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.