Monday, June 12, 2023

WHAT WE DON’T KNOW ABOUT THE CORRUPT

My man, I will call him Jack, has fallen on “hard times”.

This time two years ago, he was a high-flying government official, with huge budgets at his beck and call. Needless to say he was dipping his hands in the kitty and his lifestyle had grown to match – he had a palatial mansion in a Kampala suburb and one in the village. He and his wife had matching four-wheel drives bought from the showroom. His children had done the international school circuit and now were studying in foreign universities, whose annual fees would pay for at least 34 undergraduate students at Makerere. This is what we know or can discern. It may be the tip of the iceberg.

He had worked in government for the last 30 years or so and his known salary – even if you add all the allowances he gets, could not sustain his lifestyle, at least the one that was open to the public.

I would pay to see his balance sheet.

Two years ago, he left government and the reality begun to set in.

I am going to hazard some assumptions.

"Let us say he had a sh50m a month lifestyle, which would come to sh600m a year. His expenses included maintaining his palatial homes, paying schools fees and upkeep for his three kids abroad, maintain his farm in the village, paying the salaries of a phalanx of workers here and in the village and of course sharing his money with needy relatives and friends. In addition, there was some construction works going on here and there. He did not have a rambunctious nightlife, as far as a I knew, but then again you never know what he got up to in his mansion after dark....

He has easily another 20 years of working life in him but can not be employed in the public service again and he has no skill that the private sector would need.

So, he has had to resort to his savings and investments to stay afloat.

The funny thing with life is, when things are good, we don’t put aside anything or enough for a rainy day.

Assume Jack maintained his sh600m lifestyle he would need assets of about sh3.2b. I got that number by using the 18.5 percent annual yield on the 20-year bond. If his assets were in shares on the Uganda Securities Exchange (USE) he would receive dividend yields of between 0 and 14.3 percent at current rates. Assuming he has all investment in the highest yielding shares he would need assets of sh4.3b to sustain him and his family in the way they have been accustomed to.

If he had invested in real estate at the average return of between two to five percent a year, he would need assets of at least sh12b. If he was doing business returns can much better or much worse, but it would still be a stretch to find a business which would net him sh50m a month especially since he has not built it up over the last so many years.

The New Vision SACCO with which I am intimately familiar, has been in operation for 18 years. Last year they managed a net profit of sh976m, this off sh11b of assets or about 9 percent return on assets, but even then, only made a dividend payout of about sh120m. And this is not indicative of usual businesses as the SACCO works off a very low-cost base and is exempt from corporate taxes on its profits.

So, the “hard times” for Jack have come in the way of drastically scaling down his lifestyle, as he has significant amount of dead assets, assets not making a cash return even though they maybe appreciating, we think. But don’t cry for him yet he scaled back lifestyle may mean he is down to spending sh20m a month, though he would be best advised to take a panga to those costs even more...

All the land or assets in the world will count for nothing if it is not generating incomes when you need the cash.

I know too he has been selling off some of his assets to plug his expenditure holes, but that is a slippery slope, because if you sell assets where will future income come from?

We forget that even when these officials are pilfering our taxes, they most probably consume more than they invest, the way we mere mortals behave with our hard-earned income. It’s a natural thing when you think the taps will continue flowing long into the future.

It is hard to sympathise with such retired public officials, instead we wonder what they did with all the money they were “eating”.

And that’s the point, they ate the money.


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