IS UGANDA'S ANTI-CORRUPTION FIGHT GAINING TRACTION?

On Friday was the International Anti- Corruption Day. One has to wonder about the timing of certain revelations of high corruption in recent weeks and the commemoration of the day last week.

According to the Inspector General of (IGG) Raphael Baku his offce is not only getting more reports to investigate but is piling up a commendable win –loss ratio against the “forces of darkness” . This year 109 arrests have been made, 45 cases concluded and 28 convictions obtained, a far cry from the 2009 record of 12 arrests, seven cases concluded and two convictions obtained.

The spike in activity has something to do with the passing of two new pieces of
legislation – Whistle Blowers Act and Anti-Corruption Act, 2009.

The Whistle Blowers act allows members of the public to report incidents of corruption, provides for their protection and a percentage of the illicit funds in question. It has its problems but is a critical step in the fight against corruption. More about that later.

Despite these gains against the vice the public perception is that, on the contrary corruption is galloping out of control and the cases we seeing being brought to court are the low hanging fruit on the tree. That there is selective prosecution with the biggest perpetrators getting away.

That maybe true but the nature of the crime lends itself to this kind of scenario.
Unlike murder or even outright theft, in corruption cases, bribery for instance both parties are guilty of a crime, witnesses are hard to come by and paper trails can be obscured. The aggrieved party is a faceless government or a far removed public neither of whom maybe aware a crime had been committed or an unable to do anything about it for legal or bureaucratic reasons.

Like a borehole pump which takes time to get going as the airlock is worked out I would like to believe that once momentum has kicked in corruption will be worked out of our system with time. The cynics argue that corruption is too well entrenched to be worked out and believe the normal judicial processes are incapable of making a dent in the cancer.

I on the other hand think that the fight against corruption will find its greatest ally in the business community – the supposed beneficiaries of this ill.
This is the reality facing the Ugandan businessman; He either grows, merges with international players or get swept away by new regional and international competitors. It’s happening already.

Formalising business processes will give owners a better picture of their business, allow them to maximize their strengths and minimize their weaknesses, allow generational transitions and in a globalised world make them more attractive to potential partners or buyers.

To ensure longevity businesses will have to document their process and adhere to the law – including pay taxes due. In this ever evolving scenario the space for corruption will narrow. In addition foreign players who are already steeped in best practice will insist on the same for their local partners, not to do so may be worth billions in lost revenues.

On the flip side, what may end up happening is that squeezed out of the business sector, our businessmen will go to work for government and perpetuate corruption there. The corrupt elements will then attempt to take government hostage failing that will seek to disrupt events, so that chaos can thrive and they can resurrect themselves.

This is the ever present challenge of governments. It is the corrupt cliques that have the greatest incentive to frustrate the private sector from being a credible counter to government, because a strong private sector can call government to order.

For our subsistence businessmen, with no ambitions beyond big 4X4 cars and a harem of little brown girls, and for our governments with less than a short term view of the their countries destiny, corruption may serve current purposes but it is not sustainable.

Unsustainable because governments need more and more revenues to service growing populations, which revenues come from the private sector, and businesses need to grow as a survival strategy.

Corruption is everywhere the challenge is to relegate it to the fringes of our daily lives, current evidence suggests we maybe on our way.

CORRUPTION IS INEVITABLE?

The press has been awash with the tales of corruption and the corrupt -- the botched ID project, the shenanigans around the UBC land and masts and our government’s inability to import a few dozen bicycles for village officials.

It does not help that these stories are coming out when inflation has hit historic highs, loadshedding is getting on our nerves and the rains have washed away the few roads we had left.

The way our officials are snorting at the trough, it all just leaves a bad taste in our mouths.

But then there is a logical – however unpalatable, explanation to all this

The development of human society has followed a well charted path.

Society start as small bands of under 100 people often speaking one language, related by blood and with an egalitarian or consensus leadership. Through birth or assimilation of other bands this grows into a tribe with hundreds of people still one ethnicity and often characterized by fixed settlements. The next stage is chiefdoms with thousands of people and at this point we begin to see centralized oftentimes hereditary rule.

In addition to or as a consequence of this centralized power, we see the emergence of the kleptocratic state, defined as one, which through corruption, enriches its supporters and sustains itself. This it does by monopolising the instruments of violence and conflict resolution, keeping the population happy by redistributing tribute (taxes) and more controversially promoting ideology to justify the continued kleptocracy.

How else can you organize large populations, spread over vast territories without centralizing power and violence? How else can you sustain that power without extracting revenues from the people and distributing it to the elite? And once in power how do you guard against your supporters running amok, plundering resources with increasing impunity?

US President Barak Obama, UK Premier David Cameron and German Chancellor Angela Merkel governments grapple with the same question. These governments are all kleptocracies only varying in degrees.

By logic and description all governments are kleptocratic.

It is futile to think otherwise. And it is with this understanding that we may have a chance of addressing the challenge.

MAKING OF A BUSINESSMAN

Businessman Patrick Bitature identifies the real turning point of his business career as the time he determined to go formal. Years ago a consignment of mobile phones was smuggled out of Entebbe airport by his workers. 

Thinking they had done good by him they told their boss what they had done. “It was a challenge to smuggle them back into the airport so that we could pay taxes on the consignment,” said Bitature of the event that marked the turnaround in his business career. The long overdue confirmation of his transition from informal to formal businessman came two weeks ago with the East Africa’s emerging entrepreneur of the year Ernst & Young award...

 The award which has been running for 25 years and held in 50 countries worldwide is recognized as the premier event of its kind. The judges drawn from eminent people in society -- this year included Justice Geoffrey Kiryabwire, head of our commercial court, take the nominees through a rigorous vetting process that tests the entrepreneur’s vision, knowledge of his business and grasp of the enterprise’s strategic direction. 

 “It was a very enlightening process that clarified a lot of things to me about my business and the way forward, not only in speaking with the judges but also in interacting with other nominees in the region,” Bitature said. 

Bitature known for his flagship Simba Telecom, which deals in airtime and mobile phones with branches in Kenya, Tanzania and Nigeria, also has interests in real estate, insurance, power generation and following his entrance into radio years ago has now added Television broadcasting with his interest in pay TV company, Zuku television. 

It all started with this father, Paul a businessman in his own right, who gave Patrick and his siblings pocket money at the beginning of every holiday and insisted on seeing who had grown his money most. Selling sweets to neighbours, grew into selling clothes to schoolmates and then owning night clubs – he sold the wildly successful Ange Noire club to current owner Charlie Lubega, eventually owning an MTN airtime selling franchise from which all his other interests seem to have spawned. 

This has all come to pass because of a change of mindset. “I made a lot of money before I got formalized but I have little to show for it, by formalizing my business I have made more money than I imagined,” said Bitature, who estimates his companies which employ at least 1000 people, turns over more than $100m annually. He doubts he would have been able to partner with credible international firms in his business and retain their trust is he had not formalized. Bitature acknowledges there is a lot of work to be done on his businesses, but says he is now on an irreversible path in that direction. 

In his seminal book “The Mystery of Capital”, Hernando de Soto argues that the reason capitalism only seems to work in western economies is for lack of formalization in the rest of world. He looked beyond the systematization of business processes to the nature of property rights. Property rights are the bed rock of capitalism, if you cannot show proof of ownership you cannot extract maximum value from of a property and therefore frustrating wealth creation. De Soto found that the cost of formalizing property rights was so onerous in many underdeveloped counties that many people chose to remain informal in their practices, putting a cap on a country’s development. A country develops because its citizens develop. 

 But as Bitature’s story shows for the few who make the thousand mile journey the benefits can be innumerable. “The seduction of being informal is that it seems like you are savings costs not registering, not paying taxes, dodging debtors, not keeping books properly, operating in cash … but it limits your growth and in which arena you can play,” Bitature said on the sidelines of another event last week in Kampala to honour his achievement. “You cannot grow to be big a tree without a mindset shift, without that (mindset change) you will remain a shrub,” he said.

THE KIIRA EV-- MORE THAN JUST A CAR

Last week President Yoweri Museveni took a 10-minute ride in Uganda’s pioneer electric car the, Kiira EV.

The two-door lime green vehicle can scoot around at a credible speed and will cost you sh6000 at current Umeme prices, to get you from here to Jinja.

The handiwork of our very own College of Engineering, Design, Art and Technology (CEDAT) has its genesis in a 2008 Massachusetts Institute of Technology (MIT) project to develop a car that can run on both fuel and electricity.

The car has met with mixed reactions with some dismissing it as a mere car assembly project while on the other side of the spectrum others are looking beyond the car to other potential innovations that can be thrown off from the project.

Groping for what this means it was only natural that the idea of mass production was top of people’s minds.

But car assembly is a capital and labour intensive process that should not be in our immediate future plans....

Across the border in Kenya the Nyayo car was a similar project whose ominous beginnings pointed to doom. On the launch of the car in 1988 at the Kasarani Stadium failed to make it around the 400 meters athletic track much to the embarassment of the then president Daniel arap Moi. Nevertheless the Moi government ploughed on, pouring hundreds of millions of Kenya shillings into launching a company that would mass produce the car before corruption did in the project.

The cold war era is over. Propaganda is unnecessary and the idea of immediately mass producing this car should not find traction with our society.

We should look further afield maybe to Toyota. In the first half of the last century Toyota used money it got from the sale of a patent for a revolutionary automatic spinning loom to kick starts it car development arm.

Similarly in producing the Kiira EV intellectual properties might have been created. These can be patented or registered and licensed out or sold to concerns that can afford to invest resources in mass producing the car or using the licensed technology in their own processes. The money CEDAT gets thus can be used to finance future research and innovation.

Thankfully Professor Tickodri Togboa who oversaw the project is not seduced by the romance of an immediate push for mass production by Makerere University.

Togboa sees the Kiira EV as a useful tool to make people look up and take notice of Makerere’s potential.

"The immediate benefits of the project he sees, is changing the way Makerere’s students are taught – fusing theory with real time practice and says the process of registering the intellectual properties ensuing from the project are ongoing...

The project developers are looking much further down the line to developing technology solutions for our own unique circumstances. A planned Vehicle & Transport Research center should take care of this.

The paradox of innovation is where is it can happen in structured environments its best result are often a result of tottering down unbeaten paths. This kind of endevour often throws up unintended discoveries that can be utilized in seemingly unrelated fields. That is why universities are seen as ideal places of research and innovation.

So to see this development as only about a car would be to miss the point.

The car is the end product of intangible processes that can be adopted and built upon by other innovators in Makerere or further afield.

A lot of innovation is already going on at Makerere hill, what the Kiira EV will do is launch the university’s reputation as a center of innovation in the mass public. But beyond that it can ignite a spirit of innovation beyond the university.

It is in our interest to applaud innovation wherever its rears itself rather than snort at it.

In overall terms innovation is important for companies, countries and the human race at large because it allows us to extract more and more value from less and less of the finite resources we have on this earth.

THE GENESIS OF UGANDA'S POWER CRISIS

In 1999 then energy minister Richard Kaijuka came to parliament to get an amendment to the Electricity Bill passed that would allow his office the right to license Independent Power Producers for six months, as appropriate legislation was being put in place.

Parliament threw the amendment out insisting that the appropriate laws be expedited, arguing that the amendment was like treating a fracture with a plaster.

A visibly bewildered Kaijuka later on told journalists he was shocked that the amendment was thrown out. He thought the urgency was clear and the need for speed obvious.

Uganda is a small portfolio run by a middle level manager in Deutsch Bank, it can be turned around like this he said, with a snap of his fingers, our problem is politics, he concluded before jumping into his ministerial car and zooming out of the car park.

The laws when eventually passed led to the breakup of UEB, the privatization of its component parts and the creation of a regulatory authority.

In understanding the genesis of our current power crisis this moment probably has pride of place on the timeline.

I remember thinking that the minister was a bit politically naive to expect the amendment’s success without prior lobbying. But it also left me wondering why the major legislation was taking a long time to be brought to the house considering its strategic importance. That notwithstanding couldn’t parliament find it within itself to negotiate a middle way that would involve not throwing out the baby with the bathwater?

The current power crisis has its origins much further in the past than I know but a few inflection points stand out for me.

There was the disastrous contract to Chinese firm Sietco in the early nineties to expand the capacity of the Nalubale Dam -- Owen Falls dam then, to its current 180mw from the previous 150mw. That fiasco not only led to the termination of Sietco’s contract for corrupt practices but also put paid to local insurer Pan World Insurance Company (PWICO) who failed to make good on a sh33b performance bond.

The net effect was to delay construction, meanwhile demand continued to grow regardless.

When former US commerce Secretary Ron Brown in 1995 committed US business to build a dam at Bujagali one would have been forgiven to think that by the turn of the century work would be in advanced stages on the 250 mw facility and the dam would be done by the middle of that decade.

Determined sniping by foreign environmentalists, with the help of people like John Ken Lukyamuzi, delayed American firm, AES Nile Power long enough that financial pressures in their South American operations forced them out ten years later.

The results again is we have fallen further behind in catching up to ever growing demand.

During this sad episode with AES the World Bank and foreign donors refused to bankroll the simultenous development of the Karuma dam because they argued that there is not enough demand to sustain both dams. Norwegian backed NORPAK was planning a 700 mw dam on the northern Uganda site.

In fact as a donor condition to release funds for Bujagali, then energy minister Syda Bumba had to shuttle around the region soliciting guarantees from neighbouring capitals that they will consume Bujagali’s power when it comes online.

Bujagali’s delay coupled with the falling levels of water on Lake Victoria have forced us to contract expensive thermal generation plants that have added salt to injury.

In fact AES was committing to sell power to the grid at US6 cents a unit, a figure that would have brought power to our homes at US9cents a unit in 2006. This figure was lurched upon by Lukyamuzi and co. to bog down the dam’s development down because at the time the Ugandan consumer was paying a heavily subsidised US4 cents a unit for power. Today – thanks to Lukyamuzi et al we are paying about US12 cents a unit of power, a figure that is unsustainable as it is also heavily subsidized.

The cumulative effect of this circus orchestrated by donors, our own leaders and any number of do-gooder, is our current 24- hour loadshedding debacle. Obviously when Bujagali’s 250Mw hits the grid we will have temporary relief – a few months at most before the specter of day long loadshedding rears its head once again.

It would make for good comedy if it were not sad, to see power distributor Umeme being pilloried for the power deficit problems.

The power distributor is not beyond reproach but given the genesis of our current power crisis, Umeme is just a convenient scape goat, deflecting attention away from the real culprits in this sorry episode.

THE HOUSE THAT MUHAIRWE BUILT

The turnaround of the National Water & Sewerage Corporation (NWSC) almost ended before it begun.

Shortly after being appointed boss at the water utility Dr William Muhairwe, arrived at his Jinja road office one morning to find the premises padlocked by the URA, for defaulting on VAT.

As if that was not enough the internal revenue department was looking to attaché any assets of the corporation they could get their hands on to redeem the debt – including the managing director’s official car.

That was 1998, this week Muhairwe’s contract comes to an end and he thinks it’s time to move on.

“The average person craves legitimacy, the exceptional person builds legacy” they say.
NWSC’s numbers during his tenure tell an interesting story.

Customers to whom the corporation supplies water has jumped to 270,000 today from 50,826; the number of towns it supplies has doubled to 23 from an initial 12 and turnover is up six fold to sh131b while operating is up nearly thirty fold to sh30.3b. And the company showed a net profit of sh13.3b from being a loss making enterprise when he took it over.

All this growth was done in the context of a public utility company. An interesting story because when Muhairwe joined the corporation the Finance ministry was preparing it for the block like other public companies.

Privatisation will still take place but more likely through the more acceptable listing of shares on the stock exchange.

His legacy at NWSC may take many shapes but I think most importantly he put to rest any delusion that indigenous Ugandans cannot be good managers. Many people complain that it is not lack of management skill that dooms our enterprises but lack of finance. Muhairwe showed that where there is good management the money will follow.

Also to note is that because of the turn around of the corporation it has recently been inundated with the requests to share this knowledge. As a result NWSC now has a full fledging consultancy department – with the requisite PhDs and training center, that is fielding contracts from as far flung regions as Trindad & Tobago to Singapore, South Africa to Yemen.
NWSC external services as it is called, also does management consulting locally and has added sh8b in revenue to NWSC’s top line in the five years of its existence.

And one other point of interest is that in turning around the corporation Muhairwe is quick to point out, was done with some few changes by the human resource he found at the company. NWSC was never lacking in manpower.

There is still a lot of work to be done.

With just under 300,000 accounts in 23 towns, it means that even in Kampala water coverage has a long way to go before universal coverage can be claimed. If the numbers for water provision remain woefully inadequate it is a sadder story with sewerage coverage. An eventual extension of NWSC’s mandate outside the urban areas should also be on the cards.

And one last legacy other CEOs would do well to emulate; In an attempt to raise the service delivery efficiency of the far flung corporation, Muhairwe devolved power away from the center, allowing regional managers more autonomy on budgeting
and hiring, leaving major capital expenditure and overall policy decisions to the Jinja road head office. As a result new cadre of leaders is coming up through the ranks at the corporation. The long term implication maybe that the corporation will not flounder after Muhairwe is gone but may actually grow from strength to strength.


So when an epitaph for Muhairwe’s time at NWSC is written it may very well read “He worked himself out of a job”

COMPETITIVENESS, SIMPLE BUT NOT EASY

The competitiveness of a nation refers to the ability of its companies to win and maintain market share in the global market.

The concept of competitiveness is important because the poverty of nations has a direct connection to the lack of competitiveness of its companies and vice-versa.

That is why Singapore a rock in the ocean off the coast of Malaysia at independence in August 1963, has a GDP -- total economic activity, of over $200b. This from a population of about five million on an island the area of land that is less than distance from Kampala to Entebbe squared.

Uganda, which was ahead of Singapore at independence on the other hand, has a GDP of $17b with a population of 34 million in a land size that is 340 times the size of Singapore.

But we shouldn’t feel so bad the per capita GDP of Singapore is twice the total of the comparable figure of Mauritius, South Africa, Botswana and Egypt combined.

It goes back to the basic truth – confirmed with the collapse of the Berlin wall, a country is only as viable as its private sector.

The private sector generates wealth by paying workers and making profits. And performance of the private sector has a direct bearing of the size of a country’s domestic revenues.

However the private sector is only as vibrant as the government that oversees it.

Beyond creating a stable macroeconomic environment there should be a systematic means of promoting private sector development through formulation of national business-centered strategies, provision of efficient infrastructure and human resource development.

During the 5th National Competitiveness Forum last week, a host of experts said this in very many words.

In a more than candid admission, Keith Muhakanizi, deputy Secretary to the treasury said that ministry officials commit more energy to dealing with donor officials than with private sector leaders, despite the fact that the private sector carries 80 percent of Uganda’s budget.


To get competitive there has to be a total mind shift from people working in their own little silos oblivious to what’s happening around them to shared competitive mind set.

One of the things government can do is actively promote business clusters, these are groups of inter-related businesses enjoying mutual benefits from associating with each other.

A possible cluster in Uganda for instance could be the commercial printing industry concentrated around Nkrumah road. Importers of paper, inks exist side by side with stationary shops, printers and graphic designers. Their close proximity encourages specialization adding to their combined efficiency.

So there should be initiatives to develop a sector strategy to encourage this cluster, help these entrepreneurs improve their business skills and find ways to give them other concessions that will boost the businesses and strengthen the sector. This should be part of a wider strategy with linkages to the transport, financial and education sectors.

A similar strategy has worked in Rwanda. Where at the start of century tourism was identified as a sector in which the small central African nation could carve out a competitive niche for itself.

Between 2003 and 2010 Rwanda invested $103m in standardizing facilities and infrastructure, marketing and promotion and institutionalization of various initiatives.

Government and private sector invested in upgrading rooms outside Kigali, rehabilitation of historical sites, training guides and drivers and incorporate basic tourism training in schools.

As a result of this initiative Rwanda now has a seven day tour that incorporates the country’s history -- the old kingdoms, the colonial era, the genocide and the RPF’s guerilla war.

It is estimated that tourists spend $320 a day for the duration the tour. As a result during the period of the investment total revenues to the sectors have come in at $345m and tourism numbers to these sites have gone up almost five fold to 70,000 in 2010.

Is it any surprise then that Rwanda overtook Uganda in per capita GDP terms last year?

There is no way around it we have to go beyond providing lip service to private sector led growth , understand the concept of competitiveness—especially as a key driver of poverty eradication and commit to it.

Easier said than done? Well in 1986 the NRM inherited empty coffers, a broken economy and an unstable country, they have made something of that basket case but clearly it is not time to rest on their laurels.

We will be served well by remembering Nelson Mandela’s words, “After climbing a great hill, one only finds that there are many more hills to climb.”