THE 100 MILLION SHILLINGS CURSE

It is a simple question, on the surface of it.

If I gave you sh100m right now and here, what would you do with it?

The answers to the question would fall in two categories – consumption or investment.

Consumption would be buying cloths, food, travel, cars -- things or experiences with no financial return, while investments would include saving, buying, government paper, shares, land or real estate.

"Given the distribution of wealth in the world, we can expect that 10 percent, or less, of responders will choose the investment route while the remaining 90 percent will choose the consumption route....

According to the World Economic Forum (WEF) 10 percent of the global population own 76 percent of the world’s wealth, while the bottom 50 percent of the population only own two percent.

There are obviously many reasons why this is so, not least of all because poverty can be passed down generations, but when you strip away all the excuses, whether we become wealthy or not is down to our spending decisions. More precisely the balance between consumption to investment in our decisions over time.

It really is as simple as that.

When I get onto the financial literacy circuit my talks will begin with that reality, that there are only two ways to spend your money –- consumption or investment.

The trick is to reorient your thinking. 

Easier said than done. I used sh100m in the question above but what about if it was sh100,000 or sh10,000 or sh1,000?

In school there was always this one kid who was a trader. They often took all their pocket money at the beginning of the term, which in those days may not have amounted to much, bought sweets or cigarettes or whatever other small knick knacks to trade with other kids. I don’t remember them being spectacularly rich, though maybe this was a defence mechanism to guard against those who tended to reap where they did not sow, but also they were never broke – especially if there was a good deal to be had.

I imagine as they grew and dealt with larger sums, they are much richer today. But first they had to learn the discipline with small sums.

"Many of us think that we will really begin to make money when we have big monies. The truth is if you have bad financial habits – consuming rather than investing your small monies, you will carry this indiscipline when you have bigger sums....

If we operated in a vacuum it would be much easier to acquire this discipline, but since the majority of us do not think like this –see the WEF statistic above, most of us are doomed to a life of poverty or at least living way below our financial potential.

The societal inertia, which urges us to consume rather than invest is not easy to beat back. Because, think about it, what in practical terms would this mean, investing instead of consuming.

You would have to forgo, for a while, new clothes and shoes, eating out as often as you want (or eating altogether), riding in taxis to work instead of buying a car or staying in amzigo instead of renting in a high maintenance area , which is adequate for your needs and only costs sh100,000 a month. Sacrifice.

Not easy when everyone, or at least nine in ten people around you is consuming not investing.

The interesting thing is, done of long enough, this accumulation takes on a life of its on and begins to seem like magic. The magic is called compounding, unfortunately few of us  are in it long enough for compound interest to take hold.

My favourite American, Warren Buffet turns 92 this year. He started investing at 11 but most of his wealth has been made after he was 50. And its not just because he was investing larger sums, but more because the compounding curve of his experience and knowledge went exponential after 50.

This is enough to discourage most. Who wants to wait so long to become rich? What is the point of accumulation if you are not going to eat your money (Buffett is notoriously frugal despite being worth more than $100b)?

"Whether you shift your spending habits or not, the time will still pass, so why not use the time effectively?...

But Buffett is oceans too far.  In the late 1990 The Financial Times interviewed local businessman Sudhir Ruparelia at the end of the interview they asked him how he had accumulated so much wealth – I imagine they were wondering how he did it in such a poverty-stricken country. Sudhir responded something to the effect t, “It is an old Indian trick. Make ten shillings, eat one and reinvest the remaining nine shillings in the business. Repeat until rich.”.

 

TO SAVE THE ENVIRONMENT EACOP MUST GO ON

I had a déjà vu moment last week seeing some breathless young lady accost French President Emmanuel Macron entreating him to stop the development of the East African Crude Oil Pipeline (EACOP).

The EACOP is the 1400 km pipeline that will evacuate Ugandan oil from western Uganda to the Tanzanian port city of Tanga.

The earnest young lady explained that the pipeline (As if Macron does not know) that the pipeline would encourage the use of fossil fuels which are major driver behind climate change, whose effects are manifest in droughts, floods and even the increased frequency of sand storms the middle east is suffering currently.

It took me back nearly 20 years when all sorts of activists jumped out of the woodwork to protest the development of the 250 MW Bujagali dam. Led by the local agents of an NGO called the International Rivers Network.

The anti-Bujagali lobby argued at the time that damming the river would displace hundreds and destroy the scenic beauty of the area.

"So that time they could not hide behind climate change, especially since hydroelectricpower is one of the most ecofriendly energy sources, they argued for scenic beauty...

One local activist was quoted as saying at the time, "The real issue in Uganda is not electricity but poverty. Currently the majority of Ugandans have no money for electricity, for they are below the poverty line. Production of more electricity will not reduce use of fuelwood and charcoal until deliberate programs are evolved to reduce poverty and the cost of power."

Since Bujagali came on line in 2012 – the world has not collapsed around our ears, but in fact, more than a million households have been hooked up to the grid. Those are a thousand families who left to find their own devices without electricity, would have used kerosene lamps or diesel generators for their lighting at night or used more charcoal in their kitchens and would have been less productive.

Access to power is just below 50 percent today but this is a far cry to the just over five percent of the population who had access to power before Bujagali came online.

It would be interesting to see how much more economic activity has resulted from this development and further still how many people were lifted out of poverty or at least saw their incomes increase as a consequence.

I want to bet that the Bujagali activists now live in houses – they probably built with their paychecks from the campaign, powered by the dam fought so vehemently.

"The anti-Bujagali activists were dead wrong then as the anti-EACOP campaigners are today....

In fact, to stop these developments will be to damage further the very environment they claim to be seeking to protect.

Because it is true that in our part of the world the biggest cause of environmental degradation, is not the fat cats who are reclaiming wetlands for construction, but the poor who have decimated 90 percent of our forest cover in search of new farmland and firewood for their survival.

The history of poverty eradication is quite clear. Countries interested in doing so, exploit their natural endowments to create economic activity, which leads to a rise in incomes across the board and therefore reduction in poverty. In some countries they have done it so well they have surplus resources to bankroll a welfare state, where everyone is entitled to an income in or out of a job. This did not happen by wishful thinking.

"Because we do not have the luxury of enslaving people or colonizing other countries to push economic growth, we have to employ what we have, that is our natural resources and our people. Our confusion about how to do this – due partly to the handsome paychecks from foreign environmental lobbyists, means we are not even doing a good job on this front.

That being said the exploitation of these resources can be done in a way that does not cause irreparable damage to our environment. As it stands now voluminous environmental impact assessments have been carried on the project and provisions have been put in place to mitigate against the damage to the environment to the extent possible. This is not the Niger delta.

If we are truly sincere about conserving the environment we should be poring over these reports to ensure every possible measure was taken to conserve the environment.

The increased revenues to government and to the private citizens involved in the industry, have the potential to improve the provision of public goods and social services that will give more and more people a chance to climb out of poverty.

You do not fight poverty by dishing out money at street corners but by empowering people through better education and health to take advantage of and to create new economic activity.

So if to banish poverty takes the exploitation of our natural endowments and some do-gooder, clearly who knows better than us what is best for us, is fighting this time tested progression, you have to wonder what their intentions are.

"To be charitable to them I would say they are ignorant parotters of slogans on an issue they have no clue about (African poverty), he more cynical view would be that, it is in their interest to remain in our state of under development so our living standards do not rise to their level, because they would have to better share the globe’s resources...

The latter is the conspiracy theory I choose to favour.

 

CREATING JOBS, MUST BE JOB ONE

It was reported last week that two Ugandan ladies died in Abu Dhabi and in India. In the former’s case a real time video of her jumping to her death from the fifth floor of an apartment block did the rounds on social media. In the second case, while it was at first reported as a suicide, on closer scrutiny a more sinister reason was suggested.

Most people would rather work at home than abroad. The comfort of family and familiar environment compensate for higher pay abroad. So often when people go to work abroad its normally because circumstances have forced their hand. War, disaster, economic hardship, political and other persecutions could be the cause.

"Most of the Ugandan youth fleeing abroad do so in search of greener pastures and less for other reasons. They are voting with their feet, this economy is not able to sustain them in the way that they would want....

So we have seen hundreds of youth file out of the country every month to work in the middle east which has taken over from Europe and the US as the preferred destination for our immigrant workers.

So how come we cannot make enough jobs for our youth?

The private sector is the major driver of job creation. Its inability to create jobs means either that there is not enough economy activity to warrant its expansion and therefore greater job creation or they are automating processes therefore needing fewer workers as they expand.

There has been criticism of our economic growth over the last three decades, that while on paper it has been laudable – averaging about six percent a year, it has not come with the commensurate job creation.  This is particularly disturbing especially since our population doubles every 25 years and if we think we have problems it can only get worse before it gets better.

Every first Friday of the month, the US’ bureau of labour statistics reports the Non-Farm Payroll (NFP), as the name suggests the number of jobs created outside the agriculture. This is a major indicator of the health of the economy and its future prospects and is awaited with bated breath as it can affect the dollar price or whether the Federal Reserve increases or lowers its interest rate.

It is a recognition that whatever happens in the economy is about people. Numbers are good but they are useless if they do not translate into the improvement of people’s lives.

They say too, that what you focus on expands. BY choosing to focus on job creation as they do, it ensures that the policy makers ensure that any improvements in the macroeconomy are transmitted to the man on the street. You may question the success the US bureaucrats have had on this but at least they try.

In Uganda, like in the US, we have monthly reports on inflation, the state of the economy and every quarter we have other reports on the state of the economy, but we do not have a report dedicated to job creation, even annually. So if we are going to create jobs in this country this would be a good place to start...

We complain about our education system and how it is focused on rote learning and not skill development, but we forget that all job holders today have gone through that same system. While skills development needs more work, my thinking is we go to school to learn how to learn, especially in this age when knowledge becomes obsolete no sooner have you put your text book down.

Skills development is being pushed with the hope that future school goers can make their own jobs, but is possible that one can learn a skill and fail to create a job on a sustainable basis.

 A major oversight of many of this skill development programs is that they do not teach accounting or financial literacy, which would help these graduates monetise their skill.

An engineering graduate many years ago – things may have changed, once confessed that he knew everything there was to know about engineering but nothing about how to run an engineering firm. His firm lurched from job to job mainly on the strength of his salary, without that subsidy the clocking would be ticking towards the firm’s doom.

Government can go a step further and integrate financial literacy in the school curriculum as early as in primary school. 

"We are poor as a country not because we do not have resources but because we have failed to aggregate our resources, be they land, capital or labour, into meaningful wholes. Hardwiring financial literacy in our children early through a formal process may very well be a game changer...

That being said it maybe in the youth’s best interest to take advantage of the skilling projects being offered in the country before they head for the exit, so that at least when they go abroad they can be more valuable workers. As it is now many of the technical colleges around the country are struggling to enroll students.

MAKING UGANDA WORK

To collect your passport you are directed to the former Face Technologies offices in Kyambogo. A compound seating on more than an acre.

“Oh My God!” I gasped at the queue that started at the gate down to the bottom of the compound, along the perimeter wall and back up again to the entrance of the collection office across the compound on my right. There were easily a thousand people lined up and I had just arrived for my noon appointment.

My first thought was that, standing in that line was not an efficient use of my time, where efficiency is work done per unit time. My second thought was since I was here I better grit my teeth and get on with it.

Ordinarily I don’t mind waiting, I normally have a book on hand and the more I wait the better.

But I couldn’t read because I was thinking about the state of affairs that got us here.

A week prior, at the Jinja road offices of Directorate of Citizenship and Immigration Control (DCIC) I wondered aloud to the officer interviewing whether there wasn’t a more efficient way of doing this, than have hundreds of people seat around for hours.

"She explained with suppressed annoyance, that the process would be smoother if people honoured the time of their appointments, but pointed out too that 90 percent of the people waiting did not even have an appointment for the day and were occupying space of the genuine appointment holders...

The process is you fill an online form—and exponential improvement from before. That process is complete when you pay for the passport – new or renewed and are given an appointment time and date. Days after you get a message, giving you another appointment to collect your passport from Kyambogo.

In a room of a thousand people in Kampala, I would ordinarily know one or two, a function of age and profession. I stood in line for three hours and I can honestly say I never saw anyone I knew.

Easily 99 percent of my fellow collectors were young people, mostly women. When I asked, they told me most, if not all, were looking to add to our labour export numbers. I believe governments should not restrict the movements of its people, but that being said, I think it is an indictment on the government and on Uganda as a whole that we cannot keep these young people gainfully employed at home. Especially since they are going to do menial work abroad they would not be caught doing here.

Industry as a driver of growth is so 20^th century – the breweries for instance, employ fewer people per bottle of beer produced than they did in the 1990s, but factories would be a good start. I have always argued that the most natural place to start for us is with agroprocessing. We are currently ramping up production which is useful, because believe it or not, except for coffee, milk and a handful of other crops, we do not produce enough to sustain a viable agroindustry sector.

"You also want your youth to remain in the country because they are the drivers of innovation. Older people, like me – I really felt old waiting in line, are set in our ways, it’s the youth who think things can be done better, dream the impossible, unhampered by experience and obsolete knowledge and who, if given a chance, make it happen.

We need to stop seeing them as individual units of unskilled labour and more for their potential as a generation that will make the difference in the future about whether this experiment called Uganda, will prosper or not.

After three hours on my feet, I got my passport. I should have jubilated and celebrated but I quietly slunk out of the area, a nagging feeling that someone might call me back and take it away from me. There would be a fight.

The officials at the DCIC were courteous and helpful, a far cry from an official – in another country, almost 40 years ago, who after a sip of his Fanta (DCIC officials do not eat at their stations) told me to go and wait at the border for the renewal of my student’s permit – a story for another day.

But you have to think, for a ministry that is top heavy with military Generals, things can be better.

A few years ago while in a check-in line at an airport somewhere in Europe, a Caucasian man wheezed past us, pausing only to swipe his phone and breeze through the gates to the departure lounge. When I asked, I was told he had an app with all his details, that allowed him to swipe over a sensor and complete his process in a blink of an eye, leaving the rest of us backward travelers in the analogue line.

I am sure such technologies are available widely now. But if that is too much to ask, my analogue solution would be to have the passport office work 24/7. It would call for more manpower and jump in allowances for staff, more inefficient than newer technologies, but there must be a way to ensure a Ugandan’s right to a passport is not a nightmare to acquire.

TO TORTURE OR NOT TO TORTURE?

Podcast here

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 MONEY CHALLENGES WE WOULD LIKE TO HAVE

I have some rich young friends who have come to the cross roads of their wealth creation journey.

These young men have been saving and investing for the last 13 and 12 years respectively. They have followed a simple formula, every month they saved fixed amount, the amount hasn’t changed over the period. When they had accumulated more than sh30m they moved their savings out of their simple savings account and into a fixed deposit account. Rates were good then they were getting nine percent on their money. But in the third year the fixed deposit rates were down to six percent and they wondered whether there wasn’t anything better in the market.

Two years ago they got all their savings, about sh100m by now and bought a fifteen-year treasury bond which pays them just under six million shillings every six months.

That may not sound like much, but the beauty of the deal is that their interest payments on this bond have now surpassed their annual contribution to the fund. They are earning more than they save...

They are determined to take advantage of the power of compounding and are ploughing back all the income into the fund.

In the last year they dipped a toe into the equity market, committing sh5m to the MTN IPO. The plan is to start allocating money every year to buying some shares on the Uganda and Nairobi stock markets.

While they have kind of made up their investment plan as they have gone along the broad outlines show that they have been climbing up the asset ladder from cash to near cash and now going into equity. The next logical step down the road may be real estate, where they will hope to secure the wealth.

This is their plan for the next 10 years, after which they plan to pay themselves a monthly allowance from their potential earning by that time.

"My young friends have managed two things that often mess up our money affairs.

One, they have automated the process. The monthly contributions are standing orders from their income, that like a tax they have learnt to live without and secondly, they resisted the seduction of the get rich schemes they have come across and maintained they steady, even boring progress...

I could not help but admire these unassuming young men. Barring any accidents these young men will have a better financial future than the vast majority of us, not because they will have a good nest egg to begin with but because their minds have been oriented towards investment and away from consumption, which is what makes the difference between the wealthy and the rest of us.

They young men unlike most of us have the benefit of time on their side. Their little savings compounded over decades add up to a credible sum. But the principle still stands start where you are, with what you have.

Meanwhile the young men have invested in themselves studying investment. Their foray into equity signals a further shift in their investment journey.

The assured returns from the bonds are comforting, but over the long term the stock exchange provides the best chance of improved returns. Even better returns can be had from going into private equity, buying into companies not listed publically.

They going down the path that many office workers should take who do not have the time or temperament to run their own businesses but still need to aim for financial freedom.

The inadequacy of time we all understand. You expected on your desk from 9 to 5 and while business is a fulltime job. But more importantly is the right temperament – attitude or psychological makeup, to run a business. While we are the most entrepreneurial country the statistics show that we cannot all be business people.

This path though is not as sexy as pointing to your shop or rentals or trucks and saying their mine. My young friends path is one focused on the end – financial freedom in the future. They are focused on being rich and not looking rich. Placed in one sentence it does not look much, but the difference between the two is worlds apart.

The young men are learning this lesson in real time and in the not so distant future they will not only be rich but be able to look the part.

2022: NSSF MONEY IS HERE NOW WHAT?

In recent weeks the amended NSSF Act was sent to President Yoweri Museveni for assent. Once he does assent to it, as he expected to, it will be up to the relevant ministries to come up with a way for the amendments to the bill be actualized.

So while beneficiaries may have missed Christmas it is reasonable to expect you will get your benefits before Easter.

The attention grabbing clause is the mid-term savings access. In the amended bill if a member has turned 45 and has been saving for more than 10 years he will have access to up to 20 percent of his savings.

For most this will be a windfall like they haven’t seen in their lives and the trick will be that when the dust settles, from spending the money, there will be something to show for it,  more than a hangover and hazy memories.

NSSF research shows that eight in ten members after they receive their retirement benefits, have nothing to show for the money after only two years. With life expectancy up to 63 years now, higher than the 45 years when NSSF came into being, this statistic points to many years of financial challenges ahead.

What do we ordinarily do with our money after retirement?

We build the family home, not a bad idea, this may take away the rent expense, but it is also a sunk cost, that will return no income. And in old age the biggest need is a regular income. We also go into business, which was one of the biggest arguments for the midterm access. We tend to think that if we have money the business we start will succeed. There is nothing further from the truth. In fact, when you start a business with a lot of money, it does not give you a bigger advantage than someone who starts on a shoestring budget, maybe that you will start with a bang and probably maintain the illusion that you are in business for a bit longer...

And all this is before the brand new cars we are going to buy and the travelling we are going to do. We probably deserve it after slogging for all these years at dead end jobs.

So what to do that will give us half a chance of making the best of this windfall? Here are three suggestions.

1.       Eat less, invest more

It starts with the mindset. The difference between the rich and the rest of us is that the rich invest more than they spend. Its habit they developed even when they were earning peanuts. There are only two ways to spend money, by consuming it or investing it. The more you are doing of the former than the latter, the less likely you are to become rich.

Almost 20 years ago Sudhir Ruparelia did an interview with the Financial Times. He closed the interview with a flourish, saying something to the effect that getting rich is an old Indian trick, of the ten shillings you earn, you reinvest nine and eat one shilling and repeat until rich.

I shall not torture you with a reexamination of your spending patterns but keep this one thing in mind when thinking about the NSSF windfall. Invest more than you blast away.

2.       Set ego aside

The challenge for many of our investments is that they are more a reflection of our egos than desire to make money. Our investments tend to be things we can show people while pointing to our chest, “It belongs to me”, even if they are investment black holes with no chance of showing a return.

We need to get out of the way of our money, if it is to have a chance of looking after us into our old age. They say, we spend money that is not ours, to buy things we do not need, to impress people who don’t care.

To be true investors we need to be interested in sustainable returns over the long term. The 15-year treasury bond in November promised an annual interest of 15.50 percent. This means that a person who invested say sh100m in that bond would get 15.5m annually for 15 years. If you can get an investment that can guarantee those returns and better over the next 15 years go for it, if not go get yourself a treasury bond.

A treasury bond is not as sexy as a ranch or rentals or a kabusiness -- they no longer even give certificates, so you cannot show it off to friends, family and haters, but it will do its job, which is keep the money flowing while you retain your initial investment.

 

3.       Forget about it

But this investment thing may be too difficult and the reality of living in destitution in your last years is too painful to contemplate. Don’t try to keep up with the Jones, leave your money in NSSF where going by past results, you may get a double digit return until you qualify for retirement benefits.

If you have just touched 45 and leave your money in NSSF for the next ten years and they just manage 7.2 percent return on your money, your current balance will double by the time you pick it up in 2031 and that is not counting the subsequent savings you have made into the fund and interest on that.

Some are already doing it. About 40,000 beneficiaries of the retirement benefits have chosen to leave their money there after they clocked 55 enjoying the record interest rates NSSF has been posting in recent years.

I know this is not even as sexy as pulling out your money and trying to beat the market, but it gets the job done. And in the meantime for the next ten years you can go online and learn to be a true investor for that day when you clock 55.

Happy New Year!

PS 

Since this was published in the New Vision on 27th December 2021 President Yoweri Museveni assented to the bill in the first week of January. Disbursements are expected to start 60 days after the bill is gazetted, by the the finance minister would have come up with regulations taht will govern the way the bill is implemented.

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.

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

 

 

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.

 

 

 

NSSF:TO WHOM MUCH IS GIVEN, MUCH IS EXPECTED

There was jubilation in the streets of Kampala when National Social Security Fund (NSSF) announced 12.15 percent interest on member savings for 2020/21.

I exaggerate of course. But it was a good rate, better than the previous year when they gave members 10.75 percent  and the best rate we have received since 2018 when they announced 15 percent. This is a rate better than what people get on fixed deposit accounts at the bank and rightly so.

With a portfolio which is overweight, 78 percent on fixed income – government paper and fixed deposits, it would be scandalous if they could not manage a double digit return. This coupled with their progressively lower cost of administration, down to 1.06 from 1.19 percent of assets the previous year, means they can shift more of their returns to members than other players can. Traditionally asset managers charge two percent of assets.

Assets under management rose to sh15.5trillion from sh13.3trillion but the interesting statistic is that despite the vagaries of Covid-19 for the third year in a row NSSF is making more money from its investments, sh1.8trillion than it is raking in from member contributions, sh1.2trillion. this is a factor of the rate of growth of contributions is slowing as the compounding effect, earning interest on interest begins to go exponential...

Looking in from the outside, one is tempted to think NSSF have a tested business model and that they can now press automatic and cruise from here on, into the future.

That last statistic shows that this is not the time for the NSSF management to rest on its laurels. The fund is hitting maturity and in order to sustain the momentum it needs to increase its efficiency and find new avenues to park its money.

According to their strategic plan NSSF has as an intention to reduce its exposure to fixed income to 70 percent, increase the portion committed to equity to 25 percent and have real estate account for five percent of its total. The current distribution is 78 percent, 15 percent and seven percent respectively.

A rebalancing of the portfolio is necessary to optimize member returns, however NSSF finds itself playing in a small pond.

For the time being government paper continues to be lucrative, but that is because of government needs to finance its development agenda, with oil on the horizon will this still be an issue? The local equity market is too small to lift the needle for NSSF.  Uganda Securities Exchange (USE) market capitalization – the value of the companies whose shares are trading on the exchange is sh20.7trillion. NSSF whose equity portfolio stands at sh2.3trillion has disproportionate share of the floating shares on the USE. In real estate NSSF, with a trillion shilling in holdings, is punching well below its potential.

NSSF will always be a big player in government paper the challenge is to increase the equity and the real estate space.

Mobile phone company MTN is set to list its shares – at least 20 percent of the company on the USE by year end. With an expected sale of about sh700b expect this to give the USE a much needed shot in the arm. Airtel should be coming onto the market in a year or so down the line. These two listing may serve to increase NSSF equity holdings but not by enough.

"A strong lobby should be set up to compel more companies to list on the exchange. Companies which were privatized is a good place to start. The “gentleman’s” agreement can be invoked and they list their shares on the market....

Within the law too NSSF can set up a private equity fund, which would allow it to buy interest in local firms. This would require them to build in house capacity in this direction and have direct impact on local economic players.

In real estate NSSF is setting up very well to be the biggest real estate developer in the country. The Lubowa and Temangalo projects alone will bring more than 7,000 units to the market over the next decade. But more can be done.

How about NSSF buys a bigger stake in Housing Finance Bank (HFB), where it currently controls 50 percent of the company. This would tie in very well with their real estate development plans. A better capitalized bank would be employed to finance other developers and also provide mortgages for NSSF’s units coming to market.

HFB’s paid up capital is sh61b, half the amount NSSF collects from its members monthly.

A takeover of the troubled National Housing Construction Corporation (NHSCC) would be an interesting possibility as well. Dogged by shareholder disputes and undercapitalization NSSF could very well be the knight in shining armour the underperforming company needs.

Government should consider too, underwriting infrastructure costs in the development of real estate to lower the costs to intending buyers, not only to NSSF but for the industry as a whole.

And if, as is this government’s wont to drag its feet, we should lift restrictions on how far afield NSSF can invest its funds. International markets can swallow anything NSSF can throw at them.

I can understand the argument for keeping NSSF funds close to home, but if we don’t do anything to increase NSSF’s options locally it would cramp their style and make them fail to give the double digit returns we have become accustomed to. Government should care about this, because NSSF is our best long term saving vehicle and can be a major driver of this country’s development, as long as workers trust it and continue to save with it.

The point is for NSSF to sustain or exceed its growth trajectory while it is restricted to investing only within the East African, means it is only a matter of time before the biggest Fund in the region begins to falter in living up to the high expectations it has set itself.

NSSF A HOME GROWN CASE STUDY FOR FINANCIAL LITERACY

On Thursday National Social Security Fund (NSSF) released its financial results for the year that ended in June.

As a saver with the fund for more than 20 years, this is an event I look forward to every year.

NSSF has continued on its winning ways. The Fund continues to grow from strength to strength and once again seemed to shrug off the effects of the covid-19 pandemic to register more growth.

Comprehensive income jumped 25 percent to sh1.84trillion from sh1.47trillion the previous year. This improved performance came despite a drop in interest rate in fixed income products, which dominate NSSF’s portfolio. Income grew in all the asset classes, notably more than doubling in real estate portfolio to sh23.5b in 2020/21 from sh11.1b on the back of sales of housing units at their development in Mbuya where a three-bedroom unit were going for sh650m.

The seemingly contradiction is explained by the fact that member contributions grew eight percent to sh1.37trillion from sh1.27trillion in 2019/20.

All this and more adds up to the continued growth of the fund’s assets which now stand at sh15.5trillion a 17 percent increase from the previous year’s sh13.3trillion.

All these numbers are a bit intimidating if not mindboggling but NSSF’s history in growing the fund and ensuring good returns, holds powerful lessons for our own personal financial health.

Not in order of importance these are the lessons from NSSF

1.       Start where you are

As reported above the size of NSSF’s asset base is sh15.5trillion. interestingly about ten years ago this figure was sh1.6trillion, if you had said that time that the fund would have grown almost tenfold by this time people would have laughed you out of town. The lesson here is to start where we are with what we have. We should not be discouraged that our ambitions are big but our income is small, we should start. The trick is to be consistent, which consistency will generate a momentum that will even shock you.

2.       The two ways to spend money

There are only two ways to spend money – eating/consuming it and investing it. The richer among us have slanted their spending towards investment and away from consumption. Investing comes with the promise of more income in the future – you are making your money work for you, while consumption holds no promise of future income. NSSF continues to control its consumption, this year the cost of administration was recorded as a 1.06 percent of assets from 1.19 percent the previous year.  This figure has been falling annually for the last decade or so, which means NSSF spending is shifting consistently towards investment – 98.04 percent and away from consumption – salaries, stationary, fuel, rent etc.

 

3.       The eighth wonder of the world

Renown physicist Albert Einstein said that compound interest is the eighth wonder of the world. Compounding applies to anything that builds on previous progress, but in this case we are talking about the consistent profits the fund makes which it then reinvests. As mentioned earlier the fund has grown tenfold over the last decade which comes to an annual compounded growth of about 25 percent. Simply put if you took 10 shillings and grew it by 25 percent annually and retained the profit and grew the initial principal plus profit another 25 percent year after year for ten years it would become 100 shillings. Similarly, sh1,000 would become sh10,000; sh10,000 would become sh100,000; a million would be come sh10m and sh10m would become sh100m and so on and so forth. It helps that the savers are contributing about sh125b a month but most of the gains come from interest on interest.

For compound interest to work the key ingredient is time. Good returns are ideal but more importantly time.

Assuming NSSF only managed half the growth rate it has over the last ten years it would grow to about sh50trillion by 2031 which would be about half the GDP of Uganda at current prices.

 

4.       If you want to go far

They say if you want to travel fast go alone, but if you want to travel far go with someone. The biggest achievement of NSSF is it has created a vehicle for the aggregation of our savings. People’s contributions range from a few thousand shillings to a few millions of shillings on the higher end. Each of the members working individually would not be able to achieve what NSSF has achieved for them. By aggregating all our resources NSSF has leveraged the larger economies of scale to improve our bargaining power in the market. NSSF can get better rates and is privy to the juiciest deals.

In our own lives it would be a good idea to mirror this by saving and investing in groups to go far.

5.       We underestimate what we can achieve in ten years

Someone once said that we overestimate what we can achieve in a year and underestimate what we achieve in ten years. Thanks to the history of our country our default mode seems to be that we want improvements now, we are not wired to wait for a year or five, 10 or 20 to reap the fruits of our labour. As a result, we fail to take advantage of the exponential gains that come with long term endevour.

But there is another benefit of having a long term perspective. You do not get distracted by the squirrels that cross your path when you are on the hunt for the elephant.

NSSF in 2015 set themselves the goal to be a sh20trillion fund. Despite the covid pandemic they are set to hit, even exceed that target. Without a strategy NSSF emboldened by its mounting war chest would be seduced by every deal that crosses their part and very well killing their chance of good returns.

 

 

THE DEMOCRATISATION OF CAPITAL

Last week the Uganda Securities Exchange (USE) partnered with mobile company MTN to allow mobile phone owners register to buy and sell shares on the exchange.

To trade on the USE one needs to have a Securities Central Depository (SCD) account, this is basically an electronic record of your share holding, trading history allows you trade shares. So under the new partnership one will be able to open an SCD account from their phone. With an SCD account working through a broker people will be able to participate in the USE.

It was a logical progression. First, the banks allowed us to transact off our phones. Then the mobile phone companies allowed us to  transfer, save and borrow off our phones. And now we will be trading off our phones.

With MTN’s more than 10 million subscriber base if only one percent or 100,000 new SCD accounts are created, they may  very well cure the USE of its shortage of liquidity.

There has not been much activity on the USE because there are a few companies listed, 14 in all and most of the shares are held by institutional investors who are more inclined to buy and hold. This latest development coupled with the impending listing of MTN on the USE may improve matters considerably in years to come.

This is important for the wider economy and the for the individual shareholders.

"A major difference between the rich and the rest,  is that the rich more than the poor, have their money work for them. My favourite American Warren Buffett has been quoted as saying something to the effect that if you can not get your money to work for you, you will work until your death....

Democratising shareholding is effectively giving more and more people a chance to jump onto the wealth accumulation ladder.

Shareholders benefit from the annual dividends paid out by the companies and the appreciation in share price if the company is profitable.

Over the last three decades the economy of Uganda has grown more than sevenfold but the everyday Ugandan complains that he is not seeing these gains in his pocket.

This is not surprising as most of the benefits of this growth have ben enjoyed by the owners of capital, the company owners. As the economy has grown the companies have grown with it and therefore too how much the owners of these companies can keep for themselves.

It is not unusual from companies to make profit margins of 20 percent, way above the average inflation rate of five percent we have seen over he last decade.

Meanwhile the everyday man if he is employed has maybe seen single digit annual growth in their paychecks if at all, which has barely kept ahead of inflation. But companies have also cut back on their staffing by automating over the years, which has seen whole departments wiped out in some industries. Such restructurings have made them more profitable.

You can see how the economy’s growth favours the company owners over the workers, never mind the jobless ones.

Going by the above, a chance to play in the company ownership game should be jumped at for anybody who wants to benefit more from the economy’s fortunes.

To illustrate, when Stabic bank listed on the USE in 2007 a share sold at sh70 along he way the slit the share into ten, so that the IPO price in hindsight would be sh7. On Friday a share in Stanbic was trading at sh26 an almost four fold increase in value during the period. This might not seem like much but it represents an almost annual ten percent compound growth in share price. The way to think about is who would give you ten percent return a year for your money? Even at the banks to enjoy such rates you would need to put down a few millions.  Not to mention that Stanbic shareholders have also enjoyed an annual dividend that probably represented half the money they spent buying the share at IPO.

No doubt, to benefit from the stock exchange is a long term play. If you want to bag a windfall  in a month or a year the stock exchange is not for you. But then again no sustainable fortune was built in a month or even a year. And then you have to ask yourself, if all the richest people , genuinely rich people, became so by owning companies, building them over years, why would you reject an opportunity to own an already well run company, saving

  yourself the pain and heartbreak of building your own company from scratch?

Author Thomas Piketty in his book “Capital in the 21^st Century” made the point that as long as the returns on capital remain higher than inflation, the gap between the rich and the rest will continue to widen.  Inflation is a rough proxy for the rate of salary increments. So in an economy like ours where inflation hovers around five percent how do you keep up with company owners who are enjoying at least 20 percent return on capital?

The trick is to join them. And the more people who can the better for them of course but for the economy as a whole.

CASH BETTER THAN POSHO AND BEANS ANY DAY

Last week Prime Minister Robinah Nabanjja announced that this time around the government was going to give cash hand outs to the most vulnerable, unlike the last lock down when the government dished out posho and beans.

This was a welcome announcement in light of how shoddily the food distribution happened last time, but also because it makes good economic and dare I say, political sense.

Social security payments really kicked off after the second world war in Europe. A lot of Europe’s industrial base was flattened and needed to be revived quickly to give those economies half a chance of getting back on their feet.

Aid from America under the Marshall plan worked, helping to restore Europe’s industrial base. England only recently paid it off in full. However, the mass market that was needed to sustain these industries was not there as most were out of work or barely getting back on their feet.

Government’s then decided to design social safety nets, which catered for among other things unemployment benefits.

"With money in their pockets people went out to buy products, allowing industry to expand and employ more people. Despite greater affluence the social security nets have stayed largely in place to ensure “no one is left behind”...

During the pandemic cash handouts were seen in the US and Europe too.

The same logic should apply to support the cash hand outs to the most vulnerable during this lock down in Uganda.  

From the start one might be in need during the lockdown but it may not be for food. I might have access to my gardens or other sources of food and therefore my challenge is not feeding my family and I.

But also it has been shown that at the bottom of society’s pyramid, people are more likely to spend for consumption than to invest.

So the billions that would have been paid out to a handful of connected posho and beans hawkers, would better serve the economy if they were put in people’s hands. If a person got his sh25,000 handout he would run out to buy soap, charcoal, salt or even food from the nearby market, which money the shopkeeper will use to order more stock, pay his workers and utilities and on and on it would go. A real trickle down.

However, the big distributors who were paid last time were paid through the bank and probably kept their earning in the bank and since the banks were not lending that money got stuck there. Or even if they went out and made some purchases of a new car or a house or land, you can not compare the ripple effect to that of giving your tom, dick and harry hard cash.

In the former case a minute section of society benefits, while in the latter case you can have society wide benefits.

The prime minister also announced that they were contemplating paying the money by mobile money. Which came under a lot of criticism from the usual suspects. 

"It is actually a very efficient, transparent and traceable way of not only determining vulnerability, but also getting the money to those in most need...

Of course not everybody has a mobile phone, but with this one method you will have got to a significant number of people, for a fraction of the cost of sending trucks laden with beans out into the country side. For the others the LC networks can be employed as have other networks like the Social Assistance Grants for Empowerments (SAGE), a government program for aid to the elderly.

Most of the critics shook their heads at the suggestion because they know what happens when government technocrats come into contact with funds meant for the poor, or any funds for that matter. And they will not be wrong. But better to have a system which has a better chance of making real change than one, which does not but the funds will still be stolen anyway.

But staying on the subject of social safety nets, the high cost of intensive care has come into sharp focus in recent weeks. People who have never been admitted to hospital for anything worse than childbirth, are in shock at the millions of shillings they are being forced to fork out to settle their bills. Worse still if the patient dies.

Government has focussed on providing basic health care – and not very well, and done little to nothing in the way of providing  nationwide intensive care.

Government will protest that last part, but the proof is there for every body to see. There is no way the private hospitals would get away with the charges they have been asking, if government had enough capacity to counter these price gougers.

"It was all ok as long as the big shots in government could fly out at will and have their bills paid by the taxpayers – per diems and all, but now the chicken have come home to roost...

Hopefully now we will take a sharper look at our health system. It is not by accident that Cuba has a better health system than even the US, a decades long embargo of the small Caribbean island made it necessary.

As for those hospitals that have deliberately taken advantage of this crisis to fatten their margins unreasonably, the lightening that will strike you down is still doing press ups.

NRM CEMENTING THE WOMEN VOTE

By the time of writing this parliament was in its final day of approving President Yoweri Museveni’s 80- person cabinet.

This cabinet will prove a landmark in coming years especially because we have women filling in the positions of vice president and prime minster, Jessica Alupo and Robinah Nabbanja but also because women booked  four in ten of the ministerial positions, a first in Uganda’s history.

This is a high point in women’s politics, which while we had women ministers in previous governments, the flood gates of women ministers were flung open in the last 35 years.

The critics of the NRM would not like to hear that, and for good reason.

Historically, not only in Uganda, patrilineal society has shut women out of politics. That is why in the 21st century the US is celebrating their first female vice president.

The nature of the NRM’s bush war however made it impossible to ignore the women’s contribution and hence rig politics to ensure they got a place at the table.

When you are in guerilla struggle it is literally all hands on deck, every body counts, you do not have the luxury of recruiting only men in your ranks. Women finding themselves in the rebel ranks would have been dead weight weren’t they able to make themselves useful.

Secondly,

in order to swell its ranks when it came out of the bush, the NRM sought to incorporate groups previously marginalised...

In 1989 the NRM introduced the women’s female district representative position which added a 39 new seats to the National Resistance Council (NRC), the parliament of the time.

While some people criticised this as tokenism, the  women saw it as a foot in a door and have guarded it jealously ever since.

Other initiatives like the affirmative action for women joining university, has ensured that there is a continuous pipeline of women into politics.

As a result, a female politician does not draw double takes from a population who now see women as real contenders in politics.

And why the critics of the NRM do not like this, the ruling NRM has all the cards in its pocket. It can do some political grandstanding by appointing women to cabinet, has the most district women MPs and can appoint women to any number of high offices in government, the opposition does not have as much leeway. 

"The double benefit to the NRM too, is that most women appointed have performed well, even when more has been expected of them than their male colleagues... .

So its very easy for the NRM to portray itself as the champion of the women vote.

Against the background of the NRM’s dismal performance in the Buganda region in the last election, you can see how the importance of women constituency almost overnight.

The political calculation is that by elevating women to positions of authority, women around the country may see the NRM as the only party that can speak to their issues, if not fully but better than the others.

And its not that NRM has been a good benefactor, in private many women think they are just being used, but its that the ruling party has given them a real chance of effecting change. While the sexists may see it as window dressing, they underestimate the power of example and the possibilities opened up to the millions of young girls around the country in seeing women in power.

Beyond the opposition being unable to make such high profile appointments,

"this political sleight of hand speaks to two political acts we are holding our breaths for – the 2026 presidential elections and the Museveni succession issue....

For the second, the constitution is clear that in the event the president can not carry on, the vice president can takes his place. This may take added importance because no one thought Edward Sekandi had a chance of ascending to the helm of Ugandan politics. Whether Alupo has a chance or not, is less about her and more about the women’s lobby who would be easier to mobilise nationwide than any other constituency tribal or religious. The example of Tanzania’s female Samia Suluhuh Hassan is useful, but not as powerful as the thinking, now ingrained in Uganda that women can get the job done.

As for the 2026 presidential elections, what this cabinet list may very well show in coming years is that the NRM and Museveni in particular may have caught a second wind. 

Assuming the now powerful women execute their duties to the letter, not only will the NRM benefit from a job well done and hence ride on the success of these women but there will always be a feeling that the NRM will al ways do right by them.

Of course the NRM need be aware that when you give them an inch they will take a mile.

"The women of Uganda will not settle for a reversion to the old ways they will always expect to be represented meaningfully at the high table of this country’s politics, as is their right as the more populous of the genders...

Barring any disasters this cabinet may have sealed the 2026 presidential election.

THE KABALAGALA MAN

There is this gentleman who sells kabalagala – the small pan fired delicacies often made using ripe bananas and flour, by the roadside. That would not be anything to write home about except that this young man is often neatly turned out in a tie and often in a suit.

His kabalagala is polythene rapped in packs of five, which cost a convenient sh1000. He is respectful, always has change and he is joy to buy from, especially when you are stuck in traffic.

Unfortunately I havent talked to him at any length about his business but I notice every time I pass by he is doing brisk business from his box which I estimate contains more than 500 kabalagala when full.

Last year’s lockdown must have put the brakes on his progress but I see he is back at his slot serving with a smile.

We have said before in this column that for most of our businessmen its not about the economy failing them, but because they just have bad customer service...

Contrast the young man above with the lady who serves out of a restaurant I frequent. I have happened upon her sleeping at her station and often have to be prompted for service when she is awake. On occasion she doesn’t have change and when you leave your change with her , the impression is that you might as well say good bye to it. She is in business because she has a captive market, but she could do so much better if she improved her body language around her clients.

Or the other day I go to get my second Covid jab and the health center is a mess with no order, people milling around you could not tell who had come for the first or second jab and therefore who should be given priority. I jumped the queue --- there was no line to speak of,  on account of my graying pate. But it was no thanks to the young nurse who was standing on the verandah a bowl of fruit in her hand, chomping away at here fene. I had mistaken her for a fellow vaccinate. Wen I asked what the procedure is she said I should just seat  and somebody would come around to attend to me.

Yeah right. I ignored her and headed for a more elderly doctor who seemed to be actively trying to get us vaccinated. Now if she had been more helpful I may have found it in my stone cold heart to fork out a tip on my way out. A shilling saved is a shilling made.  

"It is easier and cheaper to grow the business off your existing customer base than to go out looking for others. Poor customer service means this can not happen and your business is more invested in roping in new hapless clients who would rather not do business with you if they had known how you behave...

I am sure there is a study somewhere that has n ailed down how much business lose due to poor customer service but I am guessing it must be a  huge number. I am willing to bet people would more than double their revenues if they brushed up on the way they treat their clients.

And I am probably understating it.

Imagine you have a clean place of business, so on first impressions you are ahead of the game. Despite constant entreaties since childhood not to judge a book by the cover we all do. Then your front line workers if they are in clean uniform, ready with a smile and seeming dedicated to meeting your every need you are making significant strides.

This is probably a good argument for treating your staff better. You treat the well they treat your clients well and they keep coming back.

Taking it a bit further what if this same front line workers are schooled in every aspect of the business, so for instance they know why six inch nails should be used for the job you want not the four inch ones you had ordered, they move from just pushing things down your throat to being consultants. Have you ever been to a restaurant and somehow haven’t decided what to eat but the waitresses can recommend something for you and tell you why? Pure bliss.

And then the actually delivery of the service has to be live up to the foreplay. If there is a delay come back and inform us of progress. There is nothing that makes me want to pull out my hair in frustration than a waiter who after a lot of clapping and whistling – I have found that “Gwe!” works best, than they turn up at your table and tell you what you have ordered is not available, 30 minutes later.

In brand building there are four basic components that need to be addressed; awareness, if no one knows your brand its not a brand and then associations, when people think of your brand do their think of dependability and quality or shoddiness and crap. Then the experience people enjoy or suffer interacting with your brand. If you can tick off positive attributes on those first three then the fourth, loyalty will follow.

What good customer service does for you is improve the association attributed  to your brand and the customer experience. Funny thing is if this a good, by word of mouth awareness increases and loyalty follows.

Last week an AfriArena study showed that Uganda is doing badly in attracting start up capital.  According to the report in 2020 Uganda only managed to attract $11.3m (about sh40b) compared to neighbours Kenya who did $305m. Even smaller economy Rwanda bit us to the post accounting for $11.6m in startup capital to the continent.

UI am sure there are many high sounding reasons for this state of affairs, but i am willing to bet that because of our poor customer service we are unable to scale up or show the ability to scale up our businesses to the point that they are attractive for outside investment. That is a saddening thought.