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.
