TAX ALL THE LAND IN UGANDA

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This week it was reported that the Justice Bamugemereire inquiry to land matters had recommended in their report the taxation of idle private land as a way to improve productivity of the land.

They proposed a threshold of half a square mile or 320 acres above which idle land should be taxed.

This is a great development, while politically hazardous is farsighted and inevitable if Uganda is to fulfill its development ambitions.

I would have gone further and taxed all land.

The naysayers will argue that this will disrupt our small farmers, who cannot make enough money off their little patches to pay tax. And I would argue all the more reason to tax their land.

"The economics text books say the factors of production are land, labour and capital. Entrepreneurship/ management then manipulates these factors of production to generate economic activity. A deficiency in one, two or all of them is the extent to which economic activity will be generated or not...

As it stands now our convoluted tenure system is a major reason why our land is idle. We have freehold land, customary land and leasehold land and everything in between. In more functioning economies the state owns all the land and the rest of us are tenants on the land, leasing it from the government. It is so much easier to deal with land issues under those circumstances.

In a democratic dispensation like we are under now it is unlikely that our land tenure system will be sorted out soon. Land reform is by definition politically expensive for those who try it.

One of the main reasons for any sort of land reform is to increase productivity of land for more people.

That’s why taxing the land becomes useful. So assuming we impose a tax on all the land, what would happen to the rural man with barely an acre to his name?

He will have several choices.

 One, he can improve his farming methods to ensure he has enough money to pay his taxes. One of the main challenges of our farmers is their poor farming practices which cannot ensure optimal utilization of the land. 

Secondly, he can get together with his fellow small holders aggregate their land, labour and capital to take advantage of economies of scale to improve their bargaining power in the market for inputs or with the middle men. If all else fails, our man can lease or sell off his land to someone who can work it better and meet the tax obligations.

"This is not even original. The colonialists to get us to grow coffee and cotton imposed poll and hut taxes – and liberal doses of kiboko, as a way to incentivize us to grow these crops for which we had no use for, up to that point...

We are not reinventing the wheel.

We need to stop molly coddling our rural cousins, stop patronizing them, especially if the net effect of this move will mean more incomes and better living standards for them.

I suspect though that those opposing such moves are the absentee landlords, who cannot be bothered to increase the productivity of their land and enjoy the ego trip of announcing h ow they have a farm up country at the bar. Imposing a tax on their land will mean forgoing their land either by leasing or selling and deny them the bragging rights among their friends.

This is an important subject because while our arable land is reducing by the day because of our negligence or outright abuse, our population keeps doubling every 24 years. This means we have to not only stop the loss of our land to bad practices and climate change, but maximize its productivity to ensure we head off pending food insecurities.

Peruvian Economist Hernando De Soto argued that capitalism, the manipulation of aforesaid factors of production for profit doesn’t work in the underdeveloped world because of the ambiguity surround land tenure in our countries.

According to the Uganda Bureau of Statistics of the seven million households in Uganda, seven in ten or about five million own their own homes. Ownership is being used loosely here because there are less than a million land titles issued in this country and those include factories, hospitals and schools.

By imposing a tax on land we are going to be forced to title more land, improving the value of our lands, while we increase productivity and increase revenue collections.

The knee jerk reaction of society when faced with new taxes is to resist. This is not a uniquely Ugandan problem. But the benefits that would came with taxation of land far outweigh the discomfort of the naysayers. Let us get it done.

LISTEN TO PROPHETS OF DOOM ON UGANDA POWER SITUATION

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In 1996 I  made my first trip to South Africa. We got there in the dead of the night, but you wouldn’t know it. The highway from the airport was so well lit you could drive without your headlamps on.

At the time Uganda was beginning major loadshedding. We would have power on in 12 hour alternating intervals – power would be on in the day today, off at night, tomorrow off in the day and on at night.

I asked our South African hosts whether they ever had loadshedding and they went, “What is that?”

Today they are the ones suffering massive power outages and we go crazy when it goes off for 30 minutes. They failed those years ago to plan for the growth of their economy and the subsequent jump in demand that would swallow their surplus supply.

As it is now we have a installed generation capacity of about 1,252 MW against a peak demand of 750 MW. This surplus will bumped up even further when Karuma’s 600 MW comes on line later this year.

"While we may be forgiven for taking a break from trying to build new power dams given the bloodiness of the fights that it took to build Isimba and Karuma dams, industry experts estimate that by 2027 if we don’t start building new power generation units now, we will be back to the loadshedding years of yesterday and who knows it may be South Africa’s time to ask again, “What is that?”...

Also given that on average it takes about seven years to commission a power project in this country, we are behind schedule to beat the 2027 deadline.

Government keeps moaning that it has got bad deals in the generation and distribution concessions it signed with private providers, but everybody who was around knows we were in a desperate situation at the time with little to no bargaining power. To do nothing now means in a few years we will be signing other “bad” deals because a crisis will be upon us.

For starters there has to be more integrated planning. The left hand needs to know what the right hand is doing. Recently it was reported that a 40MW hydro power dam at Achwa is ready for commissioning there are no transmission lines in place to evacuate the power. As a result government is paying a few billions a month to the owners for power we are not consuming because the promoters of project cannot be blamed for government inefficiencies.

It seems the logical thing to do, when you start building a dam you have to ensure there is demand down the line, that you have the distribution network to feed this demand and you have the infrastructure to get the power from the dam to the distributor. To that all the players up and down the line have to be in the know of what is happening. In Uganda clearly not.

It was the same complaint with Karuma where the dam construction was ahead of the process of getting transmission lines to them. Is it possible that the multi-year development of the billion dollar 600 MW Karuma dam was kept secret from Uganda Electricity Transmission Company Ltd (UETCL)?

It was heartening to see that Uganda Electricity Generation company Ltd (UEGCL) showed a healthy profit last year – all of sh92b. This has been helped by the takeover of Isimba dam which suggests we are developing in house capacity to develop our own power projects.

This is important, because in our desire to lower power costs for industrialists, who generates our power is a big determinant.

"A recent industry showed that while government power plants – Kiira and Nalubale produce about half the power we consume they account for less than 20 percent of the tariff that we pay. Common sense would dictate that government should be looking to shifting development of power plants more and more towards UEGCL as a way to shift the tariff further down...

Private investors should be encouraged but within a broader strategy of pushing tariffs down, that recognizes this fact.

It comes as surprise then that the other day Electricity Regulatory Authority (ERA) put out an announcement that China International Water & Electric Corp, the contractors of Isimba are undertaking a feasibility of building a 392MW dam at Oriang in northern Uganda.

To begin with there is too much conflict of interest in the proposed contractor carrying out a feasibility study on the dam they want to build. What if the site has a capacity of 700MW but the contractor can only finance a 392 MW dam, will he tell the truth and forgo the project? Highly unlikely.

At the bare minimum feasibility studies like these should be done by government before the put out bids for development of these projects.

This should be UEGCL’s work. UEGCL is not only to collect fees from independent producers, but eventually to develop projects just like KENGEN in Kenya does, all within an industry strategic plan.

The energy ministry as the overseer of the sector needs to pull up its socks. Just because we now have private players in the sector, does not mean the ministry should abrogate its responsibility as the overall planner of the sector.

 

MADNESS: DOING THE SAME THING OVER AND OVER

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This week parliament entertained a motion to have MP Francis Zaake lose his position on the parliamentary commission for alleged abuse of deputy Speaker Anita Among.

In a tweet Zaake suggested the deputy speaker was dishonest and reckless in her comments about him, which he thought were idiotic.

The background to the story is that last year MP Zaake had claimed torture by state agents, there were pictures of him looking far gone in hospital.  Later in the year he went on to win a sprint competition during regional inter parliamentary games in Arusha, Tanzania. The Deputy speaker in one of her comments noted the recovery of MP Zaake given this evidence, comments which MP Zaake took exception to.

A motion was moved by MP Martin Mapenduzi to have him ejected from the parliamentary commission, which serves as the administrative arm of parliament.

But another backstory is that opposition MPs are boycotting house seatings in protest over the increasing reports of torture of people with divergent views from government. That move was triggered by the release of novelist Rukirabasaija Kakwenza a few weeks ago who claimed he had been tortured in detention and had the scars to show for it.

This means that depending on the speed of the house in deciding the matter, MP Zaake’s fate may very well be decided by NRM MPs who more than constitute the quorum to carry the motion, if they so decide.

This is playing simultaneously with opposition MPs trying to censure security minister Jim Muhwezi to take responsibility for the torture being meted out by security agents. NRM whip Thomas Tayebwa has ensured the ruling party MPs have closed ranks behind the Major General and we can expect that motion will come up empty.

"One of the things we badly need is a credible opposition, which can hold government to account. This should go beyond heckling the government in public, to actually having a sword over government’s head to ensure they behave....

This column has long argued that the seduction of running for the presidency has ensured the opposition cannot muster serious enough numbers in parliament to play their effective role.

But it is easy to see why. 

It is too much work to try and grow grassroot support than it is to organize a once every five years run for the presidency. Not to mention a run for the presidency is sexier and more lucrative than the rolling in the mud needed to build and sustain local political support.

The opposition will continue to take this class as long as they don’t learn the lesson.

The opposition argue that they are hampered at every turn in building grassroot support. That should not come as a surprise. In the world history there is no group in power that relinquishes its hold without a fight.

"You cannot shame power into good behavior. In order to force concessions from power you need to build a formidable counterforce and force power to the negotiating table....

The kings of Europe in some instances had to have their heads loped off in order for them to make concessions to the unwashed masses. Even today in better developed democracies the contests for office can be intense, the difference being that over long years of practice certain power grabs, like coups, are not an option. But nevertheless those in power will do anything within the limits of the law to cling to power, while those on the outside will do anything to get in.

There are no shortcuts. Our opposition have to put building local support ahead of winning the presidency if they are to be more relevant to the evolution of democracy in this country.

As it stands now the ruling NRM has 336 of the 529 seats in the house or just short of the two thirds majority needed to push any law through. However, the independents many of whom are sympathetic to the movement are 74.

And over the years while the opposition, which has 109 seats in the house have seen their numbers rising, the percentages still are in the NRM’s favour.

"If they are really serious about at the bare minimum, influencing the politics of this country and at best wrestling power from the NRM they have to boost their numbers in parliament....

It will be a hard slog but if the evidence before our eyes is anything to go by – their ineffectiveness in the house, somebody has to come this realization and commit to pay the price.

Parliamentary walkouts and confronting the security forces on the street may make is just grandstanding and achieves nothing of any substance.

But our opposition are intelligent people and they must know all this, so what are they playing at?

 

BOOK REVIEW: CHARLIE MUNGER: THE COMPLETE INVESTOR

 HELPS TO BE A GOOD INVESTOR, TO BE A GOOD BUSINESSMAN

AUTHOR: TREN GRIFFIN

 

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Charlie Munger along with Warren Buffett are the co-chairmen of American conglomerate Berkshire Hathaway, the $715 billion – almost 25 times the size of the Uganda economy, enterprise that is into everything from insurance to power generation; railways to furniture and from paint to candy makers.

The diverse nature of the company’s holdings is what happens when rationale investors -- Buffett and Munger, are in charge of a company. In their search for good companies, run by good managers they can work they have built a literal mosaic of companies, which on the surface seem to follow no rhyme or reason.

"While Buffett is widely acknowledged as the greatest investor of all time, Munger is considered his equal at least in how he thinks about business and investment. The two of them have been at the helm since 1970 and bolted together a wealth creation machine the likes of which have never been seen. As of writing this review Berkshire Hathaway was trading at about $480,000 (sh1.7b) a share, and that is not a typo.

Author Tren Griffin distills the wisdom of Munger in this compact book and below are a few of Munger’s thoughts on investment and business.

1.       Understanding how to be a good investor makes you a better business manager and vice versa

He says it in the book that the number one job of the investor is asset allocation, committing money with the hope of future return. To do this optimally it helps to understand the business you are investing in. On the flip side as a businessman if you understand how investors think you can better structure your business for long term success, because investors are looking for businesses that can sustain high returns for the long term. A businessman who thinks like an investor will focus on building the companies value consistently.

2.       Betting on the quality of the business is a better than betting on the quality of the management.

A business quality is largely dependent on its ability to develop and sharpen its competitive advantage, that thing that it can do profitably better than the competition. By developing and maintaining its competitive advantage not only will it keep the competition at bay or people dissuade people from joining the industry, it allow them better flexibility in determining pricing of their products or services. Those are the best businesses to be in, than those whose pricing is determined by their competition.

3.       The most effective way to genuinely reduce risk is to know what you are doing.

When you leave home to drive to work, no one seeing you having done the trip to and from often, fear that you will not return at the end of the day. But give the car keys to your ten-year old child to drive and the risk rises exponentially. The way to mitigate risk is to know more about the business or investment. Just because your neighbour has made a killing in the mobile money business doesn’t mean you will enjoy equal success, mostly because you don’t know what he knows.

 

4.       Excess cash is an advantage not a disadvantage.

They say profit is an opinion but cash is fact. Anyone who has been in business knows that what is in the profit and loss statement may not reflect what is in the bank account. While the accountants fret about too much cash lying around, because the returns on it are not much, cash on hand allows you flexibility and may be the difference between surviving a crisis – like the covid-19 pandemic, or not. At last count Berkshire Hathaway has $149b in cash and has served as the savior of other less liquid companies during the financial crisis of 2008 and more recently with Covid-19. So actively building cash reserves in the business should not be frowned upon even if the bean counters think otherwise.

 

5.        The only way you win is by knowing what you are good at and what you are not good at and sticking to what you are good at.

Munger and Bufffet always talk about circle of competence and how important it is to know the boundaries of this circle. As suggested above to stray out of this circle increases the risk of failure. How many businesses have come unstuck because following success in one endeavor the promoter thinks he can replicate the success in another field of business? Munger counsels concentration of ones efforts for better returns, while diversification seems to be a hedge against future disaster, it risks pulling you out of your circle of competence, increasing the chance for loss of capital.

 

Munger and his partner have been in the business of investment for more than 100 years between themselves, so when they talk you listen.

Its fantastic book, more than worth its weight in gold.

 

The book is available on Amazon.

TO TORTURE OR NOT TO TORTURE?

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In the last few days the critics have had the government on the back foot, following the release of author Kakwenza Rukirabasaija. Kakawenza had been in detention since the end of last year during which time he claimed he had been tortured by state agents and had the scars to prove it.

He was charged with offensive communication for saying unflattering things about President Yoweri Museveni and his son Lieutenant General Muhoozi Kainerugaba, after which he was released on bail. As I write this it has been reported he has jumped bail and fled the country.

This sequence of events is disturbing on very many levels.

There seems to be no doubt that Kakwenza’s detention and mistreatment was carried out by agents of the state, not least of all because they had the good manners to produce him before court after they had worked him over. Ironically this is a source of comfort but also further discomfort.

On the one hand if it was your regular kidnapper they may have just dumped him by the roadside somewhere – dead or alive. The discomfort would come from the idea that state agents can mete this kind of brutality on anyone let alone a citizen of Uganda...

We in the public were further confused. Is this now government policy in dealing with people they disagree with or the work of rogue elements in the security services working at the behest of individuals?

It could not be the former because the framers of the constitution did not even try to qualify torture. In one sentence, in article 24 they said “No person shall be subjected to any form of torture, cruel, inhuman or degrading treatment or punishment. “

No lesser an authority than the President himself is on the record for condemning torture as a means of interrogation.

But beyond that, this whole adventure –the NRM project, can be called into question. The bush war was a protest against a flawed election, but even more importantly, to defend the integrity of Ugandans who had suffered gross human rights violations for years.  For a younger generation those are all old wives’ tales, but when they are confronted with present day rights violations, who are you to tell them anything about the past?

When I joined journalism in the 1990 one of the senior journalists at the time, told me that in the early 1980s he used to come to work with his passport in his back pocket, just in case. The way journalists these days play fast and loose with the truth they clearly have no fear of extrajudicial reprisals.

In a strange way it would be more comforting if the use of torture was government policy, because then using the various levers of influence the public has at its disposal -- the courts, their MPs and the media, and maybe able to influence government to see the error of their ways and change the policy altogether. But we know this is not government policy as several officials have said.

The alternative is far scarier.

That there are rogue elements in government and security, pursuing personal agendas, in defiance of the president, meting out their particular brand of justice, a power onto themselves, means none of us is safe. We are at the mercy of their whims.

Following the argument to its logical conclusion it is not a stretch of imagination to think, left to their own devices their influence will grow to the point … well, they are already openly defying the president.

If this last scenario is so then Kakwenza is a sign of a bigger problem.

We see a silver lining in this very dark cloud. That we can discuss it in the open. That may not seem like much, but there was a time – another old wives’ tale, that we wouldn’t dare talk about missing friends and relatives, they were out of sight and out of mind for fear that we would go the same way.

"The UPDF, owe it to themselves and their proud history to get to investigate, get to the bottom of, remedy and nip in the bud this threat to national security, because that is what it is....

 

THE TIME TELLER VERSUS THE CLOCK BUILDER

He is a businessman of some reknown. He would have been better known if we all appreciated the business he built. He is “Retired’ now, but prefers to go to office to every morning and read the papers there. He thought he would be some sort of consultant helping his daughters run the business, but clearly he did such a good job setting up his company and his successors, he is little needed at the office.

The businessman, let us call him Jack, now has time weighing heavily on his arms and is not averse to a chat.

This time he had the book “Built to Last” by Jim Collins on his desk when I visited. He was visibly excited and after the usual niceties started telling about the chapter that had really resonated with him, chapter Two “Clock building. Not time telling.”

“You know how when you see or hear or read something for the first time and it is as if you had known it for a long time? This is it,” he said slamming a palm on the hapter’s lead page.

For purposes of back ground Jim Collins, the author identified one of the biggest distinctions of leaders who built enterprises that thrived, even after their demise is whether they were time tellers or clock builders.

The time tellers are often charismatic leaders who may have had a good team or lurched onto the latest fad and showed some success for a while, the clock builder on the other hand work on shaping culture and building an enterprise that can generate ideas that allow it to thrive for a long time. To have  enduring success you need a clock builder not a time teller. The clock builder is strategic and the time teller is tactical...

“If more people or managers knew this and applied it this country would be far ahead,” he said.

In his own simpler language, he said it was like the hunter going out in search of the elephant, but every so often squirrels, rabbits and antelopes cross his path. The clock builder will focus on the long game ignoring the smaller distractions for the bigger prize while the time teller will chase everything that crosses his path and may even forget the elephant altogether.

“These small wins make you happy and can even make you a star, but you have to keep your eye on the bigger goal, the big picture,” he said. “The bigness of the eventual prize will determine whether you can weather all the ups and downs that are thrown at you as you chase the dream.”

Some people are wired to focus on the distant future he thinks, but believes it can be taught and the earlier we do it the better.

I asked how he thinks this had worked in his business.

He had scribbled some notes in his note book.

“Looking back I think it helped that I always asked the question of myself and staff, whether we are fully meeting our customers’ needs. As long as we were thinking like that innovation became easy, because as the customers’ demands widened or increased we got better and better. Making money is good but it comes as a byproduct of delivering a good product or service.”

It sounds so cliché but it is a basic, a first principle, he said.

“Look around you people or businesses who fail are not in touch with their clients. They either lose them along the way or were n ever in touch to begin with.”

But later when the business started making money he learnt, he doesn’t remember from where, that real money would be made when you sell the business.

“At the time I looked at the business and realized even I wouldn’t pay much for it, because I was the alpha and omega, without me the business was not worth much,” he said.

To make it more marketable he had to put in place systems. It was painful to let go and it took him about 10 years to the point where he was comfortable letting go of his “baby”.

“It was not easy and I even gave up several times, took back control of the business. I was too emotionally attached to it. But because I had seen the promised land I somehow always got back on track, maybe I would have achieved it sooner.”

It took him another six years to get to his current stage of “retirement”.

The point of the chapter “Clock building. 

Not time telling” he thought, was that as business owners and managers we need to be ambitious beyond making money for ourselves and be ambitious for the company’s success in order to build businesses that will outlive us...

“If you are stuck in emeere ya leero thinking, you cannot build anything of enduring value.  Impossible.”

He hasn’t sold the business yet, he hasn’t felt a need to – the multimillion dollar offers aren’t tempting enough. And the way his daughters are running the business, he thinks it may still be a while before they sell.

FUEL SHORTAGES REMIND US OF OUR INADEQUACY

The recent fuel shortages that saw a liter of petrol going for as a high of sh12,000 is a reminder that when we fail to make hard decisions we make life hard for ourselves somewhere down the road.

The trigger for the shortages was the insistence by the health ministry that truck drivers must b not only be tested before they enter the country but must also pay for the tests. The truck drivers struck in protest of this measure, arguing that they are tested for free in Kenya and this was an additional cost they refused to carry.

First of all it must be the height of negligence that truck drivers acting on a whim can hold a whole country ransom. A country whose landlocked nature is not new and should dictate that we have numerous alternatives to ship in or ship out goods.

The truckers of course now represent a huge cross national interest group that will fight tooth and nail to sustain the status quo.

The status quo is that Uganda continues to rely on costly road transport for all bit a small part of our transport needs.

This is a result of the failure to resuscitate the old railway or get the Standard Gauge Railway (SGR) off the ground. In light of the powerful interest groups that have coalesced over the years around road transport I am inclined to think the woes surrounding the railways are not a coincidence.

The truckers have forced our hand and we have suspended testing but our troubles with fuel will not be immediately lifted. Experts say it could take a month or longer before things are back to normal. Losses in lost business and tax revenues while we readjust will be in the billions.

But imagine an alternative scenario where all or most of our fuel comes by rail, even if you instituted a testing regime it would only be a handful of people to be tested. They say the SGR can haul as more than 100 containers. On the road this would be at least 200 drivers and turnboys to be tested.

So what has happened to our railway projects?

Uganda Railways Corporation (URC) is still reeling from a scandal surrounding the purchase of engines that are not fit for purpose. This after a concession with Egyptian based RVR came unstuck a few years ago affecting the flow of goods by rail, seeing businessmen shifting their cargo back on the road. Funding is being sort for the rehabilitation of the more than 100-year-old line but this can only be a stop gap measure as we seek to build the SGR.

"It takes years to build a few kilometers of road in this country now you can imagine what will happen with a railway...

It has been since 2008 when the SGR project was mooted. Today 14 years later not a single railway sleeper has been lined – not counting the ceremonial ones laid in Munyonyo more than five years ago. With compensation for the right of way we have only managed 130 km of the 230 km between Kampala and Tororo since 2016. And even then we have spent sh100b of the sh400b planned in compensation with treasury managing to trickle through about sh20b a year for this.

The history of development shows that Uganda not have meaningful industrialization without inexpensive mass transport – rail or water. It is not a mistake that the colonialists braved man eating lions, hostile tribes and the engineering demands of the rift valley to build a railway; and it is the reason we learnt about the Rhine Valley in Germany as a driver of industrialization there.

It costs almost double --$5200 to shift a 30 ton by road from Mombasa compared to $2800 by rail. The tradeoff currently is that you use road because it takes two weeks by rail today versus just under a week by road to shift cargo. But with a more efficient rail system that argument would not hold.

"To be a competitive economy we need to be able to shift huge volumes quickly and at the least possible cost. It would not be a stretch to think that the way we are treating our railways suggests talk of industrialization is just hot air....

So we can blame all the stoppages over the last two years on the Covid-19 pandemic, but don’t worry if it is not Covid it will be something else.

The Kenyans have failed to move the SGR from Naivasha and onto Kisumu and Malaba. China is justifiably jittery to release money for our side when the Kenyan leg has stalled, probably, fatally.

That may be as it is but cargo to and from Uganda now at 18m tons annually is set to rise to 21.5m tons a year, figures that are well above our old railways capacity regardless of the patchwork we do on it.

When UPE was launched 25 years ago, no one seems to have thought about how we will employ the jobseekers that would hit the market 15 to 20 years down the road and how to prepare for them. Now that the jobless ranks are swelling it has suddenly hit us.

Industrialisation would sponge up all the thousands hitting the job market annually. But to sustain an industrialization push you need huge amounts of raw material and the markets to absorb your output. At both ends of the value chain mass transport systems are needed....

Which makes you wonder about lackadaisical attitude towards developing our rail transport system.