they anchor a value chain that sustains more than six million people....

These standard Operating procedures (SOPS) in the fight against COVID are washing hands, wearing masks in public and social distancing all of which are hard to enforce in the hospitality industry, which by their very definition require a coming together of people.

But like all else in life, there is the other side of the coin, which in this case is the millions of Ugandans deprived of a livelihood because the hospitality industry continues to be under lock down. 

Infections have been spiking in recent days – we are set to hit 30,000 cumulative infections by year end, but the case for loosening the restrictions on the hospitality industry is a hard one to ignore. This is bigger than the beer companies and the bars.

Let government talk with the industry to determine how they can hold them accountable in enforcing SOPS, let the industry organise themselves to ensure its members adhere to the SOPs.

WHAT TO DO ABOUT THE HIGH LENDING RATES

About two weeks ago in a seminar hosted by the Bank of Uganda the vexing question of what is causing high lending rates rared its ugly head again.

In one presentation, “Determinants of interest rate Spreads in the Uganda banking system,” presented by financial sector deepening, Uganda boss Rashmi Pillai narrowed it down to the high cost of capital our banks are working with.

She showed that

viewed against regional operators our banking industry is not abnormally lucrative and neither are the costs of doing business unusually high....

She showed that  only between three to 38 percent of the people use the banks. The lower figure representing the poorest 40 percent of the population and the higher percent is the Kampala population.

Interestingly between 28 and 45 percent of Ugandans belong to savings groups. Even 41 percent the poorest 40 percent use the savings groups.

They didn’t examine in much detail why we opt for the savings groups over the banks, but I imagine apart from ease of dealing with the savings groups for most, people are intimidated with dealing with banks.

Despite the strides the industry has made in opening more branches, though the truth be told their coverage is still anemic at best, and easing  their processes people are still wary of the banking system.

"What mobile money has shown us is that we are not averse to saving we just need more convenient channels. A few years ago it was reported that on people were living a few hundreds of thousands on their mobile money accounts for months untouched.

To lower the cost of funds to the banks we need to save more with the banks, which are now relying on the more expensive shareholders funds and high cost fixed deposits to finance lending.

The question is how to incentivise people to save more?

It helps that inflation is within managable levels, the average inflation rate overt he last decade is just above seven percent, it could it be lower were it not for the 19 year spike in 2011, when inflation peaked at 30 percent.

Encouraging, rather than discouraging savings group is also good, because these deposit their funds with the banks. The ten year moratorium on tax on income for SACCOs was useful.

In the new NSSF bill it will affect employers with less than five employees  as was required in the old law. Hopefully this will encourage more people to save or at least NSSF will compel more employers to sign on their workers.

Unfortunately, efforts to make monthly savings tax deductible was defeated. In western economies they make retirement savings tax deductible to incentivise people to save more. Maybe more negotiations are in order to allow this to pass. It should be that the more one saves the better the tax break.

Government should even consider increasing the mandatory savings for retirement to as much as ten percent of a workers’ income.

Increased monies flowing into the banks will force them to shovel it out the door any which way they can. Banks making money by lending – to government or private sector. Government  appetite for debt while huge is finite and as this wanes, as it should, banks will have to create new products for their clients.

As it is banks are seating easy with on average less than 50 percent of their assets in credit to the private sector.

It is why you can be a client of a bank for more than 10 years and only doing salary loans. They have little to no incentive to wonder what you do with their credit and how can they interest you in other products – a mortgage or asset financing or something. They have it too easy.

Of course there are people who want things to remain just the way they are. Who don’t want to rock the boat. 

Bankers looking to meet their profit targets easier, for one. With lower lending rates they would have to work harder to meet targets.

"It seems like high lending rates will have to stay for us for a while. With tax revenues slipping and the donor community looking more inward to their own countries, government is being forced to borrow more and more from the public...

Given a chance between lending to government and the public the decision is an easy one for any bank manager. While individuals pay higher they are a higher risk proposition.

In India a few years ago as a way to curb corruption they banned all high denomination notes. They gave people are deadline to submit these notes and of course if you parked a bullion van outside your bank the revenue authorities would be on hand to get their pound of flesh and the equivalent of the financial intelligence authority got a chance to ask some tough questions. 

In our case we ban the use of sh50,000, sh20,000 and even sh10,000, not too far fetched given our increased use of electronic means of pavement. The poor who rarely interact with these notes and also have no access to electronic payment means, would barley feel the inconvenience.

One of the by products of this exercise in India was that bank deposits jumped and there was fall in lending rates.

There will be a lot of gnashing of teeth in the hills of Kampala – Nakasero, Kololo, Mutungo and Naguru, but they will be fine and we would all be better for the exercise.

THE EAST AFRICAN COMMUNITY MUST WORK FOR UGANDA

In December 1987 there was shoot out in Busia, on the Uganda-Kenya border. Kenya claimed that Ugandan troops entered their country and were stopped in their tracks. Uganda at the time complained of rebels attacking Ugandan villages from the Kenya said. Presumably our soldiers were in hot pursuit.

There was exchange of fire for a few days until President Yoweri Museveni and his Kenyan counterpart Daniel Arap Moi broke bread in primary school compound in Malaba, the other major border town north of Busia.

At the time there was some mickey mouse outfit – The Force Obote Back Again (FOBA), which was more bluster than substance allegedly operaing in eastern Uganda and working out of western Kenya.

The hostilities were snuffed out within the week.

The Kenyans closed the borders and we had a fuel shortage, which did not do any good for our inflation which that year was running high at 215 percent. 

There was a parallel narrative behind the shooting. 

"That Kenya having considered Uganda a captive market, for almost two decades by that time, was not amused at Uganda’s noises about economic self sufficiency....

The industrial base in western Kenya was predicated on Uganda continuing to be a basket case for a long time.

So the shoot out and subsequent border closing was a shot across Uganda’s bow. A warning that our eastern neighbour can do major damage to our economy if they want. That we should just lie down and continue to be Kenya’s market for finished goods.

Fast foward to today and it seems Kenya is up to its old tricks.

Ugandan exports to its eastern neighbour has been growing in leaps and bounds. So much so that in 2017 we reversed our trade balance – we started exporting more in value than we import from Kenya.

Whereas that is mostly the export of raw materials from Uganda, our manufactures are beginning to  climb as well.

In fact, one of the major drivers of our increased exports to Kenya in 2017, was a jump in processed milk.

In 2019 Uganda’s exports of milk to Kenya came in at $150m bettered as an export earner by only gold and coffee.

Uganda Manufacturers Association (UMA) complained a week ago that Kenya was throwing up non-tarrif barriers against Uganda exports that went against the spirit of the East African common market protocals.

Kenyan technocrats and enforcement agencies, were questioning the origins of Ugandan products, claimed our exports were counterfeit, had institutionalized  harassment of our exporters, raided Ugandan warehouses and were issuing quotas on how much Uganda could export to them. 

"These were all the more painful because Kenyan products were being allowed free access to Ugandan markets....

The EAC common market is a godsend for businesses in the region. It expands markets, can lead to greater job creation and eventual economic transformation.

It also should sharpen competitive advantages. With Uganda beginning to live up to its potential as the regional food basket, it will become increasing obvious that food production should be left to us.

"Trade wars are often triggered by one country trying to protect powerful lobbies at home...

. The offending country will try to couch their actions  in populist rhetoric, claiming to be protecting jobs but in truth it is to protect the interests of a well connected elite.

On the surface of it Uganda’s bargaining position seems weak – we are a landlocked country, who need the markets to expand production at home.

But on the other hand even if our trade balances with Kenya has shifted we are still a major market for their goods. 

Government should consider some retaliatory action against Kenyan goods, which will at least make the EAC secreteriat in Arusha seat up and take notice.

"While an eye for an eye will eventually mean everybody goes blind, its hard to see what choice Uganda has at this point....

IS IT TIME FOR UGANDA TO REMOVE THE KID GLOVES?

Last week the Uganda Manufacturers’ Association (UMA) complained that unfair trade practices by our East African Community (EAC) were proving detrimental to our local businesses and that government should muster a more robust response than it has currently managed.

According to UMA, Uganda which has served as a market for Kenyan industry for decades is finally coming into its own, seeking to not only manufacture things we previously imported but also to export the products of our factories.

However, they complain that while EAC common market guarantees the unfettered free movement of goods and services between member states our neighbours are not playing ball.

Kenya for instance continues to throw up non-tarif barriers – questioning the origins of our goods, they claim they are counterfeit, smuggled, there is institutionalized  harassment of Ugandan trade, road blocks and raids on Ugandan warehouses and issuance of quotas, all of which are against the spirit of the common market.

UMA complains too that frequent tariff tampering by Tanzania and the border closure by Rwanda has shrunk their share of regional trade.

"These are important complaints that need to be taken seriously in the context of our drive to transform the economy and eliminate poverty...

At the heart of the idea behind the common market was that it would boost our individual industries, create jobs and spur economic transformation. When some countries thin they would rather be protectionist rather than open the cause will be lost.

That being sad this kind of shenanigans are not unique to us. Building common markets is a labour of love that takes ages to create anywhere  in the world.

However, there is a genuine need to speed things along.

It seems Uganda is getting the short end of this stick. While diplomatic protests have been made to the offending parties they seem to ignore them.

President Yoweri Museveni, for who this has been his pet project for decades, should jump into the fray and try and get his counterparts to orgainise their technocrats and enforcers.

"And if we cannot rely on the goodness of the hearts of our neighbours, though not desirable, restricting their access to our markets must be considered until we get an amicable settlement. 

WHILE YOU WERE AWAY, THE ECONOMY HELD UP

While we were all fixated on the drama surrounding the presidential campaigns this week, the World Bank released its Uganda Economic Update, a forward looking report that rose above the noise of the day.

The bi-annual report titled “Investing in Uganda’s demographic transition,” addressed itself to the ongoing demographic transition from a largely youthful population to one, which in a few years will have a much huger workforce that can either be a loadstone on the economy or a force for continued growth.

But while that was happening a report from financial information services provider, Bloomberg filtered through, which said that Uganda’s economy is set to grow by 2.1  percent in 2020. Much lower than in 2019 when the economy sprinted to a 6.7 percent growth, but still amongst the fastest growing economies in the world.

The report said that Uganda will  be the fifth fastest growing economy this year, behind Bangladesh, Ethiopia, Vietnam and China and ahead of Cote D’Ivoire, Egypt, Ghana, Rwanda and Kenya.

The report gave no details about Uganda’s growth outlook but noted that

African countries, which made up seven of the top ten fastest economies, had seen the shift away from raw material exports to becoming ICT hubs accelerated by the COVID-19 crisis...

Local observers pointed out that ICT output grew 33 percent compared to contraction in the last two years, driven by an increasing reliance on e-commerce and mobile money.

It was also reported that agriculture was among the sectors that grew, as rural-urban supply chains were left open and recent initiatives to push up farm production continued to pay off.

However, while this macroeconomic resilience is cause for celebration but will mean nothing to the everyday man, if they don’t trickle down to the man on the street. 

"The trick to doing this is building an economy that not only fosters economic activity but also uses these gains to ensure continual improvement of the business environment and invest in its citizens, through education and health services to make them more productive....

Unfortunately for Uganda, after years of neglect and mismanagement, we have huge deficits in infrastructure and human capital.

This is a dilemma because we have the choice to try bridge all these deficits simultaneously or on the other hand try and sequence the investments.

We don’t have the luxury of doing either. In the first instance because of our wanting resources and in the second instance, because it cant be an either or question – do you let school enrolments stagnate as you build transport, communications and energy infrastructure or the other way around.

Truth be told we have leaned towards the latter rather than the former.

The World Bank counsels though, that a better balance has to be found if we are to reap a demographic dividend in coming years.

The demographic dividend refers to the benefits from a huge working population that is skilled and productive and contributing to the country’s growth.

Uganda will have to double its annual investment in education and health over coming decades if it is to reap this dividend.

Given our current population growth rate the population is doubling every 25 years, which means beyond the doubling growth in these investments, these will have to at least match population growth rates.

The World Bank doesn’t say it but

a huge youthful population without gainful employment is a recipe for social unrest and chaos...

The challenge is financing these investments – at the same time ploughing money into infrastructure.

We have to collect more taxes. The existing tax payers are already overstrained and hence a need to rope in more people into the tax base. Taxing land – all land, can not be put off much longer. With one stroke we will collect more, while making the land more productive.

Secondly, we have to plug the leaks. We cant have a connected few plundering state coffers to finance their first world lifestyles while the vast majority cant get quality health care or a decent education, ensuring that income and wealth disparities are perpetuated down the generations...

And then we must save more, by force if necessary, as a way to increase domestic long term funds to finance this same development.

Our ability to feed ourselves as a nation has continued to  support us in our hours of need – our lockdown experience would otherwise have been worse, but

if we do not take a long view and make the hard decisions that need to be made to ensure sustainability, even quack prophets can see the future.

THE CASE FOR SOCIAL SECURITY IN UGANDA

Last week Scotland became the first country in the world to make sanitary products free, including sanitary pads and tampons,   which they said was to help eliminate period poverty.

They recognized that one in ten Scottish women struggle to afford sanitary products on a monthly basis and half of the girls surveyed missed school on account of the monthly event.

In Uganda school drop out among girls were higher than those among boys, lack of adequate facilities to deal with their periods being a major contributor.

This speaks to the larger issue of social protection. The recognition that while we should all receive according to our needs, some classes can not meet their basic requirements of life. This maybe due to their low incomes or disability.

In the same week our finance ministry reported that people living in absolute poverty in Uganda had increased to 28 percent during the COVID -19 lockdown compared to 16 percent prior.

"With the effects of the COVID-19 pandemic not expected to let up for at least another year, it is unlikely that most of those who have fallen into abject poverty will be able to dig themselves out in a year....

As it is now our social security safety nets are too thin and those who are covered are largely already in gainful employment.

Hence the case for cash grants to the most vulnerable members of our society.

A few weeks ago government put a halt to an NGO sponsored scheme to provide monthly cash grants to poor they had identified and who they could afford to support.

Government is within its rights to be wary of any foreign sponsorship of such schemes, as long as it is not in control of the process. But it then has the obligation to provide an alternative solution.

The world over there has been huge controversy about welfare payments, except in countries where they work, in Scandinavia  especially.

The critics argue that it only serves to increase government spending and increase dependency of the recipients. The supporters have shown through the data that actually the handouts are less likely than thought to create dependency, they in fact are used to uplift their living standards by paying for school and health fees and even acquiring assets. 

With the recent lockdown the case for social security became even more pertinent.

With companies working at less than full capacity for lack of demand, cash grants would help keep them in business. In fact it would be a better intervention for the economy than the posho and beans handed out to the most vulnerable, because with money in their hands they could decide what their most pressing needs were, not necessarily food.

Like during the global financial crisis of a decade ago, the debate was whether to bail out the big companies or step up relief to people who were hardest hit by the crisis. The US chose to bail out the big companies, while Europe, without letting its companies fold provided a robust social security response.

"While the US rebounded faster from the crisis at a macro level, Europe’s populations were cushioned for the worst of the crisis, thanks to existing social security mechanisms which were beefed up, with differing levels of success to aid its populations....

Bailouts by the big companies were used to help restructure them – often leading to job cuts, while in Europe the money in people’s hands helped their companies stay afloat and ensure that some dignity was saved for the everyday man.

Governments don’t like these discussions because, in an earlier age it was difficult to execute and would make them more accountable to more people beyond the tax payer.

If in Uganda’s case cash grants as i describe would mean another million people would be watching government, to who government doesn’t exist in a direct way. Missed payments or other inefficiencies would trigger protests they do not need. Not to mention they would have to commit for the long term because once you start it is unlikely you can stop the process without a lot of protest.

A lot of the cash grants in western economies begun after the second world war, when western Europe had to resuscitate the economy. It is all very nice building companies but if no one is buying  the companies’ shares are not worth the paper they are printed on.

Back to the lucky ladies of Scotland. With one stroke the governmmnet has given a boost to the industry around sanitary protection, while ensuring girls can do better at school and eventually become more productive members of society in the future. One outcome – the boost to industry, is more immediate but the second is more durable and pay uncountable dividends to the country generations into the future....

 President Yoweri Museveni has pledged to bail out companies stressed by the COVID-19 pandemic. This could turn into a gravy train for a few connected individuals and the outcome will be very questionable. But if we split the bail out between the companies and providing social security recovery can be more evenly spread and sustainable.

It is not only good economics but good politics as well.

IT STARTS WITH THE ECONOMY

Last week riots broke out in several towns around the country in reaction to the arrest of presidential candidate Robert Kyagulanyi aka Bobi Wine.

The security forces’ response was quick and decisive. At the time of writing this the death toll was placed at, at least 30 people. This action came up against a lot of criticism and hair pulling.

Why do the police use live ammunition against civilians? I have my thoughts on that but that is not the subject of today.

What interests me is, who are these people – almost always young and male, who are ready to risk life and limb against armed security agents?

In 2009, a decade ago, Wakiso district chairman Ian Kyeyune came against these same kind of people.

Disgruntled at the state of the Busabala road, by then a murram track that was responsible for the red hue of the houses, cars and clothes on the washing line in the area, they summoned the good man to come explain.

His smooth tongue counted for nothing, as an angry mob forced him to seat in the middle of the road and proceeded to cover him in murram from the same road.

I commented at the time that a revolution was afoot.

"Revolutions are not sparked by lack, but more by failed expectations.

People can remain in poverty for a long time as long as they see they have enough company in their misery. Things go south when people can’t work out why they are wallowing in poverty while others are wheezing around in fuel guzzlers, living five figure tabs at the bar (even if there is a curfew) and holidaying like Corona is a myth.

We are talking about income and wealth disparities.

The widening of these is what triggers the violence, wherever you look in the world.

"Economic disparities within a country are an indictment on the ruling class, especially in a situation where the economy is growing....

It means the politicians have failed to convert the growing economy into equitable distribution of the ensuing wealth that was created.

Distributing the growth is simple, but not easy. That is assuming you have mustered how to grow the economy, which our planners seem to be able to do even in their sleep, going by the record of the last three decades.

This is what we know about growing the economy. 

You shift production of goods and services into private hands. And work to create an enabling environment for businessmen to thrive – provide security, lower inflation, stabilise the currency and build infrastructure to facilitate business.

What we have struggled with, is  distributing this economic growth. As it is now it is concentrated among the urban elite, who went to school to a high level and have ingratiated themselves with the ruling class – directly or indirectly.

We have done it before. The ruling class climbed from rural poor backgrounds or are one generation removed from rural poverty.

They managed to ascend to their exalted positions by sticking it out, braving the ten kilometer-plus walk to school – unlike their contemporaries and not succumbing to debilitating disease – mostly by the grace of God. These two alone set them up to take advantage of post independence opportunities that their rural cousins couldn’t.

Understandably, the first post-independence government was dealing with much fewer people or educating fewer students – there were 300 students in A-level at independence.

"We have committed ourselves to mass education and health service provision. What that means is that our little resources are being spread very thin – doing a little of every thing and not much of anything....

In this context two things have to happen, simultaneously, we have to increase our revenues and plug the leaks – stop corruption.

In the last decade or so the government has gone on a massive infrastructure building spree and this is beginning to pay off. But given the existing infrastructural deficiencies it is too soon for government to rest on its laurels. In road construction, power infrastructure and rail transport, we have to invest at least twice as much as we have over the last three decades to stimulate private enterprise to a point where revenues to finance social services can begin to make sense.

There has to be a major commitnent to fight corruption. Not only by government – stop giving pride of place to thieves in church, at weddings and at your babies’ baptism.

Because with corruption continuing to run rampant the infrastructure projects wouldn’t be done, but more importantly in the context of recent events, will concentrate wealth in fewer hands to the detriment of the millions.

Which brings us back to our rioters. Assuming he has a subpar education and work hard as he might on odd jobs and hawking, is barely putting a shirt on his back or roofing, leave alone feeding himself and cannot see any hope at the end of the tunnel and yet he lives in the same town as the more affluent. It will not take long before he makes a connection, however tenuous, between his afflictions and the “unexplained” wealth of the middle class...

And so when some unrest – choreographed or otherwise, erupts it will find in our disaffected youth, a useful fuse for the time bomb.

When Lee Kuan Yew and his contemporaries took power in Singapore after independence, they made the analysis that ruling parties tend to lose in the capitals. For them to hang on to power they needed to deliver services effectively and efficiently as a way to ingratiate themselves with the population. And ensure their stay in power.

They embraced the private sector and used the taxes to improve security, infrastructure and social services.

"They also embarked on a plan to enable widespread home ownership.

One of the spinoffs of this latter initiative is that protests against the government became more benign...

You are not going to go around wrecking property when you know you have a house of your own.

RADIOS FOR EDUCATION – HERE WE GO AGAIN

Last week the parliamentary budget committee visited one of the bidders for the sh336.8b contract to supply nine million radios to school going children.

Government has decided, because of the uncertainity surrounding Covid-19 and when schools will resume normal operations, to procure radios so children can keep up with their classes at home.

School children have been out of school since the end of March. Candidate classes returned to school last month. Government has not said when the other children will return to class.

Under the plan government will source five million sets locally and four million will be imported in equal lots in December and January.

 It was reported that the visiting parliamentary committee found that Orion Transformers & Electronics did not have the capacity to produce the radios locally, and that the sample radios they had used to bid for the tender were imported from China.

"The usual suspects jumped on the story as an indicator that Orion was not fit for the job....

It is at times like this that one doesn’t know whether to cry or laugh.

To begin with there are 15 bidders for the contract, so it is curious why the parliamentary committee visited Orion.

Especially since the bid has not been awarded yet.

It is true that government has applied for a sh336.8b supplementary allocation to finance the deal so the MPs are within their rights to scrutinise the deal. It is already bad enough that the MPs are inserting themselves in the process, be that as it is, wouldn’t the prudent thing then be to visit all 15 bidding companies and then come out with a report? Why single out one company?

"I know the ways of parliament are not the ways of us mere mortals, but one has got to wonder what this is about....

To simplify, imagine your local district has called for bids to supply  maize flour to the local schools. You hand in your bid along with 14 other bidders, but before the bid has been awarded the district council comes to inspect your mill and whether you meet the requirements. Note that they are not part of the procurement process. Secondly they are visiting only your mill. What are you supposed to think of that? Especially after that casual inspection they announce to the press you are not competent to fulfill the contract.

According to reports the contract stipulates that the radios are supposed to be delivered within 60 – 90 days of the contracts signing. The locally procured radios are supposed to be procured at just over sh37,000 a unit.

But who are Orion Transformers & Electronics anyway?

A cursory look over the net will show that Orion Transformers & Electronics has been in operation in Uganda for eight years. It has been supplying transformers and maintaining electrical installations for such companies as Uganda Electricity Distribution Company (UEDCL), Umeme, Electromaxx Ug Ltd and Kalangala Infrastructure Services.

As to their capacity to build the required radios the company has issued a statement in which they have said they have the capacity in place to produce 200,000 radios a day with production lines at Namanve and Nyanama. And this is ahead of further scaling up of their operation if the deal comes through.

Besides, were they in danger of failing to come good on the contract then they will lose the sh3b bid bond they have put in as well a sh30b performance bond they have to provide on execution of the contract.

But that is neither here nor there and immaterial to the argument here.

We need to aim at being a rule and law based country. We can not advertise one set of rules and then run rough shod of them at a whim. That is the easiest way to scare away investors – both local and foreign. Capital is a coward. It will settle for lower returns in a predictable environment than higher returns in a riskier environment. It owes us no favours.

While parliament is supposed to provide oversight of government, there is a time and place to do that and it is not in the middle of a bid process whatever their feelings maybe about a deal.

As stated earlier government has put in a request for additional funding to finance the radio deal.

"It has been reported that the MPs think the deal is flawed in conception and execution, and it is therefore their right to investigate the process, but common sense should suggest that they can not go and start knocking out bidders selectively.... 

By doing this they have appropriated the role of the relevant procurement department contrary to the law, a law they wrote into effect.

Looking from the outside you have to wonder what is going on and hence be at a loss of whether to laugh or cry, at this state of affairs.

VICTORY MEANS DIFFERENT THINGS TO DIFFERENT PEOPLE

Contestants John Katumba and Willy Mayambala provided some comic relief to a presidential campaign that so far flatters to deceive. 

The Covid-19 overhang means crowds can’t or won’t turn up to support their candidates stealing the thunder from what was potentially going to be an explosive contest.

The two afore mentioned candidates, the youngest in the 11 person field, discovered to their shock that the car provided by the Electoral Commission is only for the security details – each candidate is supposed to sort out their own transport needs. One of them, not two days into the campaign couldn’t feed his security detail. While another was feted when he walked into a Kampal arcade to have his mobile phone screen fixed.

While funny these events bring into sharp relief the issues of political victory. 

"For the guerilla fighter if you survive to see the next day, that is victory....

Handicapping the field we can say, this is President Yoweri Museveni’s race to lose. Robert Kyagulanyi will provide a few flashes of brilliance and while he is  firing up his base with hope of eventual victory, the more realistic goal is that his National Unity Platform (NUP) gets the most MPs in parliament of any opposition party to lead the opposition. 

For more established campaigners like Mugisha Muntu, Norbert Mao, Henry Tumukunde and Patrick Oboi Amuriat the best they can hope for is increasing their name recognition, to set them up for future campaigns and to increase the visibility of their parties, again ahead of future elections.

Going by past performance and name recognition --- or lack of thereof, the rest are really just making up the numbers.

None of this is a bad thing.

There can only be one winner and all 11 contestants know it. For the sake of their sanity the rest have to recalibrate  what victory means to them.

Beyond gunning for absolute victory, increasing influence in the house, setting up for future elections, there maybe a case for a candidate or candidates who run to highlight a particular issue. The benefit of the presidential campaigns is that over the 65 days of the campaign one can criss cross the length and breadth of this nation and talk to anyone willing to listen about their pet subject.

The front runners on their part will be trying to be all things to all men, but a fringe candidate can focus on a  topic or handful of topics diverting little from their central theme for the next two months.

In a democratic society this is a good thing. In the US we had for along time Ralf Nader, turning up every four years to bat for environmental issues. In the UK there are parties pushing the self rule of the regions cause – their finest hour came with Brexit. And in any number of established democracies their small parties throwing their hats in to the race to front one  peripheral issue or the other. And some are rewarded for their doggedness and persistence, albeit after years of straining at the bit.

"While people may not waste their votes on these outliers, a message is often wedged in our subconcious and can end up ricochetting around our heads, eventually gaining traction – and who knows, in a few years or decades become a mainstream issue....

And why not? When democracies took their first tentative steps decades ago the main parties were the conservative ones, often fronting the interests of the landed gentry. The industrial revolution came along and labour issues came to the fore, it too was a fringe issue at one time.

What is needed, and it will take time, is for  the candidates fronting these seemingly sideline issues, to  cobble a coherent message, articulate it better and maintain consistency over the long haul.

So

"While Katumba and Mayambala may seem  like the  trick ponies of this race, spare an ear for their message, however outlandish it may seem now....

Who knows, one day in the future we will nod knowingly when we remember that this is what Katumba/Mayambala was talking about in 2020.

pbusharizi@newvision.co.ug 

Twitter @pbusharizi

THE FOURTH INDUSTRIAL REVOLUTION IS HERE

A fortnight ago the Fourth Industrial Revolution (4IR) National Taskforce presented to the public a draft strategy, the broad strokes of how Uganda is going to situate itself in this new phenomenon.

The first industrial revolution saw the shift away from animal and manual power to the use of fossil fuels for energy and mechanical power. Electricity heralded the second industrial revolution. We are easing out of the third revolution where digitisation and internet connectivity have been its main features. The fourth industrial revolution is seeing the combination of virtual, physical and biology interactions facilitated by technology.

Looking down the ages  we can see that the duration between industrial revolutions are becoming much shorter, with each revolution increasing human productivity dramatically.

The difference between how far one can go on bicycle as compared to riding in a car not only  compressed distances but time itself. Or the difference in output between having a computer connected to the net and juggling a typewriter, calculator and making regular runs to a physical library.

The fourth industrial revolution, with its advances in cloud computing, Artificial Intelligence, blockchain technologies, 3D printing, autonomous vehicles   and biotechnologies is going to dramatically – is already, changing the way we produce, distribute and consume goods and services.

"The wide application of these technologies, as will inevitably happen is set to increase our productivity exponentially to the point that futurists envisage a time when machines will do all the work and we will be paid to just seat around....

As incredible as that sounds, as recently as the 1980s the idea of wireless telephony, driverless cars and 3D printing were the stuff of sci-fi novels and movies.

But just as the potential of this new revolution is hard to wrap ones mind around its also true that the early adopters will have a head start on everybody else, with real ramifications for global and local wealth distribution, security and natural resource usage and regeneration.

It was therefore inspired thinking when Uganda launched its 4IR taskforce to look into how Uganda can proactively take advantage of this new revolution.

Over about a year the taskforce chaired by John Nasasira, himself a former ICT minster and peopled by members from government, academia and the private sector have turned the subject upside down and come up with a strategy which will help Uganda get ahead on the subject.

"The opportunities identified include increasing agricultural productivity, boosting human capital development, supporting urbanisation and governance and bridging other development deficiencies...

Its an elegant document that spells what and where the opportunities are, how we can set up to take advantage and the agencies that will lead the charge into the brave new world.

Its value will be in how much the government will adopt and operationalise the strategy.

To illustrate, if we had comparable document going into the ICT era the government would not have stumbled over issues of taxing computers and mobile phones, would have been better prepared to create an enabling environment which allows us to take maximum advantage of ICT and even prepared us better for 4IR.

We are not the worst –

we have a liberalised telecommunications sector, which has seen our phone penetration increase by leaps and bounds, introduced financial services that exploded the stuffiness of the banks and increased the general productivity of the economy in the face of donor moodiness, a global financial crisis and several natural disasters.

Imagine if we had been more deliberate and systematic in appreciating and taking advantage of the digitial age? It is not a stretch to imagine we would be much better off as a country today.

To take advantage of this new era certain enablers have to be put in place – greater 4IRconnectivity, greater regulatory agility, upskilling of Ugandans, deeper eGovernment, resource mobilisation and investment promotion to attract new players.

"Contrary to popular opinion government has a good record of following through on reports it generates, only that it s does not accompany the execution with as much fanfare as they do when releasing the report....

Given the speed with which things are changing this new strategy has a short shelf life than say the report on URA or the police, so speed is of the essence in operationalising the strategy.

Nevertheless its a document that can be referred to and upgraded in coming years.

I remember more than two decades ago to get my stories to Nairobi where the Reuters office was, i had to type the stories out, slide down to the post office to send the fax and stand by the fax machine to ensure the whole story was transmitted. The process took at least an hour.

"Today not only are fax machines obsolete but off my phone I can write a story, while in motion and email, whatsapp or text it down the line, the whole process taking little more than 30 minute  or not much more than it takes to write the story...

.

In theory I can now generate at least twice as much as I used to then and for much cheaper.

I think that’s amazing. But I have to pose when I think that with proper utilisation of 4IR technologies the same story may take even a third as much time to execute.

Comparable gains can be seen in any industry. Hang on to your seats we are in for an exciting ride.

RAISE NOMINATION FEES FOR A BETTER DEMOCRACY

The week begun with the presidential nominations, the culmination of a process that begun with nominations for local governments and special interest groups.

The substance of the event was overshadowed by the manhandling of opposition leaders Robert Kyagulanyi, the National Unity Platform (NUP) candidate  and Forum for Democratic (FDC)’s Patrick Oboi Amuriat. 

Another sub plot transpired with two aspirants – Nancy Kalembe and John Katumba, failing to pay the sh20m nomination fee on their allotted day.

"They say all publicity is good publicity, hard to argue against that given the media space given to Kyagulanyi, Amuriat, Kalembe and Katumba compared to that availed more established politicians as Mugisha Muntu, Henry Tumukunde and Norbert Mao...

The nomination fees, which were raised recently, for both presidential and parliamentary aspirants has been a source of much debate.

Critics of the higher fees have argued that it was locking out the poor, who may nevertheless have good leadership potential.

More than higher education qualifications, we need to further raise the bar on presidential nomination fees to say, sh100m or even a billions shillings if we are to help our democracy along.

Nomination fees are a serious declaration of intent. They indicate that the intending candidate is not some clown off the street. That he has the capacity to mobilise funds. And yes it should serve as major criterea to weed the chaffe from the wheat. 

Ideally the fees should not be put up by the intending candidate, but by his supporters and interest groups that believe he or she  best represents their interests.

So the issue of poverty of the candidate should not arise. If the intending candidate has a serious cause to put forward, even if not a serious chance of assuming the highest office in the land, he will be able to mobilise backers who will foot the bill.

It is the reason that Donald Trump will have fundraisers for his campaigns despite his claims to being a billionaire.

So if you raise the nomination fees, while you will have a smaller pool of intending candidates, you will have more credible backers for our candidates. Backers who are not looking to throw their money away but hoping to make an impression in the campaigns. That their agenda will get enough airplay to be taken seriously  by whoever is the winner, if it is not their own candidate.

And what kind of backers will these be? Major players in the economy – farmers, industrialists, traders and real estate moguls. They will be sponsoring candidates to front their issues, which issues will benefit the larger community as well. 

"We keep complaining that we want an issue based campaign but since almost any Tom, Dick and Harry can be a candidate, in a country where the biggest issue is development, its only personalities that  will distinguish candidates....

One of the reasons our democracy is limping along, is because we don’t have parties, strong institutions with distinctive agendas, whose issues distinguish them from each other and are identifiable by the voters for the issues they espouse.

Raising nomination fees will force parties to be more coherent in their agendas, which when they present to financial backers will give them cause to open the purse strings.

"With one fell swoop we will have eliminated adventurers looking to catch the eye of the president, careerists looking to pad their CVs or good for nothing chartalans....

While politics is too important to be left to politicians, their should be a process of graduation up the ranks. You have to wonder about someone who has not even been on the village LC vaulting to contest for the presidency.

We have come to this situation thanks to the NRM decades long project to dominate the political space.

When they rolled into Kampala in 1986, while a formidable fighting force they were thin on the ground politically. By suspending party activity and promoting politics by individual merit, they tore up the vetting mechanisms that come with a multi party system.

"Allowing independent candidates, while a human right, serves to  short circuit the building of political institutions by frustrating party discipline....

Raising a billion shillings for your party flag bearer for the presidency or sh100m for parliamentary aspirants will force parties to focus on building their structures and whip their members into line.

There will be some grumbling – we are now too wed to individual merit system, but in the long term it will be good for democracy – and spare us the circus on nomination day, which may even be shortened to a few hours event, that wont disrupt hard working members of society ability to go about their business too long.

UGANDA HOTELS NEED HELP!

Last week on a whirlwind trip around Uganda, I had the pleasure – and sometimes the displeasure, to test the best and worst of Uganda’s hospitality industry.

It was sad to see investments worth billions failing to live up to their  full potential just because the bathrooms are designed badly or the receptionist is working like they are doing patrons a favour or you can not locate an establishment on google maps. That last one may sound funny, but the promoters of establishments need to realise we are past stopping on the road to ask a random bicyclist, laden with sugar cane, the way to such-and-such place. Guys?!

There was a lot of good to report from Jinja to Lira and from Mbale to Fort Portal but I think the industry will be better served by a how-not-to list, so here goes.

1. Get your google location, right

It is not funny when at the tail end of your journey the google maps sends you  10 km out of town and then announces in that tinlike voice “You have arrived. Your destination is on the right” where there is only a grass field and brick kiln.

The days of making the best mouse trap and people will make a beaten path to your door are gone. You have committed millions shillings on an investment, it is the height of negligence not to have information – accurate and attractive, out there so that people can find you where you say you are.

In relation with that what is it with pictures of shower faucets, tiled floors and light bulbs on your websites?

The way the trip was designed given the covid depression in the industry, there was no real need to book ahead, just outside every town we checked to see what was available. Believe it or not that is the way people travel these days,  referencing online sources, believing client appraisals and judging by the nature of material you are putting out whether to patronise you or not.

So if you invested a billion on your facility the least you can do is invest a few thousands to get some well done pictures and a half decent web presence.

2. Staple a smile on the receptionist

When you have been on the road for a few hours you just want to get to your destination, clear the preliminaries, get to your room and put your feet up. In this context it does not help if the front of your operation is a grumpy receptionist, who meets every enquiry with a sneer and everything else with a resigned shrug of their shoulders.

These are hard times. Hotels have cut back on staff, rolled back the perks and are counting all the pieces of meat. We understand how there could be some hard feeling all around. But even more so now than ever, our hotels need to invest in amiable individuals to serve as the front of the operation not only at the reception but also on the phone. Our smaller, local establishments need to be making hay while the sun shines.

3. The bathroom is not a by the way

You like the room, they have a flat screen and AC, but the bathroom! It is not ok to have a shower in the same pace as the toilet in a way that you will be splashing all over the toilet seat when you are showering. It will not do that to use the sink you have to contort yourself into shapes because they just slapped the sink behind the door as an after thought.

These should be obvious but these faux pas happened enough times to realise that they may not be that obvious to our local investors.

Design aside, on a good day a normal bathroom habours millions, if not billions of germs invisible to the eye. It is not on, that you have not changed the towels, it is not on, that water does not drain properly out of the shower and it is an absolute deal breaker that you still have condoms in the waste bin!!!

4. Food! Food! Glorious Food!

In these hard times virtually no one was laying a buffet spread. It was all a la carte menus. In several places it seems they sacrificed quality in the kitchen to save a few shillings. Bad idea. We are away from home, we have to trust what you are serving – stay away from white meat if you don’t trust the cooking. I had to spit my meat out because it tasted like offals, awful. I had ordered chicken wings!! 

The kitchen will make or make your establishment, again we thought these were standard requirements but we have been disabused severally on the journey.

There are hundreds,  even thousands of small establishments dotted around the country – hotels, motels, restaurants, I am convinced you can’t lack for accommodation or a good meal anywhere in Uganda. But our poor proprietors are treating their establishments like they do their farms – a source of sustenance and not interested in maximising its full potential.

In the hospitality business all the advertising in the world counts little compared to word of mouth referrals, because eating or going to sleep in an establishment is a personal thing. For the few hours I am there i am entrusting you with my safety and good health.

The hotel proprietors of Uganda lets get the basics right – location, hospitality and food right and then we can add all the other bells and whistles later. Please!

FARE THEE WELL, COL SHABAN BANTARIZA

It has always seemed redundant to me to eulogise the dead. First of all they can’t hear all the good – never bad, things you say about them, so who are you trying to impress? Why didn’t you say those things when he/she was alive. Secondly, especially for those of high achievement,  the words rarely match up.

It is an ego trip, to let people around you know you knew the deceased – they never eulogise the lowly in society.

With that out of the way, I first met Col Shaban Bantariza in the late nineties, when I was beginning to report on the Lord’s Resistance Army (LRA) in northern Uganda. I called him seeking comment and he said since he had never met me it was only fair that we meet to size each other up.

He had an office in Mbuya barracks or at least that is where he asked me to meet him. I found him in a bare room except for a wooden table, two chairs and a bench. The table was bare except for a pistol that lay nonchalantly on his right. I never thought of it then until much later, I wondered “What was a pistol doing on the table?”

This was the beginning of a fruitful relationship, I would like to think for the both of us. He was always ready with a quote and I guess as the Reuters correspondent in Uganda I was useful to him in getting the perspective of the UPDF out into the world.

"He was not only always good for a quote, he understood – that’s the impression he gave me, at deeper level why the army did what it did and understood those actions in a larger political context....

One incident that I look back on with fondness and a degree of guilt, must have happened around the entrance of Zimbabwe into the DRC war, on the side of then president Laurent Kabila against Rwanda and Uganda.

Ugandan and Rwandan backed rebels in 1997 had swept across eastern Congo and overthrown Mobutu Sese Seko. However, Kabila’s attempts to wean himself off his allies caused some hard feelings and a second war begun between the erstwhile allies – Uganda and Rwanda versus Kabila.

However in September 1998 Zimbabwe threw its hat into the melee, siding with Kabila. I remember vividly the announcement that Harare was throwing its lot behind Kinshasa came on a Friday.

I called Banatriza to ask what this meant and he said something to the effect that Zimbabwe would leave its shirt and shoes in the jungles of Congo

The next day New Vision picked up the story and run it as a second lead in the Saturday Vision.

I got a call from Bantariza early that morning, “Busharizi, you have killed me,” were the first words out his mouth. He never really explained what he meant and did not claim I had misquoted or misrepresented him. After the call another call came in asking me whether Bantariza had really said those words, that’s when I thought he was in deep s**t.

Almost 20 years after the event I met  him in his new capacity as deputy chief at the Uganda Media Center. I thought enough water had gone under the bridge to ask him about that Saturday morning those many years ago. He remembered it very vividly. He laughed his hearty laugh, “You leave that one alone.”

It was testament to the man’s character that he took responsibility for what he had done and did not try to pass the buck on the subject.

On a later occasion he made me look good in the eyes of my editors.

We had shut down the Nairobi bureau for the day and decided to go and catch a beer on our way home. Several beers later a call from London came in reporting that “the competition” – Reuterspeak for other newswire services, was reporting that the UPDF had “abducted” Fr Carlos, a Spanish priest operating in northern Uganda at the h eight of the northern insurgency.  

The bureau chief said we could match the story, so we returned to the office, a few beers weighing on our heads, to try to salvage the situation. Time check 11 pm. I called Bantariza who didn’t pick the call the first time because he was nursing an injured finger. He came good on the second call and without grumbling about the time of the night, gave us the UPDF version of events. For a few days after that people at the office were in awe of me, that I could get the army’s spokesperson out of bed to comment on a story. All my attempts to give context to how that happened were waived away with the comment, “Don’t let the facts get in the way of a good story”. 

"He gave me and several other young journalists a chance. Wet around the ears, but convinced that we knew the truth, he humoured our youthful exuberance and patiently spelt out the army version of events whenever we asked. We didn’t always agree but his accessibility and coherence ensured that the UPDF voice was always heard....

My last tale about this man who has gone too soon. On the day the results of the 2001 presidential election results were announced I called Bantariza to ask his comment. He was on the way from the airport, having just landed from Liberia where he was part of a peace keeping mission.

I started our converstion with something like, “Congratulations, your candidate has won, give me a comment?” There was a pause at the other end of the line then, “Who is my candidate?”

Rest in peace Colonel Shaban Bantariza!

MOBILE BANKING COMING SOONER THAN WE KNOW

Last week the Bank of Uganda released its annual report for the year ending in June.

Aside from the big numbers – the economy grew by 3.1 percent in 2019/20 down from 6.8 percent the previous year, that private sector credit had slowed due to the Covid-19 related lockdown, there was the interesting statistics on the mobile money front.

"In the just concluded year sh79.7 trillion was transacted on all mobile phone platforms, this figure was up 19 percent from the previous year’s sh66.9 trillion...

To put this in perspective the national budget of Uganda for 2019/20 was sh40trillion, so twice as much money went through the mobile phone platforms than government shelled out to run its programs.

Also this number which comes to about $21b is 70 percent of the sum total of all the economic activity or GDP last year.

This last comparison, no less important than the first, suggests, no, points to the fact that mobile money is playing an increasingly significant role in the economy.

The service has evolved from just a money transfer business between mobile phone subscribers, now you can save and borrow money off your phone and slowly but surely gaining traction as a payment system.

We don’t have to look far to discern the future. Across the border in Kenya Safaricom’s MPesa is now a preferred payment system but in addition now companies there can transact with each other on the platform.

NATIONALISM, THE LAST RESORT OF THE SCOUNDREL

Two weeks ago the commercial court made a controversial ruling in a case between Kampala businessman Ham Kiggundu and Diamond Trust Bank (DTB).

The highlight was the court ruling that  a DTB loan to the businessmen that was executed by the parent Kenya bank was illegal as DTB-Kenya was not registered to do  business in Uganda.

The court went on to reverse the payments the bank had made to itself from Kiggundu’s accounts when they claimed he defaulted on the loan.

Interestingly Kiggundu claimed he had repaid the loan. Anybody who has ever taken out a loan with a bank knows its unlikely, next to impossible, that you can repay their loan and the system does not register the payments. So who is fooling who?

It is

a detail that was lost in the larger picture of what the ruling meant for the industry and economy.

Kiggundu has been telling anyone who can listen how this is a conspiracy against the local businessman by foreign banks and will have dire repercussions  for our economy.

It reminded me of the bank closures at the turn of the century, which mostly put paid to locally owned banks.

In all cases the banks had sunk under the weight of growing bad loans, to businessmen who didn’t think they needed to repay their loans. In addition a lot of red ink in the bank books were due to loans to related parties – directors and affiliated companies, that had  gone bad.

In one case, the bank even illegally sold shares to the public and lost all the new owners money.

In those cases too the local bankers claimed it was a ploy by the foreign interests to stifle the growth of the local banking industry  and the local business community by extension.

They say nationalism is the last resort of the scoundrel.

"Whenever people start making none business arguments to justify their incompetence or theft – the best way to rob a bank is to own one, they say, a red flag is raised in my mind....

Banks aggregate savers’ deposits and lend these funds to borrowers.

Following the closures in the late 1990s and early 2000s the laws were amended to increase the minimum capital from less than a billion shillings to now sh25billion or less than $10m. 

This was in light of the growth in credit, the higher the capital the more the bank can lend without putting savers deposits at risk.

Also the banking regulations are such that no bank cannot commit more than 25 percent of its loan book to one borrower.

In the context of the Kigundu case where his needs were for $11m ( sh40b) you can see how few of our banks – foreign owned or otherwise, could handle him.

In addition no one single individual can own more than 25 percent of the bank, a safeguard against insider lending and other malpractices.

"The net effect of this ofcourse is that locally owned banks have fallen by the wayside – Ugandan businessmen seem incapable of coming together to meet these requirements....

The argument has been made that the requirements for locally owned banks should be eased, but that will only mean they wouldn’t be able to lend to the Kigundu’s of this world anyway.

There are structural issues in the financial sector, not least of all that it is dominated by commercial banks, who by their nature are not suited to lending to start ups, small business, agriculture and to long term projects.

Banks need to be better capitalised too. The sh25b minimum capital requirement may have been adequate 10 years ago but is now woefully inadequate. 

The Kigundu case inadvertently is saying that in order not to borrow from abroad our banks have to better capitalised, further knocking out the locally owned bank.

And what is it about foreign owned versus locally owned banked?

"Are we saying that local banks don’t deserve to make profit or is it that  with local banks we will be abled invoke non-business criteria  – family  and tribal ties, old boys network to get cheaper credit which we will dodge and duck not to repay?

See how that worked for Uganda Commercial Bank (UCB), Cooperative Bank and Greenland Bank to name the obvious ones.

The legal minds have been deciphering the case and Diamond Trust Bank will appeal the ruling.

That being said the case has raised interesting issues that will be handled in subsequent bank reforms – upping the capitalisation of banks, deepening the financial sector beyond commercial banking  among others.

On our side of the counter let us also work towards developing a culture of loan repayment. When you borrow not only from the bank reorient your mind to pay back the loan. We will save a lot of drama that way.

Oh! I see another conspiracy. When you default on a loan these days the  Credit Reference Bureau blacklists you making it difficult to borrow again or if you do, it would have to be at a higher rate.

IT’S DÉJÀ VU ALL OVER AGAIN

The event of the last few weeks took me back 20 years and a reminder that there is nothing new under the sun.

At the turn of the century we were gearing up for the second presidential race since 1986.

In 1996 President Yoweri Museveni won 74.2 percent of the vote beating Paul Ssemogerere into second with Kibirige Mayanja coming a distant third.

"It was not clear that Ssemogerere was going to run again, which raised the specter of an election where Museveni competed against himself. The NRM is rabidly averse to such a scenario. They don’t want 98 percent wins in the polls....

At around that time Nasser Sebagala – may his soul rest in peace, was back from the US where he had been convicted for passing forged checks. Before the conviction he had just become the mayor of Kampala but on his return he made it clear he was going to run for the highest office in the land. The Kampala elite smiled into their beers.

But a curious thing begun to happen. When Ssemogerere would try to have a rally it was preempted by security, but Sebagala aka Seya was running around the country holding rallies, drawing crowds and seemingly gaining momentum.

In trying to make sense of this I asked around. “We want a race. Ssemogerere is no competition so we need someone else to bring some excitement to the polls, but we know we will win them anyway” an insider told me.

In the back of my head, I thought my friend was reading too many Robert Ludlums.

I had to rethink this a few weeks later because Colonel Kizza Besigye threw his hat in the ring. To confirm my friend’s statement Sebagala’s campaign went out like a light, but not before questions were raised about his academic credentials, which had not been a problem until then.

Sebagala failed to get nominated to run for the presidency and he quickly fell in with the Besigye campaign. He of course, found time to win back his mayoral seat.

"I will be forgiven with this background in mind to look at the Robert Kyagulanyi aka Bobi Wine campaign with a jaundiced eye....

The National Unit Platform (NUP) tell the public they are a young a party – barely months old, and recent flops in the special interest group elections are down to their newness. And then without missing a beat they claim they will be the ones to run the NRM out of town, when they don’t have a presence in half the country. 

These are facts for all to see not least of all the government and its security agencies.

So then how do you explain the constant “harassment” of NUP/People Power? The narrative being sold is that the government/NRM is quaking in its boots at the growing popularity of the Reds.

Hillarious. 

There are no miracles in politics. There are no spontaneous movements that upset governments at the polls or overthrow them all together.

"Below the surface of successful movements is huge organisational structure working furiously but quietly – not unlike the duck paddling furiously under water while remaining calm above the surface

. This doesn’t need to be in offices and wheezing around in big four wheel drive cars. In today’s increasingly connected world the phone has taken over from other analogue technologies.

The Ayatollah Khomeini  returned from 15 years exile to a hero’s welcome in Iran, shutting down the largest cities in the country. Two weeks prior to his return the ruling Shah had fled into exile himself, overwhelmed by the resistance to his CIA backed rule. This groundswell of support was far from spontaneous. Khomeini’s supporters  distributed tapes of the Ayatollah drumming support for an overthrow of the Shah for years prior. The voice of the Ayatollah could not be stopped or resisted.

The point is there is a lot of work for NUP to do if it is to be in with a shout of even getting more than 22 percent of the vote in the next election.

Twenty two percent is the urban population according to the latest census.

Urban populations are known from being disproportionately loud for their size, wherever they are. And in countries, even on the continent where entrenched parties have been shown the door, it has been in countries that are more urbanised populations.

Uganda’s mostly rural population is where the action is now – the rate of urbanisation is changing that, and the one with the network to reach all of them  -- boots (literally or figuratively) on the ground, will win.

"NUP are romantic, rabble rousers, rebels with a cause nevertheless, but they will quickly learn that its dangerous to read your own press clippings....

Said another way, in the words of the 1990s band Snap, “Don’t believe the hype, It’s a sequel."

THE SEEDS OF OUR FINANCIAL DESTRUCTION

The call was as if from the blue. Even I was surprised I still had his number saved in my phone book.

He dispensed with the greetings quickly. I was transported back almost 20 years as he spoke.

He said he had been reading what I write and then he sighed. I knew the sound. The sound of an elder who sees the young man groping in the dark. Tempted to show him the way, but wisdom dictates that he should make his way alone.

We should meet at his house – it was still the same one in a leafy Kampala surburb, Saturday for lunch at 1. It was not  a request. He hadn’t changed.

I was ushered into the living room by Idah, his house keeper from 20 years ago. He will be with you shortly, she said as she directed me to the sofa and asked what I would have, while I waited.

He had lost the bounce in his step, there was sag in his shoulders and a stoop in his posture. But otherwise he seemed to have aged very well.

Let’s call him Sam. He used to be one of the richest men in this town. At least that’s what we thought.

He parlayed a Luwum street shop into a thriving Import Export business --- XXXXX Impex. Bringing everything from clothing to cars to perfumes, wines and spirits.

"He was making money hand over fist and made sure everybody knew it – flashy cars, high living and legendary nights out at Ange Noire and Club Obligato...

I got to know him, in a matter of speaking, during the spate of bank closures in the late 1990s. 

It turns out he was leveraged to the hilt and the collapse of Greenland Bank all but buried him. Or not, as it turns out. He had stepped out of oblivion and was right there in front of me as if it was just yesterday, when he was the toast of the town.

Why did he want to see me? He would not be hurried.

We talked politics … he thought we were going to the dogs. We talked the economy … he was confident that the resilience of the people will pull us through in spite of ourselves. We talked society … he wondered where  all these ‘fakes” (socialites) pop up  from.

The indication that we were getting down to business came when he declared something to the effect that the more things change the more things remain the same.

Lunch was done, the drinks had started flowing.

“Why do you think I have gone quiet?” I couldn’t say, you run broke. He spared me the blushes by answering his own question – with a question. “Do you think I was rich?” That was an easy one, “Yes. You had money”.

“Even me I thought so.” I didn’t know what to respond.

“I was good at giving the impression I had money.”

The described to me a life of timing his shows of lavish expenditure when everyone was looking – at the night club, the cars he hired every so often to give the impression he was changing cars frequently, the beautiful women he bribed to hang on his arm...

“For what?” For that he said he had to go back to the beginning.

He was born outside Kampala. His father abandoned his mother, him and his three sisters. They scraped and scratched to make a living. He managed to do book keeping after his O-level and went into business.  

Money came to him quickly and his bookkeeping skills gave him an edge over his contemporaries, especially when taxes became an issue.

By the 1990s he was flush with cash. He had plots around Kampala, about 50 rental units and millions in the bank. His business was throwing off millions of shillings a week.

"He was young. He was indestructible. It was inconceivable he would fall back into destitution...

He spoke too soon.

The collapse of the banks hurt his cashflow – a lot of money got stuck in the banks. And when the receivers started collecting on loans, it was adding salt to injury.

He laughs when remembers all the ticks they tried to save their businesses, the businessmen of that generation – loan sharks, forged checks, black dollars, the courts,  but wapi!

He shakes his head. 

There is nothing to show for the millions he blew on high living, with money that was not his, buying things he didn’t need, trying to impress people who didn’t care.

"He had a rural approach to urban excitement, he says. He can laugh now but then when his world came crashing down all around him, suicide crossed his mind....

If he were to do it all over again he would be more ambitious. More ambitious for his business, “why couldn’t he have had a string of shops?Or built dozensm ore rental units?” and not to show the world that the lito village boy had made it good, who cared?”.

That way he thinks he may have weathered the bank closure storm and still be in business today.

He is not destitute, he still had a taste for Black Label, but he thinks he would be richer than God by now – he made the sign of the cross after this assertion. 

“So you see, the more things change the more things stay the same.”

THE POTENTIAL POWER OF NSSF

The problem of Africa is poverty. We are poor because we are incapable, unwilling or unable to aggregate our resources be it capital, land, human resource or markets.

We are reminded of what we are potentially capable of by NSSF.

Today the Fund has its annual members’ meeting, which will be held online.

Everybody is waiting with bated breath for what the Fund will pay its members for their savings. Last year NSSF shelled out 11 percent interest but Fund boss Richard Byarugaba said for the firs time in a decade we will not receive a double digit interest rate. 

While the Fund earned more this year than last, the fall in the value of its equity positions, triggered by  the faltering economy due to the Covid – 19 pandemic, means the Fund may only just meet its pledge to pay at least two percentage points above the 10 average inflation rate. The ten year average inflation rate is 6.2%.

"Given the regularity with which the Fund has surpassed this target in past years maybe we need to raise the bar a bit more...

but this is a discussion for another day.

But  back to the issue of solving the poverty issue of our times and how NSSF plays a role in it.

Ten years ago NSSF had sh1.6trillion under management but has now grown eightfold to sh13trillion. That is roughly a 23 percent annual growth rate .

Part of that growth is the increased contributions of the Fund’s members -- before the lockdown we were averaging about shs120b in contributions monthly and also the increasing efficiency of its operations.

But the bigger part of the growth is the compounding effect of the returns  on its portfolio.

There is every reason why the Fund should continue to grow at that rate into the future or at least the next ten years.

The new NSSF law winding itself through parliament will among other things open up to all workers, regardless of whether their employer has more than five employees or not. Secondly voluntary savers – mostly from the informal sector will be allowed in. Already voluntary savings from existing members are topping sh5b a month.

Assuming they maintain the growth rate, because of these new entrants and barring any accidents to the Fund – Its been a while since they had a scandal, we can expect the Fund’s size to jump beyond the sh100trillion mark in 2030.

An amazing achievement by any standards. Which brings us nicely around to how NSSF can be a force for fighting poverty with its growing financial muscle.

"You do not fight poverty by dishing out money. Free money is nice to receive but tends to leave you deeper in the hole you were in....

You fight poverty by creating an enabling environment for people to carry out economic activity.

Already NSSF contributes massively to anti-inflationary activities carried out by the central bank. It is the biggest single holder of government paper of any individual. It holds 40 percent of government bonds.

"Some people may huff at this but without NSSF’s ability to mobilise funds, keeping inflation under double digits like we have done for the last 28 years – except for the bleep in 2011, would have been a harder feat to accomplish....

Most of our money we do not even keep in banks and therefore hard to aggregate.

We take it for granted because for most of us we have never seen high inflation that was a reality before 1990.

NSSF’s power to influence the rate of price increases is an underrated part of its contribution to the economy and the alleviation of poverty.

On a more basic level they are lining up to overtake National Housing Construction Corporation (NHCC) as the biggest real estate developer  in the country. 

Work is already underway on the Lubowa project’s 2,740 unit and on Thursday Byarugaba said a contractor is already on site in Temangalo to kick start work on the the first phase – 600 units, of the 5000 unit project.

The amendment to the NSSF law will also allow for a creation of housing, medical and education products. Which makes sense because if they are going to be selling hundreds of units in coming years who better to take advantage of this than its own savers.

The education product will be designed to help members upgrade their skills and hopefully become more productive. Increasing productivity is a way to raise incomes.

This is not a story about NSSF. This is a story about what happens when we aggregate our resources. If in 1985, at its inception you had said NSSF would be the biggest financial institution three decades down the road you would have been laughed out of this town....

This is a story too about how we underestimate the power of our small sums and what they can achieve and what they promise when they are brought together.

The biggest pension fund in the world is Japan’s  Government Pension Investment Fund (GPIF), which has $1.42 trillion under management.

To put this in perspective this is almost 30 percent of  Japan’s GDP. Government pensions in Japan.

NRM CHAOS, HOW DID IT GET TO THIS?

In recent weeks the ruling National Resistance Movement (NRM) went to the country to choose its flag bearers for next years local and general elections.

It was a massive undertaking that covered almost 70,000 villages, saw hundreds present themselves to represent the NRM and thousands more turn up to vote.

Unfortunately, maybe unsurprisingly, violence, intimidation and other underhanded manoeuvres were reported, to leave enough people with a bad taste in the mouth. More on that later.

When the NRA/M marched into Kampala in January 1986, the totality of its membership was probably not more than 20,000, 34 years later it is a mass party with representation in every nick and cranny of this country.

Its detractors have argued that the party used state resources to set up the Resistance Council (RC) system, in the 20 years while the country was under the Movement system, which they then commandeered with the return to multiparty democracy in 2006.

The NRM on their part argue that they didn’t hijack the existing local government structures, but it is not their fault that most of the people manning those posts were sympathisers of the Movement anyway. A hard argument to counter.

Truth also is that that network is not very active through out the year and is activated during polls. Which means

"it comes as a surprise to most when the NRM comes out to play, even during these Covid times...

. Which is a bit of a relief to NRM planners because the cost of sustaining that network year-after-year would be astronomical. 

The NRM insist that they are a mass party. Judged against their rivals this not a hard claim to sustain. Despite the challenges that come with this and the financial constraints of it, the NRM insists on universal sufferage in choosing its flag bearers. Other parties prefer a collegiate system where delegates decide for the masses. The attraction for this is its cheaper and less messier.

Which brings us back to why the chaos in the NRM primaries. The NRM insist that overall the process went on much better than was depicted by the few incidents that hit the headlines.

But you know what they say,

when perception comes up against fact, perception wins all the time....

But even if we are to take them at their word, the little of the chaos we saw was chilling in its viciousness and worrying if it became more widespread. And the question persisted, “What is it about politics that makes it a do or die exercise?”

I think it is a case of the NRM being a victim of its own success. A victim, because this kind of chaos can get out of hand, engulf and bring down the NRM.

The success is that they have been able to build this amorphous organisation, literally from scratch. The challenge for the NRM is how does it manage this organisation to not only retain power but continue to be a political force regardless of whether the current champions are around or not.

"The internal frictions, represented by the chaos, need to be managed, brought to a reasonable conclusion so that the NRM remains a coherent force ready to take on all comers in the coming elections....

The life-or-death nature of the NRM primaries, unlikely to be replicated by any other party, is down to two major factors.

To begin with in many constituencies, becoming the NRM flag bearer almost guarantees onward election into parliament. As a result candidates invest a lot of money to get on the NRM ticket, rumour has it as much as sh500m, so a loss is the same as seeing your hard earned cash going up in flames. There are few Ugandans who would shrug off a sh500m loss.

To aggravate the situation, the way candidates raise this money through debt – often secured against family property, raises the stakes. A loss can mean a straight line drop into abject poverty...

Secondly and more worrying is that for many candidates, politics is the fall back position after they have become unemployable or have failed in business. The promise of a big salary and the leverage to extract money from the state – real or imagined, that comes with being an MP is a big attraction for these types. 

This combination makes for a combustible mix that understandably leads to the violence we see around.

Maybe the redeeming factor of the NRM primaries was that voting was by lining up, reducing the scope for vote rigging and other shenanigans. It was testament to the desperation of the time that some nevertheless tried to rig the vote anyway.

Looking to the future,  the NRM will do well to invest in dispute resolution within its ranks as a long term strategy to  retain party coherence. It is unlikely that the thirst for the NRM ticket will reduce in the next 10 years so somebody needs to be thinking about this seriously and systematically.

 

WHY YOUR RATE OF SAVINGS IS IMPORTANT

In the last week I had a back to the past moment – actually three. We had three full days without power, unheard of in the last ten years or so.

In classic case of turning lemons into lemonades a friend sent me this book, “The psychology of money” by Morgan Housel.

A long time ago I wondered, why don’t the rich tell the rest of us how to make money, some easy to use formula and we get on with it? Either they are hiding something or this making money thing is not for all of us. I wasn’t entirely wrong on both counts.

"Apart from thieves and flukers – lottery winners, the process of making money requires a certain kind of orientation of the mind....

It is less productive for someone who has made money through honest effort, to try and bring others up to speed on the process. Besides they know that a lot of what they know,  can not be taught but one has to experience it before they can appreciate let alone understand it.

It is not for everybody because not everybody can achieve the mental reorientation that many of these money makers have achieved in order to make money. Because, have no doubt, money making is not necessarily an inherent skill, it is a learnt skill that takes years of practice.

The book is worth its weight in gold with lessons flowing off every page. But the two that struck home for me were one, that making money and keeping money are different skills. Learning to make the money is easier than learning to keep it. Which explains why we have had so many people coming, flashing their money around and disappearing as quickly as they came. 

At this point the author made his own distinction between being rich and being wealthy. That richness shows and often entails a high spending lifestyle demonstrated by the clothes, cars, houses and instagram documented holidays. Wealth on the other hand is quiet, can even be invisible to the undiscerning eye and is normally demonstrated in bank balances and accumulation of income earning assets.

"To use an analogy being rich is like coins which make a lot of commotion when they drop disproportionate to what they can buy, who has ever heard a sh50,000 note fall?...

The author also made the point that there are thousands of ways of making money but only one way of keeping it – exercising frugality and paranoia. So you have to respect the people who make money and continue to grow it but can also make the mental shift to keep most of what they made. That’s what leads to inter generational wealth.

I hear them already, what’s the point of making money if you can’t enjoy it, they ask shaking their heads. We need to get away from the subsistence mentality that we eat all we make, there is a place for ensuring that the basics are catered for generations to come. Its a hard thing to wrap our minds around for a pre-industrial society like ourselves but the sooner we get with the program the better for us and our progeny.

“It is ingrained in us that to have money to spend money that we don’t get to see the restraint it takes to actually be wealthy,” the author wrote.

The second idea I took away from the book is that a person, community’s or country’s chances of achieving wealth is strongly related to their rate of saving. He makes the point that there are low income earners who become wealthy but not all high income earners can do the same.

And even more interesting is that while it is easier to save towards a goal, we need to save for savings sake. The logic is simple. Saving allows you to accumulate capital for future investment. We wonder how the Asians thrive. We have worked out that they probably have cheaper pools of capital, we haven’t made the connection between their frugal living and this cheaper capital. Now imagine when a whole society saves diligently and pool their resources together, to supporting each others business?

Saving is practice in delayed gratification. This is important in helping in the second part of wealth creation which is keeping more of the money you make. If you can save you can restrain your baser instincts, which would otherwise prompt you into a life of high living and arrivalism....

And as a  parting thought,  “Saving money is the gap between our ego and your income, and wealth is what you don’t see.”