THE QUEST FOR IDIGENOUS CAPITAL

A couple of events happened in the last few weeks that made me think about the urgency of building indigenous capital.

On Monday, December 6, telecom company MTN listed on the Uganda Securities Exchange (USE). Since the last week of October MTN had offered its shares to the public in an initial Public Offering (IPO). When the results of the IPO were announced two weeks ago I was one of those whose jaw hit the ground that the offer was not fully subscribed and was kicking myself for not having bet the house on the IPO because I would have got full allocation.

But it also made me wonder at how local individual investors had missed the chance to be invested in the fastest growing industry in our economy....

A week or so later the new board of the Uganda Development Corporation (UDC) was sworn in. UDC has fallen far from its glory days when it was driving the government’s investment agenda and its resuscitation is one we should all be cheering on.

And finally two industries SangaVetChem and East Africa Medical vitals, producing animal health products and latex products respectively, were launched. They were unique because they have local directors partnering with foreign capital to meet local pressing needs.

Building an indigenous capital class is one of our most urgent challenges today. We have Idi Amin to thank for stalling the development of indigenous capital. In 1972 Amin expelled the Asians for reasons best known to himself but which he sold as a move to liberate the local economy. At one of the most disastrous attempts at asset relocation in the history of the continent, he then shelled out shops and businesses to his cronies.

"If ever there was proof that the African’s problem was not lack of capital this initiative proved it as the new businessmen soon ran the businesses into the ground, helped in no small part by the growing insecurity of the time...

Many people think that if Amin had not done what he had done the Ugandan economy would have been controlled by the Asians. This does not hold up to scrutiny.

At the time of the expulsion there were an estimated 50,000 Asians in Uganda. Across the border in Kenya there were 180,000 Asians and no one would say the Kenyan economy is overrun by Asians.  While the Asians there have thrived, Kenya has a more vibrant and credible indigenous capital class than we do.

The reason is simple business like any other skill has its rules. And like any other skill it is best learnt by somebody who knows it. Amin’s expulsion of the Asians meant we were denied the opportunity unlike the Kenyans to apprentice at their feet.

Our businessmen have tried to reinvent the wheel, with little success, so much so that when the Asians returned in the early 1990s in less than two decades had reinstated the previous imbalance, as if they had never left.

So what to do? The issue is building our own capital without disenfranchising anyone else, we tried that and failed.

It is erroneous to say there is a lack of capital in Uganda. The challenge is more that we have been unable to aggregate in meaningful amounts. NSSF, which has grown to a sh15trillion Fund and the biggest in the region is proof of this.

 "The real challenge for the growth of our businessmen is that they have not adopted the habits and traditions, as opposed to knowledge to build and grow businesses...

Here are a few obvious facts. A country is only as viable as its private sector. Success in business is not guaranteed. Therefore, to develop a vibrant business community we need more people going into business, so that by the law of averages we will have more successful businesses.

For starters we could start teaching financial literacy in primary school. We need to make reading financial statements second nature – you will be shocked how many CEOs can read a balance sheet leave alone act on it. This will achieve several things but most importantly demystify the language of business—accounts and secondly, ingrain in all our school going children that there is another alternative to the 9-5 job.

While the capitalist societies don’t have a similar formal process, they have had the benefit of decades of mentoring by businesspeople who had already hacked the process, they are not reinventing the wheel.

For those of us long past primary, government should invest more in business support services. Improving the quality of our businessmen will cure a lot of ills – lack of finance, high mortality rate of our businesses and the inability of our businesses to compete.

"The indigenous businessman is important because, more of his profit will remain in country – without forcing him, he will have a more national perspective than the manager answering to London, Johannesburg or Nairobi has and our politics will be much more predictable....

We will not build this class by bankrolling our cronies, as Amin so aptly demonstrated, but by helping them to acquire the business skills required to not only produce goods and services, but also raise capital locally and drive our goods and services into foreign markets.

UEGCL ON A PROFITABLE TRAJECTORY BUT …

Last week Uganda electricity Generation Company Ltd (UEGCL) had it’s annual general meeting during which it was reported the company was firmly in the black for the third year in a row, a healthier situation from five years ago when they relied on government handouts to stay afloat.

UEGCL, which owns all of governments power generation plants, saw their fortunes turn around when revenues from power sold at Isimba dam started gushing through. We can expect too that when Karuma finally come son line they will be on a irreversible trend to financial sustainability. Or not.

A cursory look over the company’s financials show that it made a profit of sh92b in the year to June this year compared to sh2.8b in the previous year. The quantum leap in profit – 3,100 percent, was due to foreign exchange gains—sh71b on their foreign denominated debt. While this was a happy situation, it was an unusual one as they often make exchange losses, with the last profit was registered in 2019. Nevertheless, the profit from operations was a healthy sh21b still almost a tenfold increase from the previous year.

UEGCL’s major revenue source was Isimba, which accounted for sh139b or 82 percent of the total revenues of sh170b.

Also while total assets slipped to sh7trillion from sh7.1trillion shareholder equity was up to sh833b from sh741b helped in no small part by continued reduction of accumulated losses on the company’s books. UEGCL has been profitable since 2019, three years in the 20 years of its existence.

But the management will be forgiven for not fully breaking out the champagne.

The company’s mandate does not stop at running government’s power generation assets but extends to building and acquiring new assets. It goes without saying this means the company needs money to do this.

"As it is now UEGCL cannot fulfill its full mandate because while it is provided for in their books government does not allow the depreciation and a Return on Equity (ROE). If they kept the depreciation on their plant and machinery, they would be better able to replace the existing infrastructure. As it is now to replace dams like Kiira and Nalubale UEGCL would have to run to government for funding which means UEGCL cannot stand on its own feet...

By allowing them some ROE the generator can then develop new assets either on their own or in partnership with other players.

The financial self-sufficiency of UEGCL is important because to begin with they are already behind schedule in meeting the country’s power generation needs. The National Development Plan II (NDPII) envisaged that we would have power generation capacity of 2500MW by 2020. There is a current installed capacity of 1,252 MW. While this is more than enough for now – peak demand is about 750 MW, going by current growth in demand and if we maintain the status quo we will be back to load shedding by 2027. While this may seem a while away, Uganda’s recent experience shows that it takes seven to ten years to develop a power generation project, so the time to start planning for new capacity was yesterday.

Government too can help improve UEGCL’s financial position by carrying the exchange risk on the foreign loans it contracts. While this year was good for UEGCL with some exchange gain registered more often than not in recent memory there have been more exchange losses than gains. This is important because UEGCL bills in shillings, if they were charging us in dollars for power this would not be an issue.

If they did just these things – allow UEGCL keep the depreciation, allow too for ROE and shield them from the exchange risk of repaying the loans, the company’s financials will improve markedly and allow them to go to market on their own to finance developments.

"It is not unusual. Across the border UEGCL’s Kenyan counterpart Kengen are not only wildly profitable -- $148m (sh533b) but have developed generation assets worth $2.2b (sh8trillion) over the last 10 years...

The government is currently borrowing on behalf of the sector, because they can get cheaper money as the industry companies have wanting balance sheets, companies will UEGCL which can then collect the the money from tariffs and send to government which then pays the creditors. The mere friction of passing through many hands rather from operator straight to creditor presupposes inefficiency, which we pay for in the tariff.

Maybe one last thing would be to convert the debt we have incurred on projects like Isimba and Karuma into equity, essentially government takes them over as a way to further boost the company balance sheet.

For a long time we had challenges with developing our generation capacity, hence our prolonged load shedding a decade or so ago. Drastic action by government has brought us to the happy place we are now, with surplus generation capacity. While transmission and distribution companies need help as well, UEGCL anchors the sector, now power generated no power to transmit or distribute.

To prevent future pain let government take the needed action to make sure UEGCL is sustainable well into the future.

 

BOMBS ON ADF AND THE LARGER QUESTION OF REGIONAL INTEGRATION

Two weeks ago our own Uganda People’s Defence Forces (UPDF) attacked Allied Democratic Forces (ADF) bases in eastern Congo.

Reports had it that the artillery and airstrikes were concentrated on an area of about 150 square kilometers. The ADF cannot have enjoyed the experience and while news is scanty, given the area that was flattened fatalities must have run in dozens never mind casualties.

Unfortunately, the operation is open ended with no time frame set to pacify an area, mostly dense tropical forest, bigger than the whole of Uganda.

The repercussions on our budget will be negative but we have to trust that this is a sacrifice we have to make with the long term in mind.

"For starters the security threat that the ADF pose cannot be overemphasized, but even more important is the security threat of having huge lawless, ungovernable areas bordering us. If it is not the ADF it will be someone else who has evil intentions on us using the Congolese jungles as his launch pad...

It does not help that there are more than 1 hundred armed militia’s roaming the area praying on the population and one would imagine happy to sell their “expertise” to the highest bidder. The emergence of these militias is not all down to criminal intent. In an area where the state has been absent for coming to half a century people have to protect themselves and sometimes in so doing they may just decide to prey on weaker neighbours and soon there is a full scale arms race in the area. And what is to stop them one day cross our imaginary borders and attacking on Ugandans?

The sustainable thing to do is to bring the area under some kind of central control by force initially, which should have been the job of Kinshasa but more importantly by creating an environment in which economic activity can flourish.

Sustainable peace comes from interdependence. Trade is right up there as one of the best ways to create interdependence. When we have no mutual benefit to ourselves war and predation become a real possibility.

So the collaboration with the Kinshasa to improve the road network in eastern Congo is actually what we should be focused on. Any military victories will be temporary but making movement in the area easier is not only useful from a security perspective but will automatically encourage the movement of people, goods and services.

An interesting story from the Mobutu Ssese Seko era explains why DRC – larger than western Europe, has less tarmaced roads than Uganda. During a state visit to neighbouring Central African Republic, then president Jean Bedel Bokassa drove Mobutu through wide, tree lined streets to his palace. At some point Mobutu, who was supposed to be impressed by this show of development, couldn’t hold it any longer, “My friend these goods roads of yours are how you will be overthrown!” he said.

This egocentric thinking has doomed the DRC to confusion and poverty.

"As it is now DRC and mostly the eastern expanse is fast becoming Uganda’s largest trading partner accounting for up to $400 million in exports. We have seen in our own lifetimes how little tarmac can totally change the economy of neighbourhoods and regions....

The 200 km of paved road that we shall help build in the region are just a tip of what is necessary to unlock the vast potential of that region and may very well serve as a useful stimulus for our economy to rebound in coming years.

If in these times when roads are not usable year around we are doing almost half a billion dollars in trade it is conceivable that we can more than double that with the most basic of road infrastructure in place.

Improved economic activity in the area will make joining up in militias less attractive and once the communities have tasted peace and stability will be loath to support any militias.

"Of course for the DRC they have to step up. Uganda’s presence is at best temporary, we would rather have our sons and daughters back home than roaming the jungles of Congo with a target on their backs....

Which brings us to the wider question of regional integration. It starts with recognizing that our borders, really only lines on paper, do not insulate us from the poverty and underdevelopment on the other side. That shared prosperity of first border communities and then whole regions is how will keep our worst excesses from consuming us all.

If it takes a handful of disheveled types running around playing war, to quicken the cause for integration so be it.

 

 

OF ENTEBBE AIRPORT, THE EU AND CHINA

Last week two news events far apart but very related caught my eye.

At home, there was an uproar about reports that China had taken over Entebbe International Airport, because we had defaulted on loans to expand the facility.

The story, which went global faster than it takes to say Shokolobangoshe, was dismissed by government who argued that the grace period on the facility only comes due next year and so it was technically impossible to default on a loan you haven’t started paying for.

My attitude to the whole hoolahbalooh is we needed money to expand the airport, which we did not have, we went out begging to the usual suspects and they turned us away, China offered and set their terms, otherwise we would not have got the money. That being said we are obliged to repay the loan – if only because it is good manners, rather than resort to cosmetic nationalism to get out of our obligations. But that is just me...

Later in the week the European Union announced a €300b (sh1,242trillion) plan to invest up to 2027, in the development of infrastructure abroad. All the commentators said that this was in response to China’s Belt and Road Initiative (BRI), a plan of more than 13,000 infrastructure projects across 165 countries to connect china to the rest of the world.

China’s intent announced in 2013 was clear, to gain access to the natural resources it so badly needs to fuel its own growth, gain some international influence as well and improve our connectedness.

So the analysts saying the EU are playing catch up suggest EU is seeing its influence, drawn from the colonial times, is fading or being eaten away by China looking to bankroll infrastructure in Africa, Asia, Latin America and Eastern Europe.

It’s an interesting twist of fate.

When Europe was colonizing everything that moved in the last century, extracting the resources that now underwrite their wealth, China was in isolation, its stature as the leading global power that it enjoyed in the middle ages long forgotten.

Colonial Europe built a lot of infrastructure around Africa, we have them to thank for the Uganda railways for instance, which infrastructure run unashamedly from high resource centers to the coast and on to the factories of Europe or the plantations of the West Indies and the US....

When they were building this infrastructure there were no conditions of democracy or human rights to set this up, these colonies after all were appendages of their home countries and democracy and human rights were only for them at home. The same standard was not upheld for the inhabitants of the  colonies.

China has serious considerations at home. It needs to grow its economy to improve the living conditions of its billion-plus people, to put off till the future this urgent would have serious repercussions to national stability there.

The infrastructure they are helping lay down across the world is not free, and the western media have warned against recipient countries falling into debt traps and have gleefully highlighted instances where the China’s lenders have had to come in to exact their pound of flesh.

Hence the disproportionate play on the half story about Entebbe airport received around the world last week.

China are not doing what they are doing for charity but out of self-interest, which often dovetails with our own interests. The massive infrastructure outlays we require to lift our people out of poverty is only denied by people who may not want the best for us.

Development history shows you cannot develop without transport an energy infrastructure of course this has to be underpinned by an educated and healthy population.

Many years ago I will never forget, then finance minister Saida Bbumba running around to get commitments from regional leaders, that they would take any excess power that Uganda would fail to consume from the 250 MW Bujagali Dam. This was a condition for the funding required to build the dam.

At the time we were suffering day long loadshedding, the Nalubale dam was creaking under the weight of our growing demand and yet we were barely 200,000 clients or less than one in 20 homes connected to the grid.

Somehow they thought we did not need more power and the Bujagali dam would only be viable if Kenya, Tanzania and Rwanda would promise to take the excess power! You had to wonder why someone would think that Ugandans do not need power. That there was no effective demand. Umeme’s financials over the last 16 years would beg to differ.

"Concerns about the opacity of some the Chinese dealings cannot be dismissed and given our public officials corrupt tendencies, it is right to scrutinize all and every deal we get into with China. But we should be careful not to throw out the baby with the bathwater...

And before I forget China is going to spend at least four times or €1.2trillion in their own BRI up to 2027.

 

THE CHALLENGE OF HOUSING THE UGANDA MASSES

Last week the Vision Group hosted its first Homes & Construction Expo.

The event that was carried out mostly virtually, explored the process of getting a home from buying the land to financing the build to construction and eventual  finishing.

The event a spinoff of the Saturday Vision's section of the same name, addresses a key aspect of our economy.

Interestingly, during the same week parliament was considering the landlord and tenancy bill, which among other things aims to curb the power of the landlord over the tenants on his property. The initial bill seeks to restrict  how much the landlord can demand as advance payment, prevent them from charging in hard currency and  arbitrarily evicting their tenants among other things.

The situation of housing remains inadequate, according to official figures there is a deficit of more than two million quality houses in the country.

This is a mind boggling number when you consider that,

the stock of housing has grown exponentially over the last 30 years to extend Kamapala beyond Ntinda, Wandegeya, Lubaga, Najjanakumbi, Muyenga and Nakawa...

One of the biggest drivers of the economy during the period has been the construction  boom. Construction currently accounts for 12 percent of GDP and the sector a doubling in size every decade.

This has not happened by mistake. In the early days of the NRM the argument was made to impose rent controls, as the few landlords were charging exorbitantly for even the most basic of hovels.

The government resisted these calls and for good reason.

By letting landlords charge what they wish it made the sector attractive for investment, first of all by the tenants who were suffering under the weight of the high rents and secondly by the real estate investors  who came in to the market to fill the gap.

As a result housing supply has risen to meet demand or at least tried. This too has resulted in greater choice with housing, for every economic segment now catered for.

Were government to have capitulated to the populists then the situation would have been so much worse.

"The populists have reared their heads again to try and restrain the landlords, in the process jeopardizing the viability of the sector and guaranteeing that bridging the housing deficit will be so much harder...

But why don’t we have huge housing developments like neighbours Kenya, who have doe a better job of keeping up with the rapid urbanisation?

It starts from our tenure system, which is convoluted at best and confused at worst. It raises the prices of the few pieces of land whose status is verifiable. No one is going to commit billions of shillings needed to develop the housing estates when they are not sure whether they own the land or not. Or if putting the necessary land together will throw the cost of land out of reason.

Secondly, we don’t have locally the large pools of long term capital required to finance these estates.

Lately, National Social Security Fund(NSSF) have embarked upon the development of their land in Lubowa and Temangalo, which will bring more than 5000 housing units to the market within the next ten years. The nearly sh15trillion fund has the long term money to do that, beyond them there is nobody.

In addition to the lack of long term money the cost of money is too prohibitive. Mortgage rates in the double digits do not have potential home owners running to the bank.

Many of our developers take out dollar loans, where they can enjoy sub 10 percent interest rates but then pass on the exchange risk to the potential buyers or tenants.

And finally government gives little to no incentive to developers meeting a key need. In the past developers have suggested that government underwrite the cost of infrastructure, a major cost, as a way to lower housing prices. Nothing has happened.

In other countries which recognise the importance of housing, governments has provided highly confessional funding for large scale developers. In some countries if you are a developer and the government provides financing and you fail to pay, as long as you have provided the housing as intended they can write off the money. Interestingly serious players rarely if ever take this exit route because it would jeopardize their access to the same facility in future.

"The government did a good thing to let market forces help it bridge the housing deficit, it’s own efforts through the troubled national housing corporation have not caused a dent in the situation.

That being said they time was yesterday when they should have jumped in determinedly to  facilitate the sector better...

 

pbusharizi@newvision.co.ug

Twitter @pbusharizi

 

 

NSSF MID TERM PASSED BUT NOT IN TIME FOR CHRISTMAS

This week two momentous announcements were reported.

This New Vision quoting informed sources reported that a January 3, 2022 opening for schools is being considered at the education ministry.

Hot on the heels of this was parliament passing of the new law governing the National Social Security Fund (NSSF). The new law’s major amendment, or at least the one that has captured the most attention is the allowing members mid-term access to their savings.

According to the new law, savers will be able to withdraw up to 20 percent of their savings when they attain the age of 45 and have saved for at least 10 years.

The bill still has to be assented to by the president and the finance minister will agree with the NSSF board how this new amendment will be executed. The commitment by government is that they will start paying out after two months from the passing of the bill.

Simple arithmetic suggests the money will not be available for Christmas merry making or paying school fees in January.

But therein lies the challenge. 

The supporters of the amendment argue that they should be given access to their savings to set up some investments before they grow too old – 55, to set them up and run them. That is the reason we told everybody and ourselves to justify the raid on our savings.

The truth, which will soon become apparent, is that we really want the money to consume. We are not unlike the man who has been on a long journey and just wants to lay his luggage down, rest and look back on far we have come even when they are just steps from completing the journey.

"We will buy cars, start or finish the construction of our home, take a holiday to places far and wide and god forbid, go and work up a tab at the bar to validate our place in society...

For the vast majority of us, our NSSF savings are the biggest asset on our balance sheets. It is so because government dragged you kicking and screaming to save, were it not for that, we would not have two shillings of our own to rub together.

The management of NSSF’s argument that this move, which could cost about a trillion shillings would hinder their ability to continue paying out double digit interest rates into the future. Not in those exact words but the sh1.8trillion pay out this year, which includes money to those who due their payment at retirement, means either they have to liquidate some of their investments and hence forgo those profits or borrow the money, lowering their profitability and hence the interest they can afford to pay.

NSSF has grown into the biggest fund of its kind in the region, a lot of this is due to better compliance from employers but also because they have been allowed to retain most of their profits, which they reinvested. Under the new scenario NSSF will have less to play with and it can be argued then, that Richard Byarugaba and his troops will have to really earn their keep now, because crazy as it sounds while hobbling NSSF we will still expect the stellar returns of the last few years.

For the rest of us, if we do invest, I can guarantee we will not find investments that net us more than 10 percent a year and hence we would have been better off leaving our money in NSSF. But of course we will take comfort from the fact that we have our money close to ourselves – even if its dwindling to nothingness, rather than have it managed by a faceless institution.

Think about it, if mid-term access never came up and NSSF managed ten percent interest for the next ten years, the money you have now in your account will have more than doubled – would have grown 2.594 times to be more precise. So if you have a sh100m in your account today and never added a cent of your or employer’s money in the ten years, when you are retiring at 55 you will have sh259m to take home.

But we argue that what if something happens to NSSF in that time and we lose all our money?

Well I remember someone who collected his sh100m in 2006. While NSSF has not managed double digit interest since then, let us assume they averaged eight percent during the period, my friend would be looking at more than sh300m in his account now, assuming he never contributed a cent since.

"Obviously it’s a case of better a bird in the hand than two in the bush....

Give us our money we eat it and the future shall take care of itself.

 

OUR SECURITY IS TOO IMPORTANT TO BE LEFT TO THE POLICE

On the night of July 11, 2010 two bombs were set off at Kyadondo Rugby grounds and the Ethiopian Village in Kabalagala, leading to the death of 76 and injuring dozens more, in the worst terror attack in Kampala.

Six years later, then high court Judge Owiny Dollo convicted 13 people for the attacks. During the trial a conspiracy that stretched from Ahghanistan to Somalia, that roped in Kenyan and Tanzanian accomplices was uncovered.

Three bombs were meant to go off that night, but one in Makindye malfunctioned and was discovered in an abandoned bag by staff the next day. The two that went off were detonated by suspected Somali suicide bombers.

That was the last we heard about suicide bombers in Uganda, until three weeks ago when one Matovu Muzafari blew himself up and killed one other passenger, travelling in bus heading west on the Kampala-Masaka road.

"At the risk of understating the obvious, signing up to be a suicide bomber is not for the faint hearted...

. From what is known suicide bombers are often young, and their trainers have exploited some past injustice against them or their families to brainwash them into giving up their lives for a cause. So the Muzarafi incident threw up some interesting questions. Had we started breeding our own suicide bombers?

The Tuesday attacks seemed to confirm that. Seen on CCTV camera one bomber, with a backpack was seen walking past the entrance to the Central Police Station (CPS) before he is engulfed in a orange ball of flame and smoke. The second bomber was seen riding up parliament avenue towards parliament before he and his boda rider exploded.

"By definition, no one knows how a suicide bomber behaves before he presses the button. But security minster Major General Jim Muhwezi suggested the bombers may have been unknowing accomplices to the crime. Using the CPS bomber as an example Muhwezi said he was on the phone when the blast went off, his body language suggesting he was still moving on to another destination. 

In the earlier case on the bus it was reported that Muzarafi’s accomplice Nsubuga Muhammad, alighted from the bus minutes before the bomb blast. In hindsight Muzarafi may have been oblivious to his eventual mission and that Nsubuga may have detonated his bomb remotely. We will not know for sure as Nsubuga was killed soon after by security agents.

Given our experience, where suicide bombers have been the most lethal, it should bring some relief that we may not have suicide bomber cells in Uganda.

That being said, if we needed any confirmation that security issues cannot be left to the security agents, this week was it.

The attackers live among us and they can attack at any time of the day or night. It may be added that previous bob attacks were during the night but possibly because the curfew restrictions the bombers have decided there are not enough targets at night.

Now not only should be on the lookout for luggage left unattended but also for unusual behavior from our neighbours and desist from helping carrying unknown luggage around.

The village councils need to be reactivated. They need know who all the residents in their areas are, where there have come from and other relevant details.

"The point is personal vigilance is more important than ever. The war is being brought to our doorsteps...

The police are pointing at the Allied Democratic Forces (ADF) and this too is interesting. In the 1999 spate of bombings in Kampala the story was that the ADF, under pressure in their bases in the Rwenzori mountains were hoping to divert security attention from operations in western Uganda.

These attacks may suggest the ADF are suffering unwanted pressure in the eastern Democratic Republic of Congo (DRC) bases and these attacks it is hoped can ease their pain.

Stay safe!

INNOVATION IS WHERE THE ACTION IS, WILL BE

Hot on the heels of the National Science Week that ended last week, the Kampala Innovation week will kick off next week.

One may ask why the two weeks didn’t coincide –  after all science and innovation go hand in hand, but for emphasis alone, it is good that they are held on separate weeks.

What is of particular interest to me with upcoming innovation week is that it will bring together innovators, entrepreneurs, investors and government stakeholders to “explore the role of innovators and entrepreneurs in achieving Uganda’s development ambitions, deliberate on how innovation and entrepreneurship can be harnessed for job creation and employment.”

The best of innovation allows for more output from the same inputs. Innovation comes with improvements on an existing idea.

"The challenge for innovators is often how to commercialise their innovations. It is not true that if you create the best mouse trap all the world will make a beaten path to your door. On the rare occasion that this happens look out for a good business mind supporting the innovators. It happened at Microsoft with Bill Gates backing up Paul Allen or at Apple with Steve Jobs providing the environment for Steve Wozniak to do his thing.

Left to their own devices innovators’ work will never receive wide acceptability and the benefits lost to the wider world.

This is an important point to note, especially for a country like Uganda.

I heard years ago that after an aerial geosurvey for Uganda’s minerals, it was found we have so much mineral potential that were we to exploit it fully, we would have to move all Ugandans out of the way, essentially exile them. And that is all the natural endowment under the ground without considering that we have a fifth of the region’s arable land.

The reason we are a poor country – judging by our sub $1000 per capita income measure, is because we have failed to unlock this value. That we have failed to create an environment for our innovators to exploit this rich bounty.

We have seen the artisan miners from Busia to Buhweju, that the people are there, trying to exploit these mineral deposits. However, their innovation is not being backed up by an enabling environment or the business person.

This is just one example.

The point is, innovators cannot operate successfully in silos. They are part of a wider ecosystem that includes business people, financiers, academia and government and the sooner we appreciate this and act on it, the better.

Hence the importance of the innovation week. When all these members of the ecosystem find themselves in one place it can only be a good thing.

As always happens the private sector leads the way. While this week is sponsored largely by the UN Capital Development Fund and Startup Uganda, an association of innovation and entrepreneurship support organisations, in places from Kamwokya to Ntinda and Lubaga to Kanasanga there are private operators who have tried to create spaces for the innovation ecosystem to find root.

But beyond the lucky meeting of minds one week annually, government needs to take a more proactive role in creating the enabling environment to allow these players to not only survive, but thrive...

As stated earlier good innovation allows us to do more with less. In a country looking to take advantage of our youthful demographic, our appreciation of what it takes to make innovation work is more critical, if only because it can be an engine for job creation.

Also especially because the covid-19 pandemic has reset the way the world works. The reality is that many business models in trade, services and manufacturing have been disrupted for good. For one, we are moving towards more automation and digitization, minimizing the need for labour. The people who argue for manufacturing as a driver of job creation have forgotten or are ignoring the fact that fewer jobs than in the industrialization era, are required in modern factories.

Which all points to the fact that we are going to have to rely on our own ingenuity, to make paying work for ourselves.

"Government is always tempted to jump in and throw money at the problem, but this money will go a longer way if it is anchored by a good strategy that takes into account our endowments and capacities, our needs and the available markets in which we can compete...

The innovation week can be a good learning and networking opportunity for all concerned. See you there.

 

 

 

MUSK ADDS UGANDA ECONOMY TO WEALTH IN MINUTES, SO WHAT?

Two weeks ago South African born billionaire Elon Musk’s wealth jumped $36b after car renting company, Hertz announced it would order 100,000 cars from Musk’s company, Tesla.

The gain in his wealth was as a result of the market reacting to the news and sending Tesla shares past $1,000 each. In the process Musk’s interest in the company top $300b.

These are just figures until you think that in

"Mr Musk’s gain last week is more than the total GDP of Uganda. And if that is not enough to make you seat up and take note, the World Food Program (WFP) boss, David Beasley said a sixth of Musk’s new gains would be able to save 42 million people around the world battling hunger...

Beyond trying to wrap our minds around these mind boggling numbers should be the question how can we have our own Elon Musk’s in Uganda.

Why should we care about having comparable wealthy men and women? Because such people create jobs, foster innovation and can very well change the way our country is run, for the better.

Musk is first an innovator in how to mass produce electric cars, that will go some way in saving the planet with the use of clean energy – the subject the recent climate change conference, COP 26 grappled with. We need people who can take our innovations, for which they are many, scale up their production, distribution and create wide acceptance.

How did the US create Musk --- or Bill Gates or Warren Buffett or Mark Zuckerberg and at least another 400 billionaires?

"Infrastructure is key to the growth of these fortunes, but even more critical is the development of human resource and then creating the environment for them to able to actualize their inherent value...

Musk left the constrictions of apartheid South Africa as a boy to study in Canada and the US. While there he inserted himself into the technology ecosystem. PayPal, Tesla and Space X are the result.

This environment in which Musk found himself had, and has, thousands if not hundreds of thousands of innovators and scientists working in collaboration to solve the world’s challenges. But before they were experts they went through an education, especially at university, where they were encouraged to explore and invent. Even better, their innovations were not for the sake but were snapped up the private sector, people Musk, who scaled up and commercialized them.

It is a model we can copy, never mind on a smaller scale. It starts with recognizing that human resource of all the factors of production -- capital and land are the others, is where emphasis should be placed. The other two are really enablers of our human resource.

This is particularly important since for starters, we have a huge agricultural endowment that we are not taking full advantage of, or squandering all together for lack of human capital to exploit it.

The argument can be made of course, that there is a lot of research going begging in all our major institutions, and if only we could reach for the files and dust them off, it could make a world of difference.

A decade or so ago Nile Breweries wanted to brew a beer from local inputs. They found the solution in a breed of sorghum, Epurpur, which was derived from our natural environment and enhanced in our labs years before. It took a business to have a need and to look around.

It means

our universities need to learn how to market themselves and their innovations deliberately, and not rely on luck to find them...

Interestingly our very same universities teach marketing.

In the US, Silicon Valley, where many of the innovations that run our increasingly connected world come from, has learnt not only how to market their new findings but gone a step further and discovered funders for these same projects.

While our financial system is still very shallow, dealing only with going concerns and not start ups, government would need to come in and hand hold these budding enterprises.

"Inevitably government will not do a good job of it, but it will at least open a new market that the private sector can then get into....

It has happened before. Government kicked off the fish export business when they set up a fish factory at Masese in Jinja, which flopped but was the foundation on which our current fish export industry is built.

Or even better, cleverer and cheaper, government can seek out these kind of financiers and work with them to create a whole new layer in the financial industry, government helping with some seed capital and enabling regulatory environment.

But whatever we do it will always come back to the people, the people who know how to do this and have some experience in doing it. Preferably if they were Ugandans, experienced in these particular sectors or building such value chains.

The legacy of post-independence Uganda is the number of Ugandans who have been flung around the world like the biblical Jews.

How about we start with an inventory of all Ugandans abroad, especially our specialists, we PhDs in everything from artificial intelligence to agriculture to waste management.

Former Nigerian president Olusegun Obassanjo took it a step further. He contacted all these experts and invited them back to Nigeria for a few days to give a paper on their fields and how Nigeria can employ their expertise or exploit the field. With this information a strategy was drawn up and things are happening.

Musk, by the way is worth more than $300b.

LESSONS FROM THE ETHIOPIA TRAGEDY

This week marked one year since the Ethiopian civil war begun.

What begun as a political dispute when current prime minster Abiy Ahmed rose to power and sidelined the once dominant Tigray People’s Liberation Front (TPLF) flared into a full blown civil war and now the imminent fall of Addis Ababa.

This is a tragedy on many fronts not least of all because these developments will set the continent’s second most populous nation back politically and economically.

The signs however have been staring us in the face. While rapid economic growth over the last twenty or so years – the size of their economy was doubling every eight years,  made it look like Ethiopia was on an irreversible path to development you cannot paper over the realities of poverty and inequitable development...

It is not news that Ethiopia has not been the best place for journalists to work in recent years and what triggered the recent uprising is the government’s alleged blockading of Tigray, preventing much needed relief aid from reaching the northern region which is being ravaged by drought.

The details are, of course much messier, but one can guess that Ethiopia’s politics, which is organised along tribal lines is at the heart of it.

And therein lies the challenge of running a developing country, at least in our part of the world.

The reality of power is such that you have to cobble together a power base to propel yourself to power and once there to maintain you there.

When a leader in our parts look around the easiest coalitions are family and tribe, not labour, landowners or industrialists as happens in more developed economies.

All the textbooks will tell you that the narrowness of such powerbases are a recipe for intolerance and instability and are not the best base from which to launch a democratic nation.

And for the while that it works everybody thinks “this time it will be different”, but you cannot subvert the laws of society for long before they turn around to bite you.

As Bill Clinton said when he run for the White House in 1992 “It’s the economy, stupid!”

Any leader worth his name in the world and more importantly in our neck of the woods, has to have the economy at the top of his agenda.

He has to make it his ambition to create the class structures that supersede the politics of tribe and ethnicity. They do this by creating the environment for economic growth, making it easy for business to thrive – you ensure safety of property rights, lay down business enabling infrastructure and allow the markets to thrive....

The cold war showed us, with the collapse of the communist block, that countries are only as credible as the viability of their private sectors.

The private sector creates the economic activity that can be taxed. With these taxes government can provide public goods and most especially education and health services. Education and health are critical because they are the rungs on the ladder required to allow for social climbing of even the lowest members of society. They improve the quality of your human resource.

Education, for one is a great equaliser, allowing students to criss cross the country, interact with other tribes and demystify all the myths surrounding our differences. It also allows them to transcend their ethnicity and causes collaborations that eventually lead to the creation of classes with wide cutting interests.

There are two reasons why leaders do not pursue this progressive course; it takes a long time for these transformations to take root and in the meanwhile they revert to their politics of ethnicity to hang on to power.  But also because it will very well mean working yourself out of a job as the people become more empowered and clamour for the share of power. It is inevitable.

But also, for the simple reason that political expediency does not allow for the selling of long term dreams that you will not be around to see through.

"A better educated, middle class dominated country is unlikely to revert to brute force to resolve political disagreement. They have too much to lose...

Better that than to encourage tribalism and fratricidal war as we are witnessing in Ethiopia, which bursts out and undoes all your good work.

LOCAL WISDOM AND UNDERSTANDING THE MTN IPO

In the ongoing battle to explain the MTN initial Public Offer (IPO) I got a call from a long lost source.

A banker of long standing, he is one of those who gave a young man learning to report business the time of day. Ordinarily he does not suffer fools gladly, but looking back he was painfully patient with my beginner’s ignorance.

He still has a lot to teach.

Our discussion was long and far reaching, but maybe of interest to some would be his take on the MTN IPO.

To simplify it for me he created an agricultural analogy.

Imagine that there was big open space in your locality, he begun. No one uses it, it has been a green grassy plain for a long time, for as long as you remember.

Then one day there was a lot of activity – fence building, grading of the land and roads. The story was that some people for far away, with money had gone to the district and had leased the land from the local government. They said they were going to set up a vineyard, grow grapes for wine making.

Of course the villagers laughed. Who had ever grown grapes here? What a waste of money.

The promoters however went along with their “crazy plans”, the vineyards were planted and it seemed like they flourished – the local man wouldn’t know how to tell anyway. Within a few years the owners of the vineyard started trucking cartons of wine, past the villagers and out to places unknown.

But in order to maintain local relations, they started marketing some limited bottles in the neighborhood. The locals developed a taste for the wine and became a major market....

In due course the lease for the land came up for renewal. The local authorities in their wisdom now insisted, as a condition of renewal that the vineyard owners should sell a share of the business to local investors. Their thinking was that apart from tax, some of the profits should stay in the local community.

There was some haggling, because the vineyard owners were making a lot of money and felt no need to have local partners. And they did not need to raise money for their business locally, which would have been another reason to try and bring in local investors.

They even argued that the sale be to the biggest local business man, Nasser Fadhul, locally known as NSSF (ok, that was my own addition). This would have been convenient for them to deal with one buyer rather than the whole district, but they argued too, that if NSSF bought it all, it would guarantee that the money would be retained locally. If they opened it up to all buyers people from other districts would come in and buy as well and the cause to keep money in the community would not stand. But the local authorities put their foot down and insisted that the villagers should get a share in their individual capacities.

Once they agreed they went out to the market. Given the prosperity of the vineyard/wine makers – the villagers used to see only four-wheel drive cars driving in and out of the compound, it seemed obvious that everyone would want a piece of the business.

But surprisingly stories started flying around that, the owners wanted to sell and leave the villagers with a shell of the company; money from the sale of shares was going to owners and not going to the business; the company status was not changed to allow it sell shares to the company and therefore the sale should be stopped; the vineyard had reached maturity and the profits would not be as heavy as before.

All these rumours, despite the owners describing their business to the public in a well laid out prospectus.

"The vineyard owners explained they were not going anywhere, after all they were only selling a fifth of the company and intended to be around long into the future to enjoy the returns of their sweat, which also put paid to the allegation that the business had hit its peak and was in decline. The payment to them for the shares they were selling would not affect the business and in fact in the future, given their projections for the company, it was a small amount of money. In effect they were forgoing future earnings and capital growth in selling their shares....

They did not know where to start in explaining that they were not selling shares legally. The deal had been struck with their own local leaders, looked over, over and over again to ensure it met all legal requirements locally and abroad. They were open to further scrutiny on this matter if people wanted.

My old friend has his own theories about why the rumours were running rife and he thought it was little to do with the financial illiteracy of the villagers. Maybe it was something to do with the fewer the buyers the few will get bigger individual shares?

After all he pointed out, if they did not get any buyers, the vineyard owners could report to local authorities that people did not buy and keep their share of the company to themselves. More than gladly.

My banker friend stopped there, ending his narration on a biblical note, “Many are called but few are chosen.”

 

OF TAXES AND CORRUPTION

Here are some rapid fire figures that you may or may not have known.

Uganda Revenue Authority (URA) is celebrating its 30 years of existence this year.

In the year URA opened its doors for business, the size of the Uganda economy was $3.32billion according to the World Bank.

Last financial year URA revenue collections came in at sh19trillion or about $5.3b.

So, URA last year collected one and a half times the economic output of Uganda in the year that it was launched. Assuming everything remains the same (Covid-19 emphasized how redundant such an assumption is), URA will collect at least, the equivalent of the country’s GDP in 1991 every year into the future...

That is an interesting statistic on several fronts but two leap to mind.

One, is that despite these consistent gains in revenue collection, we still need to collect more revenue as 13 percent of GDP, which last year’s collections represent, cannot support our development goals.

And secondly, to think how small the economy was in 1991 relative to today shows how far we have come. If all goes well, we will be saying the same thing 30 years from now about the size of the Uganda economy today.

Unfortunately, as it often is with Uganda every achievement comes up against an equal or more dramatic downside.

This week the new Inspector General of Government Betty Kamya reported that corruption accounts for sh20trillion annually. I thought there must have been a printing error because that would have been half of last year’s budget or as pointed above all our tax revenues gobbled up by rapacious public officials. It is inconceivable that government would have been able to function to any level, if half the budget was stolen.

Kamya explained that sh131.2b was due to lost taxes, sh233b in regulation related losses, sh451b losses in the education and health sectors, sh459.2b to misuse of public facilities, sh590b in procurements these are the ones we know and come up to about two trillion shillings. A heftier sum than estimates of a few years ago of sh500b lost to corruption annually. Clearly there has been some steady progress in this respect.

To this number the new IGG added losses due to absenteeism of about sh2trillion and to round it off sh15trillion in losses due to environmental degradation.

"While it was a relief to know that the rapacity of our public servants had not hyper inflated, there is still a lot of cause for worry....

In my book corruption is one of the biggest causes of inequitable distribution of the benefits of the growth of the last three decades.

The budget this year stands sh44trillion assuming a population of 44 million that means the government plans to spend a million shillings per Ugandan. So the two trillion lost in taxes, procurements and misuse of public facilities is the allocation for two million Ugandans gone into a handful of people’s pockets. And after denying the two million Ugandans security, infrastructure and social services what do this handful of officials do with their ill-gotten gains? They improve the security around their mansions, fly their children to school out of the country and themselves for annual health checks, that is before we talk about lavish holidays in the Seychelles, Cape Town or the French Riviera.

It is already bad enough that government is spending a miniscule million shillings annually on every citizen without some rapacious officials keeping for themselves the entitlement of thousands of Ugandans at a stroke of a pen.

But by widening the definition of corruption to absenteeism and environmental degradation the IGG is saying that corruption goes beyond stealing funds in the present to also the medium term effects of cutting work and the long term effects of environmental degradation.

The rich man who fills up the neighbourhood wetland today to build his apartment complex may not only be depriving the community of a water source today but is also causing flooding and its attendant effects on the community. The factory owner allowing untreated effluent into the lake is raising the cost of tap water and therefore denying poorer communities of safe drinking water. Cutting down trees to develop massive agricultural enterprises may contribute to climate changes that kick the ladder from under the poor. And on and on and on.

It is useful attempt to come to grips with the full extent of what constitutes corruption and hopefully then makes the fight against the vice more effective.

But it has been said before in this column that the fight against corruption will only begin to gather traction if we demonise to the point that the perpetrators are shirked like the man who defiles his infant daughter. There has to be social censure, we have to agree that this is a vice that affects us all even if the money is eaten in faraway Kampala...

As it is now our corrupt officials are given p[ride of place at Sunday service at our weddings and other functions. The message to all is that you have to take private advantage of your office wherever you are in order to be taken seriously in our society. Therein lies the problem.

 

THE OPPOSITION: ANOTHER SHAKING MY HEAD MOMENT

A week or so ago another political group, the People’s front for Transition (PFT) was launched and promptly announced Kizza Besigye as its leader.

Something had been brewing for some time. Besigye it has been reported, has been holding meetings with opposition leaders since the January election in which President Yoweri Museveni retained his seat and Robert Kyagulanyi came in second. This was the first election since 2001 that Besigye has not been on the ballot paper, an omission that maybe prompting his latest maneuvers.

The public reaction to this latest move is mixed. On one hand Besigye’s critics think he really cannot stand to be out of the center of Uganda’s political stage. People were clamouring for him to step aside, which he did and see what happened. His successor flag bearer at the forum for Democratic Change (FDC) Patrick Amuriat polled under five percent of the vote in the January presidential polls.

Those sympathetic to Besigye see him as the only credible counter to Museveni, never mind he has lost in all the four challenges he has mustered. They think he is too important a political figure to be left out in the cold as seemed was happening in recent months.

For the neutral observer Besigye’s most recent reincarnation raises some disturbing questions.

"If one of the biggest criticisms of the National Resistance Movement (NRM) is Museveni’s dominance, near omnipotence in the party and how it has stifled the upward mobility of other potential replacements to him. In Besigye they see a similar trajectory in the FDC and in the opposition as a whole....

Kyagulanyi’s challenge for the presidency while it ended in defeat, served to reconfigure the composition of parliament, with his nascent National Unity Platform (NUP) uprooting FDC as the leading opposition party, while at the same time engineering an ejection of all NRM’s bigwigs in central Uganda. That being said there are doubts about whether Kyagulanyi has the stature of Besigye and the ability to similarly carry the opposition on his shoulders.

Relatedly what does the opposition’s over dependence on Besigye do for attempts to build institutional capacity in the opposition? If there was any proof that FDC is institutionally weak was the dismal performance of the FDC at the beginning of this year.

It was a double loss for the opposition. By finessing Mugisha Muntu out of FDC and replacing him with Amuriat, the general was out at sea without FDC’s near top of mind awareness country wide and failed to make an impression.

This ambivalence has allowed Besigye to step back into the limelight in a way his predecessor Paul Ssemogerere was unable to do. Ssemogerere run for the presidency in 1996.

But Besigye is not the irresistible force to Museveni’s immovable object. A rethink of how to unseat Museveni has long been overdue and with Besigye’s reemergence we can expect such plans to build up party capacity will not get much voice...

 

Besigye it seems has worked out that all he has to do is bid his time, remain relevant for the day that Museveni steps off the stage. As the second most recognized politician in the country the presidency would be in better sight than before, whatever the NRM can throw against him.

Of course, whether Kyagulanyi can sustain his momentum for the next few years may very well put paid to Besigye’s assumed strategy.

So Besigye’s return to the center has a net negative effect on the opposition, especially the ability to build their internal capacity.

In recognition of this there is rumour that plans are afoot to cause a constitutional amendment that would return Uganda to a parliamentary system. Under this system there would be no direct elections of the President but the party with the most seats in the house would have the right to choose the country’s president.

With one stroke this change – if true, would force parties to build up internal capacity, while reducing reliance on dominant personalities. And very well play into the NRM’s hands.

MTN AND THE SHORT VERSUS THE LONG VIEW

Last Monday telecom company MTN opened the sale of 20 percent in itself to the general public.

The sale or Initial Public Offer (IPO) will last till 22 November 2021, during which it is expected about 4.5 billion shares will be sold to the general public. Each share goes for sh200 and 500 are the minimum number shares one can apply for.

"MTN has thrown in a further sweetener, that if you buy the shares using your MTN number you get a bonus ten shares for every 100 shares. If you buy via other means – direct through the brokers with payment done in cash or through the banks, you get an additional five shares for every 100 you buy.

This amounts to a five to ten percent discount on every share you buy...

Shares will go on sale on the Uganda Securities exchange (USE) on 6 December 2021.

Since the opening of the sale of shares the chattering masses have gone into overdrive, analyzing the share issue, nine times out of ten without even looking over the 90-page prospectus, available to all online.

So to that extent you can imagine what the quality of discussion was, showing how financially illiterate we generally are.

For one thing people cannot make the distinction between an investor and a trader, therefore arguing at cross purposes.

While both are looking to preserve capital the trader is looking to make quick gains due to price fluctuations, while the investor is looking to buy into a durable company that can be held for longer periods benefitting from dividends and capital gains – price increases in the share price over longer periods. The two have different mindsets on the same issue.

So the argument tended to take the tone of there is no short term gains to be made in the offer versus those looking to longer term gains and arguing there is good value in the offer.

Even among the latter group there was some disagreement about whether there is scope for long term gain or not.

"It was like a sprinter arguing with a marathon runner about what the average speed is ideal to win a medal. On the surface of it the argument should not arise...

It was also interesting how we suddenly had a proliferation of stock analysts. As of last week there were 40,000 Securities Central Depository (SCD) accounts – many of whom have come on board in recent weeks due to a recent initiative to make it easy to register online and using mobile phones. The SCD account allows one to trade on the Uganda Securities Exchange (USE).

Given those few SCD accounts as a proportion of the national population or even the population of Kampala, who are all these authorities jumping out of the woodwork?

But it was an interesting study in investment psychology. You know how it is, you put your money together and decide to open a shop. There is something to say about consulting widely but anyone who has committed his funds to any enterprise knows how you will mostly get negative feedback, the shrillest from those who have never opened a shop.

"It is a human condition and not only peculiar to Uganda. That is why 90 percent of any population’s wealth is controlled by five percent of those populations. This small number are the ones who can break above the chatter and do what the majority are not willing to do to succeed...

It’s the same way MTN took a chance on Uganda – their first market outside South Africa, when we had a per capital GDP of less than $300 and other investors thought Uganda could not sustain a mobile phone market.

Twenty-three years later as a $1b-plus company, MTN is coming to the market. They have done all the heavy lifting and been paid handsomely for it, so we are being offered the finished product with a lot of the startup risks managed. The company has not reached its peak, if the experience of Safaricom in Kenya is to be referred to, so there is still a lot value to be created and shared with new shareholders.

Risks still abound and to the extent that they can MTN has outlined them in the prospectus.

There are no sure deals in life. In Uganda only death is for sure. Investors in the new MTN offer will hopefully appraise themselves of all the risks and if they think they can stomach the risk they will buy shares if not they will wait for the next deal.

BOOK REVIEW: THE HOUSE THAT MUSEVENI BUILT

 

The House that Museveni Built will catapult you, almost instantly, beyond a linear philosophical inquisition, into a powerful appreciation for the genius of hindsight. All through, it is brimming with that delectable blend of incisive content and punchy delivery that defies any attempt to be put down or skimmed through.

Armed with a dossier holding an unprecedented wealth of records painstakingly curated to account for the major contexts and game-changing events spawning over 15 years from 2005, PAUL BUSHARIZI leans into Uganda’s premium legacy debate with much gusto.

Like a storytelling maestro, he orchestrates the rebirth and placement of individual, seemingly unconnected pieces of the recent past into an articulate narrative that unravels the central themes of the Uganda experience, spotlighting the consistent presence of President Yoweri Museveni’s signature.

"The book is relentless in stripping bare the layers of ignorance, misinformation and outright deception insulating the past from accounting for the present...

When you learn of the quiet trauma of a nation trying to tear itself apart to flee its own identity; or you are immersed in the profound valour of a people, desperately spinning wheels in the death clutch of economic predators yet set on escaping the cold abyss of poverty; or you are made to see the rabid fears of an inner circle, inexorably trapped between untold riches and ruthless power games; or you get to see how messages of hope and helplessness have simultaneously burgeoned into monsters of hyper paranoia; it is never without credible attribution. You are subliminally invited to connect the dots in a myriad of ways. The haze is lifted, questions become answers, answers morph into questions. You read again.

The articles are brilliantly sequenced to provide surprising insights into the man, the machinery and the mentality that have sedated a restless people for more than 35 years and built a mammoth chicken - egg contest between a master strategist and an overwrought project. Did Museveni make this Uganda or did this Uganda make Museveni?

"It takes unbelievable courage to blow away the dust of time like a scene-of-crime detective, and reveal the fingerprints of the main protagonist without being judgemental....

The House that Museveni Built is a masterpiece that will strongly contend as the preeminent reference for any credible study of Uganda’s first 2 decades of the 21^st century and that uncharted subject - Musevenism. Yes, because the feet on the same body cannot walk away from each other.

The book is available HERE

MTN’S JOURNEY FROM START UP TO THE STOCK EXCHANGE

I remember it like it was yesterday. The first day that telecom company MTN opened for business. I stood in line to get my MTN number, one of hundreds with sh70,000 clenched firmly in one hand and phone in the other. The sim card cost sh30,000 the rest was loaded on the phone as airtime.

Up to that point the sole mobile phone provider Celtel, used to charge for airtime in US dollars and had a punitive service fee  – it cost $10, which lasted a weekend when time was up you could neither receive nor call out.

Their airtime too was very expensive because in November 1998 – my first full month on MTN, the accountants had to call me in because my MTN airtime claim had fallen to sh200,000 from $400 paid to Celtel the previous month, for the same volume of work. The dollar then was about sh1,300.

"But our joy of shedding off the shackles of Celtel were short lived as the MTN system soon, within the hour crashed under the weight of the new numbers. I later learnt that MTN had installed a 14,000-line switch at Mbuya, the planners thought that would be good for a few months were soon back to the drawing board...

I would have paid to be a fly on the wall at the swanky new Celtel headquarters, which they bragged had cost sh4b, when they saw their subscriber numbers fall off a cliff that day.

At the time Uganda was at the tail end of its privatization effort and was moving into the more intricate liberalization phase. I covered the search for a Second Network Operator (SNO) as a journalist and one of MTN’s target as the SNO was to sign up 89,000 new subscribers within five years.  That doesn’t seem like much today but at the time Uganda Posts & Telecommunications Corporation (UPTC) the state owned telecom company had 50,000 subscribers. It was later split in to, which was split into UTL, Posta and Postbank.

By the end of the next year MTN had surpassed its 89,000-line target and I heard there were mutterings in the corridors, that the condition was for copper lines – used by the old analogue phones and not mobile phone lines. Probably a shakedown operation.

MTN has never looked back and to see them in action now one would think they were the pioneers of mobile telephony in this country.

But it’s not only the telecom industry that was shook up.

A few years later MTN went to the banks to borrow the billions it needed to keep up with the huge suppressed demand. I don’t remember the details but the bond the issued for the money was supposed to last five years but after the second year they wanted to pay off the debt. One bank refused to take back their money. Their argument was that they had planned on those cashflows coming in over the next few years and to take the money back now would throw their budget off.

So today when MTN – this country’s only billion-dollar company, announces the details of their share offer, it will belie an adventure the South African company embarked on in 1998 that, along the way, has paid off handsomely for its investors, the economy and its users.

Because people forget that Uganda was MTN’s first market outside South Africa and the one, which pointed to the huge demand for the unique kind of service they could provide, having cut their teeth in the townships of South Africa.

"It’s the Ugandan experience, which emboldened them to go into Nigeria, which long overtook South Africa as its biggest market....

MTN plans to sell about one trillion shillings’ worth of shares over the next six weeks to the public. The price of a share will be announced today but following what is becoming our rule of thumb, one can expect it will be cheaper than a bottle of soda.

While the Umeme share offer of almost 10 years ago raised more than sh100b more than the Stanbic offer, the bank’s offer has been the most exciting to date, but MTN’s offer is set to move the excitement needle beyond red. Not only is it almost ten times bigger than the Umeme offer but MTN’s top of mind recognition among the public is universal and that will count for a lot.

Interestingly across the border the Safaricom initial Public Offer (IPO) in 2008 was also the most exciting share offer on the older Nairobi Stock Exchange (NSE) at the time. At the time Safaricom dominated the mobile phone market, accounting for almost four in every five subscribers and was just getting into data services and M-Pesa – their world renown mobile money service. They have maintained their dominance in the market, some would say have cemented it, and their share price has risen eightfold since the IPO.

MTN now is around where Safaricom was then.

 

 

 

 

 

INDPENDENCE DAY AND THE DUBAI EXPO

Tomorrow we commemorate 59 years of independence. This year’s celebration comes hot on the heels of an outcry about our underrepresentation, misrepresentation or representation at the Dubai 2020 Expo.

The long awaited Dubai Expo opened its doors to the world last week and for the next six months will be the one place to go to explore countries from around the world, what they are about and what they have to offer.

Uganda has a stall at the Expo and thanks to the magic of technology, Ugandans at home got near real time pictures and video on what we were up to. The criticism came fast and thick after pictures of a few tins of milk, boxes of tea leaves, handwoven baskets and pictures of gorillas came through.

"The critics were scathing in their condemnation --- a lot of it knee jerk reaction and the default mode of the chattering masses online....

The net reaction is that again we had embarrassed ourselves with a sub-standard display, we did not get value for money and of course the top heavy delegation came in for particular flack.

I had to look again.

As I said the critics were either being unfair, disingenuous or downright nasty. I couldn’t think of many other things other than the ones I saw on display that Uganda can be globally competitive in.

The now permanent secretary at the finance ministry, Dr Ramathan Goobi pointed out a while back (when he was s till a mere mortal) that the incoming lane on the Jinja-Kampala highway was lower than the outgoing lane, an indication that the loads coming in are much heavier than the loads going out. A useful proxy to indicate that we import more than we export.

According to the last Uganda Bureaus of Statistics (UBOS) figures in 2019 we imported $7.7b worth of goods while shipping out goods worth $4.4b.

Going by these stats alone it should come as no surprise that Uganda’s shelves at the Expo are a bit bare.

But we don’t have to travel all the way to Dubai for this truth to be evident. Our supermarket shelves are dominated by foreign imports. Granted, its less now than a few years ago but the bias is there.

So the Expo emphasizes a greater challenge, one that dogs us almost 60 years as an independent nation, that we produce little that is internationally competitive – our raw coffee beans, tea leave and fish are about it, low value commodities when we should have got around, a long time ago, to exporting these processed. We would have managed to have a foot in the door of those insanely competitive markets and by now be exporting meaningful quantities.

It can be argued that we have been up to our eyeballs in the business of digging ourselves out of the hole of the 1970s and 1980s, but that line can only go so far.

"The truth is to export we need to ramp up production to multiples of what we consume locally. So currently the only things we produce that could possibly sustain a local industry, let alone meet export demands are coffee, fish, tea, milk and grain...

To show how inadequate our production is, I learnt recently that we produce about 14,000 tons of tomatoes a year, all of which we consume. A cursory look online for plants to process tomato paste, I happened on one which could manage to process 2000 tons daily or would sort our national output in a week and be redundant for the remaining 51 weeks of the year. Ok even if we got a smaller plant that would process 100 tons daily it would have taken 20 weeks to sort out the nation’s harvest.

To have a tomato paste industry in Uganda we would have to increase production by multiples of its current number. And this goes for any other crop we produce.

Taking an industry from zero to exports has been done in our life time and the lessons are there to learn. We did it with sugar, milk and gold.

It takes the execution of a national strategy that includes increasing production, enabling market access, supporting research & development, availability of affordable financing and good management.

So the Expo has reminded us that despite our middle class speaking English and wheezing around in second hand cars, we really don’t amount to much...

One last point and which speaks to our inability to lift ourselves off the floor. The lineup of government officials who were in Dubai for the first week inspired little confidence in our chances of turning our current plight around.

While Uganda Investment Authority (UIA) was present we must know by now businessmen pay little heed to government officials in deciding to invest in one country or another. They prefer to talk to one of their own a fellow business person who has skin in the game.

If there were no serious business people to make the trip with the president at least Uganda Development Bank (UDB), Ugandan Development Corporation (UDC) would have pride of place ahead of politicians, bureaucrats and glad handers.

 

BOOK REVIEW: MUSEVENI'S UGANDA; A LEGACY FOR THE AGES

The House that Museveni Built: How Yoweri Museveni’s Vision Continues to Shape Uganda

By Paul Busharizi

 On sale HERE on Amazon (e-book)                                    

326 pages

Guest writer: David Sseppuuya

 

Paul Busharizi is onto something here. Longevity in power or an extended stint on the throne will, invariably, impact a nation for generations, for better or for worse. They still talk about the Victorian Era in Great Britain, as they do of the Thatcherite years of that country’s more modern construct. There are still reflections of Stalinism in the Russian mirror today, as there is a large Mobutu imprint on all aspects of Congolese life, whether personal flamboyance or wastage of great natural wealth or hedonistic lifestyles. Pope John Paul II’s philosophy defines much of what the Roman Catholic Church will be for the foreseeable future, as will Robert Mugabe’s legacy, within and without Zimbabwe’s borders.

In the final analysis, the weighting of long rule tends to present either of two verdicts: good or bad. Or could there be a halfway point, a job half done, as the cover of ‘The House that Museveni Built’ can be interpreted?

Is this a fly-on-the-wall account, or a bird’s eye view of an observer of society, as journalists like to self-identify? Media professionals are privy to, and are privileged to be receptacles of, many goings on in the upper echelons of society, and in this book there is the odd nugget to reflect this. As Busharizi confesses, ‘The House that Museveni Built’ was not intended to be a comprehensive account of the Uganda Museveni has forged, but more the way he has seen the country change during his time as a journalist, what he calls the “interplay of politics, economics and culture that was happening and its influence on events.”

This book is a compilation of articles and commentaries published over a decade, which gives it a panoramic view. Written in real time, they have the authentic feel of that journalistic self-description of “observer of society”. But that also means that they lack the hind view perspective that the historian has, a challenge that is mitigated by the use of footnotes.

Busharizi makes a scythe through Uganda’s politics (electoral and governance), geopolitics (regional and global), economy (trade, business and development economics), and society (people, places and institutions) by way of commentaries penned independently with the macrobian rule of Yoweri Museveni, 35 years and counting, providing the spine.

Arguably Uganda’s leading business journalist of the last 20 years, the 2000s, Busharizi’s strength and bias creeps through. If the lay of the book is the topical subdivisions, he is at his best with matters business and economic, opining with knowledge and authority on subjects as varied as the Human Development Index, the Ten Point Programme, the Bretton Woods Structural Adjustment Programme, national debt, ‘nseenene’ trade, and procurement protocols. It is little wonder, then, that at The New Vision he gravitated from the Society Desk to the Business Desk and even had a stint with Reuters, the global business news beast, as Uganda Correspondent.

 The book serves as a public journal of sorts, flagging important national developments, seen through individual players, events, patterns and trends. Others are landmark events in the lives of personalities and the effect they have on the communities and systems they are a part of. Being topical, as opposed to chronological, gives the book a dynamism often lacking in memoirs, though it is not a memoir in the strict sense of the genre.

A special strength is the occasional parallel drawn with other societies, indicative of the observant and informed professionalism that made Busharizi such a valuable asset in a knowledge environment that the newsroom is (this reviewer was his first editor when young Busharizi was still at university, quite a while back). He, for instance, cites the contrasting political leaderships of the US and the UK, the former based on personality, the latter on party machinery and society’s appreciation of a party’s positions. In analysing the staying power of top leadership, parallels are then drawn with Uganda’s ruling NRM and the opposition party, the FDC.

However each piece being a reprint of the observations penned in the immediacy of their occurrence means that there is little or no benefit of wholesome analysis. Footnotes help mitigate this.

In his musings, Busharizi makes observations such as, “The NRM, forged in the heat of the Luwero triangle and moulded into a multi-million-person organization since 1986, has made itself indispensable for anyone who has serious political aspirations in this country”. This was noted on the eve of Christmas 2014, a point in Uganda’s political history when post-1986 personalities Patrick Amama Mbabazi and David Sejusa flirted with opposition from within the NRM. It is a succinct observation, penned under the headline ‘Only Fools Don’t Change Their Minds’ that embodies the kinetics of the politics of NRM/Uganda under the leadership of Museveni.

Like that account, many of the entries are microcosms of the dynamics of Ugandan society. Take electoral politics and the never-ending popularity contests that are endemic to the governance of nations: Museveni has been good at courting the female half of the population, making many policies that advance the cause of the woman. There are the earlier policies like women representation in Parliament and affirmative action in university enrolment, which have been around for so long that many probably take them for granted. But in his political astuteness Museveni keeps renewing his appeal to that demographic: Busharizi notes that the 2021 appointment of female leaders to the Vice Presidency and the Prime Minister’s seat, two of the top three political offices, combined with the appointment of women in four out of ten ministerial positions, was more a strategic move and less of grandstanding.

 

The book does not have much of Museveni the personality; rather, as the title proposes, it is more of commentary on the systems and functionalities of the construct that is Uganda under his leadership.

Busharizi is neither an apologist nor a rabid opponent of Museveni or the political status quo, dispositions that lend credence to his analyses and observations. He therefore comes through as a credible exponent of that critical journalism ethic of being disinterested but not uninterested. Disinterest plays out in admirable levels of objectivity, while not being uninterested manifests in real passion for Uganda. The 9 February 2021 entry typifies this: in the wake of NRM’s electoral victory, secured in an environment of a Covid-emasculated economy, he criticises the bloated Parliament of 520 representatives, not with emotion as many regime critics tend to do, but by making this objective observation: “History shows that among the main reasons for economic collapse is when countries starve or eliminate the productive sectors of resources in favour of consumers. When MPs get sh165b for cars to whizz around the country, sectors like tourism – our largest foreign exchange earner, have been allocated sh176b in the 2021/22 budget….. when your incomes are falling you have to cut your expenses, but clearly not in Uganda. It would be funny if it was not frightening.” Few would dispute that perceptive remark, whatever their political leanings.

 

This collection of reflections will serve as a small but significant record of Uganda’s political and economic history, observed and penned in real time. It is a truism that newspapers are the first rough draft of history. This is a well-crafted draft, a worthy contribution to that point in future when the Museveni years are evaluated with the benefit of hindsight.

‘The House that Museveni Built’ will be published online on October 9, 2021

dsseppuuya@yahoo.com

Twitter @DavidSseppuuya