IF I WAS RUNNING FOR PRESIDENT

The campaign season is now truly here. 

Last week the NRM’s Central Executive Committee filled its top positions. The election of older persons, people with disability and youth chairmen at village level were  concluded. In the constituencies far and wide its getting hot under the collar.

The main event – the presidential elections will be decided in February.

I got to wondering if I was a presidential candidate what would I propose as my action plan for the next five years.

Below are my first and ready thoughts for some of what candidate Paul Busharizi’s economic plans would be.

1. Introduce a Covid-19 bond

The challenge of the Covid-19 pandemic will be with us long after next year's polls. The major challenge is keeping businesses open and expanding.

As it is now with depressed economic activities people are out of work, making companies returning to full production difficult as there are no people to buy their goods.

We have two choices either to let every one for himself, God for us all and the devil take the hindmost. There will be a lot of pain – closed business and lost jobs, for a year or two but the ingenuity and resilience of our people will come through.

Or provide some government support to businesses and the most vulnerable, avert the worst effects of the economic slow down and provide a base for economic recovery.

This will cost money. 

I will propose the initiation of a Covid-19 bond, with a tenure of between 20 and 30 years, to raise about 10 percent of GDP, $3b or about sh10 trillion. The money can be raised in four tranches, one auction every half of the next two financial years.

This money will be focused on providing unemployment benefits, grants and soft loans for SMEs, facilitating the creation of alternative financial institutions and encourage/compell more big companies to sell there shares or debt on the capital markets.

2. Cash transfers for the most vulnerable

As I understand it government is reluctant to offer cash grants to the most vulnerable because they don’t have the money and are averse to going bowl in hand to the donor communities.

The big political upheavals from Zambia to Sudan have come as result of the removal of subsidies. To allow the donor community to finance this would be a recipe for disaster when we disagree, as we inevitably do on one policy move or the other. I sympathise.

Hence my going to the open market. 

It is estimated that there are at least eight million living below the poverty line. The covid-19 pandemic is expected to raise this number to 11 million.  Assuming an average of five people per household that would be 2.2 million families. Assuming a handout of sh100,000  per family monthly or sh220b a month. I would provide this for a year long enough for people to get back on their feet. That would cost about sh2.7trillion. 

To access the money  beneficiaries must have a national ID and even better, a mobile money account to which the money will be sent directly.

This I would be a direct benefit to the families and boost demand in their local economies. 

3. Support for SMEs

Support of SMEs will take two forms the smaller part of which would be grants to keep them in business and the second part, soft loans offered at least half the market lending rates for up to five years.

In addition I would fund business support services to ensure that not only do the businesses survive and thrive but can repay the money. This will be a seed of a revolving fund to benefit SMEs well into the future.

To benefit from this facility SMEs will have to be registered companies.

4. Encourage alternate financiers

As it is now our financial sector is dominated by commercial banks, who are well suited to funding going concerns but not start ups or providing long term capital.

The capitalisation of Uganda Development Bank will continue but at more determined pace, the target will be a $2b capital base by the end of my first term. Incentives will also be offered for other development banks to set up shop here.

On the other side of the pendulum we provide tax incentives and seed some  angel investors and venture capitalists, who in more advanced economies finance start up companies.

My government will also actively nurture the growth of a broader and deeper financial sector ecosystems that can support businesses from the smallest to the largest. 

5. Compel companies to list on the exchange

There will be no more pussyfooting around banks, telecommunications companies and big industry during my time. We will encourage, compel them to list on the Uganda Securities Exchange.

With one stroke we will be able to increase local ownership in these companies – we encourage SACCOs and investment clubs to invest and secondly, improve the capacity of our capital markets to raise capital. This will be crucial for the country to raise capitalf for its companies and development.

There are other development issues like infrastructure development, quality social services delivery but I believe resource mobilisation and  building a robust and dynamic private sector are key to building a self sustaining economy. The taxes from these will more than cater for everything else.

By the way a major objective all the above initiatives will be to widen the tax base, as all beneficiaries of the above actions will become tax paying members.

BOBI WINE SETTING UP TO BE JOHN THE BAPTIST

If the honourable Robert Kyagulanyi haboured any doubts about the enormity of the task in his bid to win state house, the results of the special interest groups elections this week would have put them to rest.

This was a damper to his campaign, in a week during which Kizza Besigye, who has carried the opposition on his shoulders for near 20 years, finally came out to announce he would not run against President Yoweri Museveni in the 2021 polls.

With Besigye out of the way Kyagulanyi aka Bobi Wine seems the natural heir to that throne.

But back to the elections of the special interest groups. Results seen at the writing of this column showed that the NRM had won 80% of the seats in more than 50,000 villages in voting to choose at the village chairmen for older persons, People With Disabilities and youth.

This last category, youth chairmen, came as a surprise and made sympathisers of Bobi Wine’s youthful National Unity Platform (NUP) reconsider their previous enthusiasm.

It should be noted though that NUP gave the NRM a run for its money in Kampala and Wakiso districts, which can be seen as a start.

Even the fence seaters are having to take a second look.

"It is difficult to see how the landslide victory for the NRM at the village level can not be replicated in the dash to parliament and eventually the presidential polls...

If these results were announced in 1996, with only a change of the parties involved there would be nothing amiss.

Which is an indictment on the opposition players of the last quarter century. It says that despite mounting disgruntlement with ruling NRM they have failed dismally to make inroads into its hold on the country;s politics at the grassroots.

"It has been the argument of this column for forever, that while gunning for the presidency is sexy and garners big headlines, the action is at the grassroots or at least the fight to wrestle control of parliament from the NRM, without that it is wishful thinking that you can have a realistic chance at the presidency....

It is commonsense. The foot soldiers for a presidential campaign are at the grassroots and not on radio, TV and online in Kampala.

Museveni and NRM by extension are suffering the contempt that comes with familiarity, so when a new challenge comes up it is easy to create excitement – even Olara Otunu managed to make our hearts skip a beat.

However the novelty factor wears away very quickly and  pragmatism sets in.

I am always amused with Museveni critics who say he is not popular, to which I am quick to retort that politics is not a popularity contest. It is about what does this candidate do for me at practical level....

Museveni may not be your favourite uncle but for enough people he has  a utility value that allows them to overlook his and his government’s shortcomings.

So the opposition and specifically Bobi Wine can thank their lucky stars that these unvarnished results come months before poling day in February.

These results suggest that there is need for folding up their sleeves further up their arms, crystalising their message and transmitting it up and down the country over and over again and very importantly, that they get viable champions around the country.

"Is it possible to overturn this result in the available months, I don’t think so. But it provides an alternative strategy to the personality cult Besigye has cultivated over the last 20 years, long on promise but thin on the ground....

If Bobi Wine is serious about a run for the highest office in the land he has to do things differently, otherwise like Besigye he will at best be John The Baptist to the eventual arrival of the messiah.

GOLD: UGANDA’S PERFECT TIMING

Last week gold crossed the $2000 an ounce level for the first time ever.  The precious metal has been on a run since March when the scale of the Covid-19 crisis begun to register.

In times of crisis gold prices tend to soar as people liquidate other assets to invest in the metal, traditionally considered a safe haven for value.

In the last few weeks with western countries going back into lock down after lifting previous restrictions, uncertainty has grown in the world economy hence the flight towards gold.

"On Friday it touched $2,075 an ounce, the highest it has ever been since September 2011 when it peaked at $1,921.35....

This until recently would mean nothing in our neck of the woods.

But in 2018 gold overtook coffee as the major export earner when we exported $514m worth of the metal.  Last year was even better with our gold receipts more than doubling to $1.25b. 

Observers put local production, from mostly artisanal miners at around $50m a year, with the remainder coming from the region. In a few short years Uganda has become the gold refining hub of the region.

In 2016 Africa Gold Refinery Opened for business in Entebbe and the rest is history.

A confluence of factors has conspired to bring about this happy result.

To begin with the gold bearing regions of eastern Congo are largely pacified as compared to a decade ago. And with regular flights to Entebbe Airport it makes more sense for traders to come to Uganda. Previously they would fly on to Dubai.

Secondly, Uganda not only has a refinery – there are three others are in the works or already up and running, but also has surplus energy. Refining metals from their ores is energy intensive. It helps too that the refinery is only a stone’s throw away from the airport, which before the lockdown, serviced about 20 airlines.

And thirdly apart from a few incidents of gold related robbery and con jobs, Uganda is a relatively safe place to do business.

The aforementioned three new refineries and the anticipated 600 MW expected when the Karuma power dam is completed within the next 12 months, means that within next five years the country will probably be exporting multiples of its current volumes.

The improved gold prices also means we will be getting more money.

It is an interesting story of how value addition can be a possibility for Uganda sooner than later.

For a viable value addition project to take root there has to be adequate supply of raw material and ready market, especially abroad where more value can be captured for the finished product.

There is probably nothing we produce in adequate proportions to sustain an industry. For coffee in the year to June we broke the record in exporting five million bags of both Robusta and Arabica. Whereas we are the biggest exporter on the continent, Ethiopia produces more but consumes most of its own produce.

The plan to get to 20 million bags is good if we are to have a go at adding value to our coffee sustainably. 

"But supply is only one part of the equation, the access to markets is the other and many will argue the major challenge....

A handful of companies control world trade in processed coffee and have in effect cornered the market. To break into that cartel would cost time and money, which would be better spent elsewhere.

The same can be said for cocoa, tea or any other commodity you can think of.

The smart thing may be to grow our own internal markets to sustain these industries. Milk is a case in point. Of all the milk consumed in Uganda barely a fifth of it is processed.

If more processed milk was consumed locally then we would have more industries around the product, which would mean more demand and more incentive for farmers to produce more through use of improved breeds and employing better farming methods....

And what would it take to increase consumption of processed milk? Government action. One, to enforce standards on milk sold in the market and secondly, to actively create local markets.

We can take a cue from neighbours Kenya, where consumption of processed milk is nearly total. In the 1980s the government started school milk program, which not only increased the capacity of the then monopoly Kenya Co-Operative Creameries (KCC) but down the road created a demand for processed milk from the adults who had grown up on school milk.

Bad management of the program means it is no more but the effects continue to ripple through the society 40 years later.

Strong domestic base serves as launch pad for exporters but also serves as fallback position in the event of wild fluctuations in external market demand.

Gold has shown us the way. There is minimal local demand, out refinery is not even one of the biggest on the continent and demand for gold internationally is time tested, but as proof of concept it has worked very well for us.

"Can we do it for our coffee, milk, fish and cocoa? Maybe but it will need more strategic thinking and execution of that strategy than we are currently displaying....

BEST TIME TO INVEST? 20 YEARS AGO. THE NEXT BEST TIME? NOW

When she was born 12 years ago, Amanda’s parents took out standing orders with their banks to each save sh50,000 a month for a total of sh100,000.

When her brother Daniel came along they set up the same arrangement for him, but this time they raised the standing order to sh100,000 for each child.

Last week the parents decided to get a better return for their children’s savings, than the pitiable rate they were getting with their children’s saving account.

They bought a 14-year treasury bond that promises them double digit interest annually or about sh11m per year. That is almost enough to cover their annual school fees at current rates.

By the way the savings to the kids’ names – now locked in the bond, amounted to sh77m!

The parents continue to save, now sh250,000 per kid a month and plan to buy another bond within the next five years.

When I heard the story I couldn’t help bt remember the saying, do not despise, small beginnings.

Or that,

"we underestimate what we can achieve in ten years and overestimate what we can achieve in a year....

There are parents who can afford to put away much more than Amanda and Daniel’s parents, but they don’t and their children’s futures, or at least their education, is constantly under threat.

Many of us don’t invest because it sounds like a difficult thing and that it requires a lot of money up front.

The minimum required to invest in the afore mentioned bonds auctioned by the bank of Uganda every month, is sh100,000.

"There are two tricks to saving....

The first is that with your income save first and spend the rest and secondly, automate the process.  

I don’t know whether to laugh or cry whenever someone starts, I don’t have enough money to save.

But with hindsight I know that they just need an attitude adjustment. Most of us think we shall pay our bills and meet other needs and save what is leftover, which is usually nothing.

When the attitude adjustment is made even if you earn sh20,000 a day or a month, if you put aside one thousand shillings and adjust your lifestyle to sh19,000 you will be shocked how the shillings pile up.

When that happens it is not uncommon for savers to increase their rate of saving. Before not long they start socking away sh5,000 of their sh20,000 income.

And then a funny thing happens, when you accumulate  money, your income increases.

"There are spiritual explanations for this but let us keep it at, money goes where it is looked after well....

And when you automate the process things even get more interesting.

The story is told in Kenya of the man who used to go with his boss, a white farmer in the highlands, every month to Nairobi to sell their produce and stock up on supplies.

His boss’ last stop would be to pass by his broker to deposit on his share account there. 

One day his boss took him into the brocker’s office one day and helped him open an account. 

He started buying shares every fortnight like his boss. He didn’t understand what it was about but was doing it to humour “bwana mkubwa”.

Independence came. The bwana mkubwa went back to England. And our driver, lets call him Kamau fell out of the habit of buying shares. 

Years later, in the 80s, down on his luck and wondering how to survive, Kamau remembered he had a box of share certificates molding away under his bed.

Maybe he could get a refund on the money he had bought them for.

There was an uproar at the broker's when he turned up to redeem his money. Long story short he was good for a few million shillings.

"The moral of the story is automate the saving process. This works even if you don’t really have a future goal in mind. Start any way and you can pump up your savings when you get a cause.

And as you save you can educate yourself on the investment options available in the market....

You can’t go wrong if you invest like a bank. Banks, which have to remain liquid to ensure they can meet their depositors’ obligations, have perfected the art of investment.

They start by holding cash. When they have more cash lying around than they need to cover withdrawals and loans they invest in near cash assets – assets that can be liquidated within a year. These can be  accounts with other banks, treasury bills and  bonds. Any  additional surpluses will then allow them to invest in real estate.

The problem with the rest of us we rush the process, we want to buy property – to show we are working, treasury bills and bonds are not as sexy as saying “I own that building”.

The problem of rushing into real estate, when there is a need for cash and you cant liquidate your real estate holdings fast enough, you end up selling at a loss.

"The most successful investors are so because they create  a plan, which works and stick to it regardless of what hot investment is the flavour of the month....

When you set the ”machine” in motion there is often little to do but feed it according to a pre-determined plan.

The longer you can do that – it helps if you started 20 years ago, the better. But if you didn’t start 20 years ago or 12 years ago, like Amanda and Daniel’s parents, start now and we will be talking about you 12 years from now.

  

MADNESS, DOING THE SAME THING OVER AGAIN

In the last week it has been confirmed that President Yoweri Museveni will be the flag bearer for the National Resistance Movement (NRM) and that Kizza Besigye has not ruled himself out of the running.

The previous week’s excitement about People Power taking overt the National Unity Platform (NUP) was replaced by the fanfare surrounding  Lord Mayor Erias Lukwago’s public crossing to the Forum for Democratic Change (FDC).

Lukwago, estranged from the Democratic Party (DP) has run for the mayorship of Kampala as an independent the last two episodes.

"MP Robert Kyagulanyi is the flavour of the month, he has brought much excitement to the race, which a fifth episode of Museveni-Besigye race was unlikely to do...

Kyagulanyi, a relatively new face to politics, has nationwide name recognition as Bobi Wine, his entertainment alter ego.

Not since 2001 when Besigye threw his hat into the ring, has anyone raised as much expectation as the honourable Kyagulanyi has this time around.

 

In 2001 Besigye lent voice to the internal mutterings that all was not right in the NRM. The electorate ignored the other candidates – Aggrey Awori, Francis Bwengye and Chapa Karuhanga to make it a two horse race.

It has been a two horse race ever since. The excitement of new entrants – Miria Obote in 2006, Olara Otunnu in 2011 and Amama Mbabazi in 2016 failing to upset the titanic struggle.

"The failure of the new entrants to cause a ripple, despite early promise, is based on their lack of supporting infrastructure...

 

As proof neither of the aforementioned candidates was able to sweep a significant number of their supporters into parliament or into position on the local governments.

FDC has fared little better with Besigye as its flag bearer. Between 2006 and 2016 FDC has reduced the numbers of seats it holds in the house to 36 from 37.

This reduction is even worse in real terms as the house has grown to 426 from 319 MPs in 2006. 

"FDC’s real support in the house has fallen back by half as at the end of the last election could count on 8.5% of the MPs for support as opposed to 12% in 2006...

We know of course, that FDC has been haemorraging MPs in the last weeks, which means in the next house its already weak position in the house may very well be worsened.

The question of representation in the house is important for any presidential candidate. It means that a presidential candidate has meaningful support in the  constituencies, after all who better to campaign for you than one whose fate is intimately intertwined with yours?

MP Kyagulanyi came to house after an unprecedented landslide victory in his Kyadondo East by election.

He has helped a motley crew of MPs to the house since, based mostly on the novelty factor that envelops him rather than by lending his organisational structure to his allies.

 

We cannot judge Kyagulanyi by his people power MPs in the house, after the next election we will tell, for now we can speculate.

"Kyagulanyi has going for him his personal charisma and a youthful national demographic, that make us among the youngest populations in the world.

Numbers suggest half of the population are below 18 and 80% are below 35 years old, so we can hazard that at  least 30% of the population fall in that critical 18 to 35 year age group – all of voting age.

This group will not be swayed by talk of how bad things were pre-1986 and their expectations of their government is based on what they consume on TV and social media.

 

A 30 minute power outage has them tearing their hair out; A journey across country they expect to do in less than a day, with frequent stops for drinks and food; Medical care should be within arms reach and not from the “double colour” vendors in the taxi park.

These may sympathise with Bobi Wine but may not vote (the la venti kids?). 

"To bring out the vote Kyagulanyi will need a nationwide structure that can not only recruit and mobilise, but fire up the base and keep the momentum going until the elections....

Is it impossible? No. Improbable? Yes, in the remaining time with the shackles of covid-19 ensuring this will be difficult for everyone.

There are no miracles, a lack of organisation on the ground will make it impossible for a presidential candidate to unseat the NRM flagbearer.

The opposition will keep taking this class until they learn the lesson.