MADNESS: DOING THE SAME THING REPEATEDLY HOPING FOR A DIFFERENT OUTCOME

The voices calling for government to go back into business are growing louder.

They argue that there are key investments that need to be made that the private sector has failed to take up and government should. They explain that this is another way for government to create jobs. 

And they conclude by saying that monetary gain is not the only reason to start business, so even if the companies make losses the businesses will have served a greater good of absorbing farmer produce, create jobs and put new products on the shelf.

Who can argue with that logic. No one. Except that it is based on a wrong premise and bound to fail.

Let us take the three arguments in order.

"The reason private sector does not invest in a place is because the viability of a project is suspect. Either there are not enough inputs or there is no identifiable market or the eventual product cannot be competitive in the open market....

In Uganda today there is a concentration of economic activity along a “growth corridor” that stretches from Tororo, passes through Jinja and Kampala and onto Mbarara. With the activity come jobs and higher incomes. It is not a coincidence that along this belt is Uganda’s most travelled highway, a railway line and almost the full extent of Uganda’s power transmission lines, which convey industrial energy.

This last part is important because if you do not have the 132kva or 220 kva transmission lines, the power you have is good for only lighting and not industry.

It explains why the cement factories in Tororo ferry their lime from Karamoja. By some estimates it takes two tons of lime to make one ton of cement. It would be much cheaper to set up a factory in Moroto and truck packed bags of cement out. The reason they don’t build a factory in Moroto is because they do not have industrial grade energy.

So even if government says it wants to start a cement factory there, it will be doomed to failure – after spending billions of tax payer money to build a factory, because Moroto is not serviced by industrial grade energy.

"Looking at that logic you can see how the second goal of creating jobs falls by the wayside. No working factory no jobs. Unless for the security guards who will be manning the redundant hulk...

And finally they argue that profitability need not be an end of all enterprises. There are other “strategic” objectives that a business can serve. They are right and wrong.

They are right because business are created to provide a good or service and profit is a byproduct of that effort. So while the businessman wants to see a return on his investment, he has to focus on providing a good or service in a cost effective way before he can see profit.

They are wrong because without profit the sustainability of the company is compromised and the chances of collapse are improved. Non-profit making enterprises will be supported by our taxes, which would be better used improving social services and opening up other parts of the country to investment by laying infrastructure.

The building of roads, railways and some of the bigger infrastructure investments, which will facilitate investment should be government’s business.

Why can’t governments, not only the Uganda government, not do business?

From day one a government’s key mission is to maintain itself in power. The tendency to people state owned enterprises with their supporters, regardless of competence, to destroy markets by giving their own companies favourable status and to subsidise their losses indiscriminately, while shoring up their political support, doom these companies to mediocrity or even worse, total collapse.

 This mission comes in direct conflict with the profit motive. Profit as stated above is critical to an enterprises sustainability.

It is no wonder that the politically appointed task force to investigate the viability of the Uganda airlines are the same people who became its managers.

If government is really sincere about creating jobs it can do so in a cost efficient way by investing in understanding how business works. Not so they can go into business for themselves, but so they can facilitate businesses to thrive and provide the much needed good and services the economy needs.

Beyond infrastructure investors may need additional concessions, which government should be able to assess and negotiate.

This takes a little more intelligence than rushing around like a mad bull starting fruit factories or airlines or beef abattoirs, which have less than even chance of succeeding because of the clumsiness of their inception....

Believe it or not, government had a fish factory by Lake Victoria and it collapsed!

This country does not have infinite resources. Such circumstances demand that we apply a little more brain than brawn to get the intended outcomes. A return to the state enterprise in circumstances of scarce resources is to throw good money after bad.

We give the champions of this policy reversal the benefit of doubt, to believe they know not what they are doing.  But the truth maybe even more sinister.

CELEBRATING THE NRM

On Sunday Uganda will be commemorating 34 years since the National Resistance Movement (NRM) came to power.

In the recent trek through the Luwero triangle we were reminded, informed, if we did not know, of the great sacrifice it took for the National Resistance Army (NRA) to march on and eventually capture Kampala on January 26^th 1986.

Love them or hate them the enormity of the task, the extent of the sacrifice, the NRA made cannot be discounted. It helps of course, that they were the victors, because victors are the ones who write history.

"The young, hardy and idealistic soldiers that emerged from the bush three decades ago are now older, rounder around the middle and more realistic, some would say jaded...

They found out very quickly that running a state, especially in the context of poverty, disease and war, is not as easy as it seems.  They have found that there is no place for fixed positions in the exercise of power, that while principle is important, the context in which you operate has a lot to say about how you go about your work. And now they are shocked to find that, not only is their bush war forgotten, but the achievements of the last three decades are being trivialised.

Those are the hazards of the passing of time.

In Europe to the horror of the World War II generation there is a resurgence of Nazism. In America a more isolationist policy, a throwback to the country’s pre-world war II, is gaining popularity. And in South Africa, believe it or not, there are people who hanker for the “good old days” of apartheid, and they are not all white.

President Yoweri Museveni often recounts the parable from Nkole folklore about the woman with two daughters. One was her step daughter, the more beautiful of the two. The woman trying to marry off her daughter covered the step daughter in mud, but beautified her daughter and dressed her in the finest gowns.

To the woman’s shock suitors saw beyond the grime and dirt covering the step daughter and picked her all the time.

So the NRM has laboured under the myth that they will be known by their good deeds and there is no need to communicate them. What they have done is there for all to see, self-explanatory.

However, nature abhors a vacuum and in communication, this vacuum is often filled to your detriment.

"When eight in ten Ugandans were not around in 1986, stories of sugar, paraffin and cooking oil shortages are just old women’s tales; stories of gun shots going off like popcorn every night in Kampala are seen as an attempt to make little children behave after dark; stories of how it took six 

hours to drive from Kampala to Masaka are dismissed as propaganda....

No lesser a person than Lee Kuan Yew, the legendary Singaporean president, did not give Uganda a chance. Speaking in the 1980s he thought it would take Uganda a hundred years to dig itself out of the hole it had sunk itself in with the mismanagement of the 1970s and 1980s.

There is still a lot of work to do. We need better, health care, education, security and less corruption. We need more jobs, roads and power.

But now our demands are from a higher base than the population was used to in 1986. The NRM is now a victim of its own success. 

Where we were glad to have power in our homes – even in Kampala, now we are ready to burn Umeme over a 30-minute outage; Where we were glad to be first in line at the LC’s house to get our weekly quota of sugar, now we walk to work when the price of sugar doubles; Where we were glad to be home before dark now there is traffic after dark.

Longevity is good for achieving long term programs. But

longevity comes with the danger that the fickleness of the human mind will not give credit for the foundations of the success.

Happy NRM day!

UGANDA ON THE RIGHT TRACK WITH WOMEN

At the end of last year credit card company, Mastercard released its Index of Women Entrepreneurs survey (MIWE), which showed Uganda had the highest proportion of women business owners of the countries surveyed.

Ghana came a close second, just ahead of Botswana. The United States of America and New Zealand rounded off the top five.

In the report on the survey Mastercard made the point that, economies where women were more economically active, by the traditional measure, are more likely to grow. But women are only economically active in an environment that allows and empowers them to do so.

Maybe this finding about Uganda should not come as surprise. Numerous surveys over the last two decades have shown that we are among the most entrepreneurial countries, if not the most entrepreneurial country in the world.

The participation of women in business is often hampered or obstructed altogether by cultural or religious traditions surrounding working and property ownership. In Uganda a lot still has to be done in making workplaces more women friendly and streamlining women’s property ownership in the family context. That being said, women can own property or businesses and are increasingly breaking through the glass ceilings in corporate Uganda.

This is progress that should be actively encouraged in a poor country like Uganda.

In order to fulfill our development ambitions we cannot afford to relegate half the population to second class citizens. While we are richly endowed by nature, we have done little to unlock the full potential within our borders. In the absence of this the smart thing to do is to develop the human resource. All hands have to be on deck.

Progressive policies in education and politics, where the most visible affirmative action initiatives were taken, have begun to show dividends.

This year more women than men graduated from Makerere University. According to official figures 50.5% of the 13,509 graduands were women....

A 30-year-old policy to award every A-level girl 1.5 points towards their university admission is clearly showing results.

In politics every one of the 134 (I think) districts is entitled to a woman’s representative. In addition to the women who win in the constituencies, they make up at least a third of the 450 seat house.

These initiatives have proven to be more than just political posturing. To uplift disadvantaged populations there is no stronger tool than the power of example. There are now thousands, if not hundreds of thousands, of young ladies and girls who see political position, higher education and career advancement within the realm of possibility. We take it for granted now, but that has not always been the case.

That is why it is a good start that already more and more women are going into business. According to the Mastercard survey 38% of business in Uganda are owned by women. They are exploding the myth, for younger ladies, that business is male domain.

It is a good start because just like the global picture of Uganda’s entrepreneurship, most women are necessity not opportunity entrepreneurs. The difference is significant.

Necessity entrepreneurs are those who go into business because, often times they have no choice, no other source of income. They go into business to sustain themselves and their families. Opportunity entrepreneurs on the other hand go into business to exploit a gap in the market and are set on growing their business beyond their own needs.

As a result businesses started by necessity entrepreneurs tend to remain informal, are not robust and are responsible for the high attrition statistics – barely five in a hundred businesses get to their fifth birthday.

On other hand businesses with opportunity entrepreneurs are set up for growth, employ more people and on average survive longer.

"The trick is to shift more of our entrepreneurs towards opportunity investment. The shift is more mental than anything else. More than lack of capital or our taxation system....

With one fell sweep in 1972 we wiped out an entire commercial class, the Asians, who through their mentorship would have transferred enough of their business skills over time that our businessmen would be more opportunity entrepreneurs. Proof of this is that, even today our most enduring businessmen are those who were mentored by the Asian community.

In the absence of that, small business training and incubator programs, which help business people reorient their thinking will have to do.

We are a step ahead of most, because entrepreneurship is second nature to us. This is a hangover from the total collapse of the economy in the 1970s and 1980s where having a side income, which became your main income, was not a luxury but a necessity. The tradition has carried on.

I think it is easier to reorient the business people we already have, than it would be to try and encourage people to go into business in the first place.

And while more women in business may be a sad reflection of their men not carrying their weight, the unintended outcome of that, may very well be that we will have a stronger society as a result of more educated and healthier kids.

RAPE? WE ARE GOING ABOUT IT THE WRONG WAY

A few days ago social media was alight with ladies outing men who had done wrong by them or their friends or their friends’ friends.

By the time the dust had settled there were a lot of hurt feelings, sheepish smiles and some very angry people on both sides of the gender divide.

The sad part about it, is that narrative was taken to the extreme end of the pendulum. Rape. We went form 0 -100 in a few megabytes.

I think to handle rape, you don’t handle rape. You start by recognizing the wider perspective of everything from, these days, cyber stalking to sexual harassment to sexual assault. A rapist does not jump out of the box, out of the blue, they probably go through a progression of unwanted sexual behavior before one day, boom!

It’s like domestic violence, we focus on the physical act of beating and forget the lower levels of domestic violence which build up to the main event.

In conversations on twitter, you could see disturbing confusion about what is and what is not acceptable in our social interactions.

What constitutes consent was an interesting discussion, but I think it put a lot of onus on the object of a person’s desire to set the boundaries of what constitutes admissible behavior. Which is ok, but isn’t there a case for a certain level of common decency, a baseline of behavior if you like, that frames our relationships?

It may be asking for too much. In the murky and ambivalent world of male-female interactions there are a lot of influences that colour how we relate to the opposite sex...

Beginning with the signals society sends out, our socialization. Signals emitted by people we respect, our parents, our teachers, our priests and pastors. And we haven’t even begun to examine the messages we get from our peers.

These are overlaid on our own inadequacies and insecurities. All this makes for a very confusing environment in which to grow and operate.

It was interesting to witness all the shrill voices, mostly women, admonishing their own, that no man – relative or not, should be trusted. Most sexual assaults are by people known to the victims and therefore this looked like wise counsel. The counter would be that this distrust could be the very thing that prevents relationships from growing beyond the fugitive glance at the bar.

On the other side of the divide were the defensive, almost petulant male voices, warning that this widening of the boundaries of what constitutes acceptable social behavior would kill a lot of budding relationships. It’s not as if every woman you are interested in responds positively from the word go and if we were to turn away at every rejection people would not get married. The counter to that is the first approach need not be offensive, obtrusive or crude for a relationship to kick off.

For anyone with even a rudimentary experience in the dating game would be hard pressed to argue with that last part.

But it seems the wise thing to do is to err on the side of caution.

Let us not only jump up and down when rape allegations are aired. Let us be appalled when people invade others private space or “accidentally” touch another in unwanted ways or make comments that cause discomfort to another or even look at someone else in a way as to cause shivers to run up and down their spines....

As for the fears that this interference in the mating game could very well mean the extinction of the human race? We need to calm down. There are enough mutual attractions around to keep the specie rolling along.

Jokes aside.

There is clearly a need to publicise the wider spectrum of sexual crimes, that rape is only one extreme of. We need to recognize that rapists rarely start off as rapists but climbed up the ladder of sexual violence and who knows if we can catch them early we can prevent them going to the extreme.

It is interesting that with more development, better communication has led to a weakening of social ties and therefore social interactions are personal affairs rather than the coming together of families. This responsibility to a larger grouping than the two individuals, kept some anti-social behaviours underground.

SPARE A THOUGHT FOR ZIMBABWE

Winston Churchill once intoned “When you are going through hell, keep going.” If you think about it, you really have no choice. Or maybe you can lie down and die.

Well Zimbabwe and its people, don’t have a choice but to keep going through the hell they are in.

At the end of last year it was reported that 60 percent of Zimbabweans do not have adequate food. 

"People are missing meals not out of some adherence to the latest fad. Drought had caused crop failure. The prices of bread and maize, staples of the Zimbabwean diet, had gone up by as much twenty times in the last half of 2019.

As if that was not enough, aggravating the already dire situation, there is a shortage of foreign currency, inflation is back up in triple digits, fuel shortages persist and livestock losses are apocalyptic.

The total collapse of the economy, on the late Robert Mugabe’s watch over the last two decades, means the country doesn’t even have its own currency. The US dollar, South African Rand and hodge podge of other hard currencies are used as everyday mediums of exchange.

This is ironic because the southern Africa’s agriculture and mineral industries are in intensive care and there is not enough hard currency to go around.

The implications for the everyday man is as described above. The government has no control of its monetary policy and they are letting people die of hunger, because they cannot muster a disaster relief effort.

In Uganda if we had a drought on the scale that Zimbabwe is now facing, in the worst scenario we can print shillings to buy relief food. The inflation we can fight later. Zimbabwe doesn’t have that luxury.

"This story is even more tragic when you remember that Zimbabwe was the bread basket of the region. With their agriculture industry deep as it was wide, with a huge commercial production and vibrant agro-processing sectors, its incomprehensible that Zimbabwe finds itself where it is now...

They got to this point because Mugabe, facing growing opposition to his rule, pointed at the while commercial sector and turned on them, as a way to win cheap political marks. In the process he gutted the pillars of the country’s economy.

It is true that the colonialist dispossessed the native Zimbabweans of their land—it was estimated that the white farmers, who made up less than a tenth of the population, controlled more than two thirds the arable land at the height of their power.

No one can argue against the historical injustices meted upon the Zimbabweans by the colonialists and white minority government up to 1980.

However, a visionary leader would have assessed the situation and worked out that to redress those injustices, they would have to leverage the productive capacity built over decades to uplift his people. 

Done effectively and efficiently, the ordinary Zimbabwean would have seen a quick enough improvement in his standard of living. Eventually a shift of capital would even things out between the races.

The populist thing of course, would be to drive the white settlers into the sea, or at least over the border – Zimbabwe is landlocked, and divide the spoils among the frothing-at-the-mouth masses. 

There would be a temporary excitement as the locals gouged themselves on their erstwhile oppressors’ wine collections, choice livestock and prance around in their finest gowns.

The reality would catch up soon enough, when they cleared out the stock and couldn’t replenish it. As happened in Zimbabwe, and Uganda before that, in a manner of speaking.

"Mugabe was spared by death. Spared from seeing how deep Zimbabweans are going to have to sink before it gets better....

We know the formula. We have experienced it first hand in Uganda.

To begin with government is going to have to go bowl in hand to foreign capitals to beg for money to feed its people. Then they are going to try and resuscitate the abandoned industries, to try and generate some economic activity. They will fail and flog them off or return them to their rightful owners. They are going to do this in context of an austerity program – minimal spending on social services. This is necessary to bring inflation under control. In order to further accelerate economic growth, they are going to have to fling open the doors to the economy, bend over backwards to attract foreign investment. Because they do not have the internal capacity to do it themselves.

There will be much gnashing of teeth and renting of cloth in the hills and plains of Zimbabwe, before the light at the end of the tunnel comes into view.

Meanwhile there will be populists and demagogues inside and outside Zimbabwe criticizing the drastic measures the government will be forced to carry out, to get the country back on track. These dissenters will propose alternative, more benign policies, that look good on paper but have no practical chance of success.

It is impossible to see how this turnaround can be achieved in the context of democracy. It didn’t happen in post World War I Germany nor post world war II Japan or South Korea.

"For Zimbabwe to pull itself up by the bootstraps, there will have to be a singleness of purpose, an unbendable resolve and immeasurable sacrifice, all of which would be hard to marshall in a liberal setting...

While we spare a prayer for Zimbabwe, let us not delude ourselves that a like implosion, cannot visited upon us if we subvert the laws of economics for political expediency.

THE CASE FOR LOCAL BANK OWNERSHIP

The other day Professor Ezra Suruma published an opinion on how the banking industry is being remote controlled by neocolonialists, who have no interest in promoting the mobilization of indigenous capital by among other things shutting down local banks and making it too expensive for local businessmen to open banks.

He said as result local business struggle to access capital.

These were strong charges by a former deputy governor of the Bank of Uganda and former finance minister. They need to be taken seriously.

For people coming to the discussion late a look back into the history of the banking sector and how we got to where we are may be useful.

In the 1990s the banking industry was dominated by two government banks – Uganda Commercial Bank (UCB) and The Cooperative Bank. Both through mismanagement and political interference, had most of their loan book blighted by bad debt as to render them insolvent. They could not meet their day to day obligations.

"In fact in his “Advancing the Ugandan economy” Suruma reported that things were so bad, at UCB when he joined it as chairman and Managing director, that people seeking to withdraw from their accounts would have to seat and wait for depositors to come into the bank, which money would then be paid out to them...

A bank in similar distress today, would not survive an hour after it opened its doors for business on any day.

Government tried in both cases to salvage the banks but didn’t have the capacity to, shutting down Co-Operative bank and selling UCB to Stanbic Bank.

Unfortunately, this malaise was not restricted to government banks. Several small private banks fell victim to the same ills of mismanagement and folded under the weight of the subsequent bad debts. 

What was interesting is that the biggest source of bad loans was insider lending. The owners would lend themselves huge sums, drawn from depositor funds and fail or neglect to pay them back.

In effect the banks were providing inexpensive capital for its owners and directors.

As a result of this, government rewrote the law books to strengthen Bank of Uganda’s supervisory powers and improve the requirements for anyone wanting to start, own and run a bank.

Under the new laws the central bank was insulated from political interference, commercial banks’ shareholding was diluted to prevent against a single dominant individual owner and the capital requirements for owning a bank were pushed up substantially from sh1b to the current sh25b.

"Given our experience the logic was simple, we need a strong industry regulator and strong commercial banks that can not only absorb losses when they turn up, but have strong enough capital bases to innovate and better serve the public....

As a result of these changes private sector lending has jumped to sh16.5trillion at the end of last year from sh731.6b in December 2001.

This statistic alone suggests a strong growth in access to credit to the private sector. It is inconceivable that Ugandans are not getting their fair share of this.

That most of this credit is going to trade and services and not manufacturing and agriculture, is down to structural deficiencies that need to be addressed.

There is really no way around it. Ugandans will be best served by an industry that is robust enough to meet their needs, not whether it is owned by locals or not. Unless of course the argument is for these local bank owners to have access to cheap money at the expense of the depositors, which is what led to earlier bank collapses. 

That being said neocolonialism in its various guises is real and cannot be wished away. However, to blame it for our failures, poor governance in our institutions, is to abrogate our personal responsibilities to ourselves and country.

MILK, SUGAR AND THE CHANGING EAST AFRICA ECONOMY

It was an interesting coincidence that 10 years since the East Africa Customs Union came into force, a Kenyan delegation was in Uganda a few weeks ago, to help resolve a trade spurt between our two countries.

At issue was the surge in milk exports to Kenya from Uganda, which had halved farmgate prices in our eastern neighbor and made some powerful constituencies very jittery.

The price collapse in the Kenyan dairy market was prompted by a near sevenfold jump in milk exports from Uganda. Last year according to official figures Uganda exported 110 million liters of milk to Kenya from 16 million liters the previous year.

It is safe to say our neighbours have seen nothing yet.

The Dairy Development Authority reported in June last year that in 2017/18, milk production stood at 2.5 billion liters. Of this only a third of the milk or about 800 million liters is processed.

So if Kenyans have got their undies in a twist about 110 million liters, what would happen if we processed 50% of our production and exported the extra 400 million liters their way?

This was one of the best business stories of last year. The surge in exports overturned our trade balance in Kenya for the first time ever, with us exporting more to them than we import from them. It vindicates the champions of regional free trade...

The Kenyans are pondering slapping 16% VAT on our milk to give their embattled dairy farmers a chance. Which is good politics, but bad economics.

One of the main benefits of free trade is that it sharpens competitive advantages, the ability to produce something better than your competitors, which is a good thing.

The most efficient producers of a good or service end up thriving and the less competitive ones go off to look for their niche, what they can produce better than everybody else in the market.

There will be casualties of course, especially of those refusing to adapt to the changing times.

The anti-market lobby like to say that this is a bad trend and government should step in to subvert the market every so often. Often times the ones fronting this argument are those caught on the wrong side of the competition who want a government bailout.

The best way to look at it is to think of Uganda and its 100-plus districts. Imagine if we had, hard district borders, with customs posts at every district boundary.

To get matooke from Isingiro to Kampala currently, your main impediment is the state of the lorry carrying the matooke. There are no real tariff barriers between Isingiro and Kampala.

But if they were hard borders the inconvenience in crossing the nine district borders to get to Kampala, the time spent – a trip that probably took 10 hours would now be drawn out over a week, and the costs in import levies, overnight travel, would make a bunch of matooke so expensive that Kampala would start growing its own matooke.

The Kampala soils are nowhere near the quality of those in Isingiro, so the people of the capital city would settle for lesser quality food because of these barriers to trade. Kampala will be forced to indulge in an activity it’s white and blue collar workers have no competitive advantage in.

"The net effect of this would be a lower standard of living for city dwellers, than if the district boundaries were brought down....

The East African Community is bringing this reality to the fore.

In 2019 Kenyan farmers have complained not only about Ugandan milk but Ugandan sugar, grain and even poultry. The hard border and Uganda’s years of instability in the 1970s and 1980s allowed less efficient Kenyan producers operate. With stability and the Uganda economy back on a growth path, the Kenyan farmer is being reminded that there are more efficient producers on the other side of the border.

But you can expect that the interest groups who have invested their lives in this inefficient arrangement will not roll over and die. They will fight long and hard to maintain the status quo. But as they say, there is nothing more powerful than an idea whose time has come.

In Uganda too, some of our producers will have to face up to this new reality. Those who were sucked into the whole import substitution drive will be the hardest hit. There are somethings we have no business trying to produce, because the Kenyans produce it cheaper or even further afield, the Chinese, with their massive economies of scale can produce and land it on our shores, for a fraction of the price that either of us can produce it at.

"Some cynics would argue that agriculture is not the way to develop modern societies, but that would be to ignore the experience of Denmark or New Zealand. This is also to not appreciate the scope of agro-industries that can be built around research, processing, logistics, marketing, retail, hospitality and, that we haven’t even begun to scratch the surface of our true potential....

The government rather than side with entrenched interest groups or crony capitalists needs to direct our economy towards the production of that, that we have a competitive advantage in. When we have mustered enough capacity and surpluses, we can tinker around in areas where we can develop some competence, eventually.

And by the way more than two decades ago the United Nations Development Program (UNDP) mapped out a strategy based on the industries that we have or can develop a real competitive advantage in, at least in the region.

These were agriculture, tourism, services – education, health, financial and ICT and mining. Twenty years later and we are just waking up to our agricultural potential.