REVIVING UGANDA AIRLINES IS MONEY DOWN A BLACK HOLE

I see that a move to revive the defunct Uganda Airlines is gathering momentum in certain circles.

There are all the well-worn arguments for the plot; that the airline will bring pride to Uganda or that it will increase tourist numbers to the country or that passenger numbers into Entebbe have increased and this will make another airline more viable or (the most childish of the lot) that everybody has one so we should have one too!

None of these answers even begins to answer the critical question, “What would a government backed Uganda Airlines do for travellers that is not being done for them now?”

Uganda Airlines was wound up in 2001 after a failed privatization attempt and the unsustainability of the huge cost of keeping it afloat – about $10m a month at the time. Incidentally the privatization of the airline was subverted by incessant sniping by a parliament which also put paid to several other projects like the initial Bujagali power project.

At the time the airline was running a single Boeing 737 on the Entebbe-Nairobi route, with little to no hope of the fleet being expanded.

In the period since its closure travellers in and out of Entebbe have more than tripled to 1.2m last year. These are being ferried by the 20 or so airlines that now operate out of the airport.

One would like to believe the promoters of this scam – sorry scheme, would like to build a world class airline (otherwise where is the pride in a slap dash operation?) that will eventually reach as far and wide as the Ugandan traveller flies.

"Apart from the fact that government doing business is a bad idea, it is that government would spend billions of dollars (not shillings) not only in setting such an airline up but baby seating it to profitability over many years even decades...

In a country like Uganda’s where health and education services are inadequate to the point of hopelessness and our infrastructure is in dire need of repair and expansion, it does not take Nobel prize in economics to see there are better, if not more profitable ways to employ those billions. For us opportunity cost is real not just a theory in the text books.

We have been without an airline for a decade and Ugandan pride has not fallen as a result. People have continued to fly into the country, more so than when we had an airline and we do not need an airline to keep up in the mine-is-bigger-than-yours boyish games with our neighbours.

Ali Adel knows a thing or two about setting up airlines, having set up the award winning budget airline Air Arabia, and his experience is that it takes $50 to $200m to set up a budget airline. Setting up a regular airline therefore would cost multiples of that.

When asked what he would tell someone trying to start an airline he said, “I would say don’t do it,” going on to explain that an airline is more than just airplanes, having seats and ticketing.

“Your number-one challenge is to gain credibility in the marketplace from the customers because there are a lot of airlines and you’re coming in new, so why should people travel with you or trust you? That’s always going to be the biggest challenge. Second, is traffic rights. Traffic rights are already allocated to all the airlines, people on the slot and everyone else, so why should you be getting a share of that cake when you don’t have it now? Another challenge is the ability to bring in so many different components of this business under one roof. One other challenge is finding the right talent to help you run the business. You need a very strong team to take this forward.”

But I am sure the people at Civil Aviation Authority and the Transport ministry know all this and that I should be preaching to the converted. But apparently not.

Somebody once said something to the effect that in explaining the reason for war there is always the stated reason and then the real reason. The stated reasons for this enterprise do not stand up to scrutiny – the proposed airline will add no value to the passenger experience at Entebbe, the real reasons we can only guess at.

On Wednesdays within thirty minutes of each other six airlines make arrivals, two of them being the larger airbuses of Emirates and Qatar airlines. There are massive delays as our rudimentary airport struggles to process the passengers at lunch time on Wednesday. Clearing through Dubai airport, which sees more passengers going through it in a week than Entebbe sees in a year, is comparatively quicker experience on any day.

"If the government feels that money is burning holes in its pockets, let it beef up Entebbe airports capacity to handle the increasing number of passengers (And we are not talking about the perfunctory rehabilitation that was done for CHOGM), improve regional airports and market Uganda as a choice destination to attract more visitors...

Or maybe we should look deepper into the real reasons for this renewed clamour for the revival of Uganda Airlines?

OBAMA’S AFRICAN TOUR IN A CHANGING WORLD

Last week US President Barack Obama made a three nation tour of the continent.

His trip to Senegal left us scratching our heads in wonderment at the visitor’s manners, as he went out to bat for the gay cause – a subject that is still anathema on the continent. While unable to see former South African president Nelson Mandela, who is battling for his life in a Pretoria hospital, he managed a visit to the anti-apartheid hero’s Robben Island prison cell.

Then he got down to business pledging US help in building 10,000 MW of electricity generation capacity on the continent, a new trade initiative with Africa – to replace or work alongside the Africa Growth Opportunities Act (AGOA) it was not clear, a new fellowship for up to 600 young African leaders and pledged support for the fight against poaching of the continent’s big game animals among other things.

"Of course he found time to launch some broadsides at the Democratic Republic of Congo’s neighbours (read Uganda and Rwanda but maybe not Sudan) for meddling in the giant central African nation...

In recent years two US presidents – Bill Clinton and George W. Bush have made the trip to the continent in widely differing contexts.

Clinton’s March 1998 trip to the continent was the first of a seating US president in 20 years up to that date, was just months before the twin bombings of the US embassies in Nairobi and Dar es Salaam. This was 10 years after the fall of the Berlin wall, the crumbling of its cold war nemesis the USSR and the home of the free and brave was just settling into its role as the policeman of the world. Though Clinton at the time, would have been forgiven for being a bit distracted, seeing as the messy affair of Monica Lewinsky was not going away.

Bush did two trips in 2003 and 2008. The world by this time had changed dramatically with the US flailing away at all and sundry in its “War against terror”. In 2001 Osama bin Laden’s Al Qaeda had flown commercial jets into the twin towers of the World Trade Center and the Pentagon, the heart of the country’s defence establishment.

By the time Obama came around, the war on terror is winding down in terms of intensity and the African continent, which was previously a hopeless place deserving of pity and not much else, is becoming the new battleground – in a commercial sense.

"The US finds itself playing catch up not only to the former colonial powers but to China, which since Obama’s last trip to the continent in 2004, has become the second largest economy in the world. It’s an old story now, but China has been making determined inroads on the continent in search of the natural resources it badly needs to fuel its growth, while accumulating influence by dotting the continent with trophy projects – white elephants or otherwise...

To illustrate, US trade with Africa came in at $100b last year half of China’s $198b during the same period.

It is not difficult to see why Africa is the next big thing. Despite the global economic decline of the last five years the continent has continued to post impressive growth figures, the average age of its population is the lowest in the world, a source of huge future markets and the continent seats on a bounty of natural resources whose extent no one really has a grip on.

It has been estimated for instance, that the DRC has untapped mineral wealth amounting to about $12 trillion or about the size of the US economy.

So it’s not out of any altruism that the US invested upwards of $100m to fly the leader of the free world to our shores. And he has already promised to return before his term is done.

We are like the ugly duckling who is turning into a beautiful swan.

We are the flavour of the month. But like all fads we better enjoy it while we can, but know that it may take year or a generation but everyone will soon move on to the next hot thing.  The trick is to make maximum advantage of this new popularity.

With him on his trip Obama came along with the head of General Electric Jeffrey Immelt, who observers say is looking to benefit from the $7b earmarked for power projects on the continent.

GE is a $243b company or three times the size of the East African Community. The company is a conglomerate of many companies that  manufacture, all number of power plants from nuclear to solar power, railway and aircraft engines, water processing, medical imaging and because they have tons of cash lying around are also into finance.

To move the needle on GE’s financials they will be looking for multi-billion dollar projects – Karuma does not cut it. The East African Community has gone a long way in merging its markets and therefore would be attractive for the multi-billion dollar infrastructure projects in power, railways and communications that would make it attractive to US business.

"A cursory look at how world geopolitics has changed in the last 20 decades, makes it clear that change will always be there and seen against the wider  context of eternity, we need to position ourselves in such a way that we will always be the princess at the ball....

Obama may have a little emotional attachment to the continent but the US state for which he is a functionary does not.

A lot has to be done. We cannot go it alone. We need to accelerate our processes of regional integration to not only ensure our relevance in world affairs but to guarantee our very existence.

WIMBLEDON & INVESTING IN SPORTS

Last weekend the Wimbledon tennis fortnight came to a tumultuous close with victory for Britain’s Andy Murray , the first British male to win there since 1936.

"For his effort Murray took home £1.6m or about sh8.4b, and it is expected that with his win he can expect his earning power to jump up to $70m annually in endorsement payments...

But the real winner has to be the tournament itself.

 Last year Wimbledon managed a record £37m profit, a figure one can expect will rise this year. Since Wimbledon is run by the sport’s governing body in the UK the surplus is ploughed back into developing the sport in the country albeit with little success.

Wimbledon would make more money if they allowed more corporate sponsorship of the event – an additional $100m it is estimated, but the powers that be have chosen to forgo this to maintain the event’s unique character.

It’s that kind of farsighted thinking that has made the 236 year old event a unique branding opportunity that corporate sponsors are willing to pay top dollar for, even if they will not get as much exposure as they would have liked.

"The Wimbledon Championships  have been carefully groomed into a commercially valuable product, which over the two weeks it is in play, makes more money than most companies in the region make in a year...

Back to earth.  In Uganda we see little effort – or is it too soon to say, being put into developing these kinds of sporting products.

Soccer is a case in point. The most popular sport in the nation fails week in, week out to marshall credible crowds for league games.

"Rugby and basketball are showing that with a bit of marketing and aggressive youth development programs they can punch above their weight and garner growing corporate interest. They now command healthy crowds to their events – although one wonders whether even half the crowd know what’s going on the pitch or court. But it’s that kind of crowd that sponsors are gleefully looking to wave their logos in front of. These crowds appear by design rather than by accident...

They say you are not in business until you have made your first sale. The key to sustainable business is simple – to sell more and more and secondly, to make sure the incoming revenues are greater than the cost of doing business. Easier said than done of course.

As it is now apart from a few sports administrators, most are not trying to attract numbers to their sport and forget about showing a surplus.

Often the leaders of our sports associations are glad to pilfer the little monies from gate collections and expend more energy making the case for government support of sport instead of increasing their own associations capacity to generate revenues.

Government need not be involved in sport. The US, the greatest sporting nation of our time, does not have a sports ministry.

Our previous success in the Olympics in boxing,  athletics and the fact that we have one of the youngest populations in the world is proof enough that we have enough talent in the country.

"What we clearly lack is the entrepreneurial capacity to harness this potential, not only for the benefit of the individual sportsmen but for the benefit of the country, to not only bring in revenue but to raise the country’s profile, bring attention to it beyond the usual poverty, disease, corruption and bombs that is our current stereotype...

Another two week event , tennis’ US Open in New York it was once estimated creates upwards of $400m of economic activity in the city during the duration of the event. The same can be said for such events as the Olympics or soccer World Cup.  The positive aura success in individual sports cannot be discounted. While Uganda continues to be known for Idi Amin, across the border in Kenya everybody knows them for their distant runners, never mind that just barely five years ago a few hundreds were killed in an orgy of blood letting that was covered by international press.

I know it’s a bit much to ask, but our sports administrators should take a long term view of their individual sports, work at building them into viable businesses or at least create bankable products – even  if it is only to increase the surface area for them to  steal from!

NO TOILETS? LET THE MZUNGUS BUILD IT

In case you missed it, Iganga municipality market commissioned their new toilet last week.

The new toilet cost sh20m, is a flush toilet, most probably also has a sink(s) and all the bells and whistles that come with a modern toilet – soap dispenser, toilet paper holder and air freshener.

One should not begrudge the 500 or so vendors of that market their new toilet, should we?
What made this big news is that the toilet was the charitable contribution of Daventry town (where?) in the UK.

"I can only guess that some resident of Daventry some time back, while wandering around Iganga town (after overindulging on nsenene)  felt the need to “go” and could not find a toilet in the market to save his life...

God bless their hearts, the residents of Daventry.  But one has got to wonder about the able bodied vendors of Iganga market and the good residents of Iganga town who shop in this market.

This story is so wrong on so many fronts.

So it took visitors from the UK, and not even London, to come and diagnose the problem and prescribe a solution?

And these were not felt hat-wearing, slave driving, Victorian age explorers, overwhelmed with religious fervor, here to  open up our god forsaken corner of the dark continent to civilization … this is the 21^st century for goodness sake.

So somewhere in Daventr,y  these vendors of Iganga town are the butt (forgive the pun!) of jokes by the town’s children who would find it quite funny that they contributed part of their lunch money to improving the toilet habits of some African village.

So if you ever find yourself in Daventry, don’t mistake the belly aching laughter when you introduce yourself as Ugandan as testament to your sense of humour.

Don’t get me started about the stereotypes this story will perpetuate in the minds of the impressionable children of Daventry.

"This story of less than 300 words and a picture of town councilors kneeling in gratitude for their toilet before some bemused Daventrans (is that what they call themselves?) is the most manifest sign of a lot that is wrong with Uganda...

Let’s start from the beginning.

Once upon a time some Europeans happened upon us, with one eye on the rich natural bounty they saw around us, they decided to subjugate us.  They did this in various ways, by enslaving, massacring and  mutilating us before moving on to  more subtle ways of brainwashing us all in aid of making us believe we are lesser human beings and therefore we should toe the line – their line.

It was obviously very effective, because now our brightest and ablest minds voluntarily ape them, hold up their culture as the standard of good behavior and jump through hoops to win their approval.

To deny or dismiss that our colonial history is a factor in the dysfunctionality of our society, is also to buy into the myth that we are hopeless and in need of help. And this is not by mistake.

However, so we have gone to school now, we wear suits and ties and whiz around in European sedans, so why do we continue to perpetuate the problem?

We not only fail to recognize the vast potential around us, but we squander it by depopulating our waters, ravaging our forests and dehumanising our people.

We are 50 year old country, if independent Uganda was a person it would probably be a grandfather by now. Some may argue that 50 years is nothing in the lifetime of a nation, but one need only look at that little-rock-in-the-sea, Singapore, which in the same space of time has transformed itself into a first world nation .

"The vendors of Iganga showed a lack of leadership, a lack of pride and a hopelessness that is hard to wrap one’s mind around...

To extrapolate, when our government officials go to the donors to beg for money, to fix our sanitation systems it is not akin to asking them to come and build us toilets.

Let the plight of the vendors of Iganga town be a cause for national soul searching. We need to ask ourselves how we can be wallowing in such abundance, as a country and still have the majority of our people (forget the dollar-a-day standard) living in subhuman conditions.

It is obviously not for lack of money or resources, it is that our minds from the top to the bottom of our society are so steeped in poverty that we are unable to lift ourselves up.

Meanwhile you will have to catch me dead in Daventry. I couldn’t stand the kids in the street pointing at me and bending over in rib cracking laughter.

NO PAIN, NO GAIN

Incredible as it may sound today, inflation peaked at 215% in 1987.

Since inflation is caused by too much money chasing too few goods, to fight inflation you either increase the number of goods produced or you reduce the money in circulation.

Producing more is not enough, you need to produce what people will buy. It takes time even for the market to determine what people want and in what quantities.

It’s easier to reduce money in circulation, than it is to kick start production.

In the late 1980s early 1990s after government was done dabbling in arm chair socialist theories, they decided to bite the bullet and rein in inflation. So they cut government spending and operationalized the treasury bill auctions to suck money out of the economy.

I don’t remember the details but I remember the pain – my pocket money took a nose dive, but I remember more especially the talk – that the government wouldn’t last the year, that they did not know what they were doing and that they would have to reverse the decision to fight inflation.

When I look back I realize it was the speculators who were the chief grumblers – they would buy goods and hoard in anticipation of higher prices.

If we drew a line in the sand of history of our economy, that was the time the government decided to get serious about reviving the economy beyond the flowery language in the ten point program, which is still a vision worth persuing, by the way.

"Since then other tough decisions have been taken – liberalization, privatisation, UPE all of which have been greeted with sceptism and outright disdain by the interest groups who were seeing their meal ticket flying out the window....

This budget, Maria Kiwanuka’s third budget reading, also marked a new turning point. These turning points get progressively less dramatic, even if their effects are as far reaching as the earth shaking liberalization and privatisations moves of the 1980s and 1990s.

Many things were said in the budget but two things stood out for me, the announcement that URA, KCCA and the Uganda Registration Services Bureau are going to work together to collect more revenues and the decision to borrow from the public to finance our budget deficit.

As it is now there are thousands probably tens of thousands of businessmen with trading licenses, which they dutifully renew every year for fear of being shut down by KCCA. And that maybe the last official levy they pay to authorities –until renewal a year later. But many of these players are not bit players in the economy, racking hundreds of millions, even billions of shillings annually in undeclared revenue. Now they are going to have come clean on at least more of their income than they have been declaring.

Uganda’s revenue collections as a proportion of GDP has hovered around 13% for almost a decade, lower than the Sub-Saharan average or than Kenya and Tanzania’s statistics. The donor cut back on budget support, clearly was the trigger we needed to make this bold move.

It is not as if we did not know about this. For years we have lamented how only a few people and entities were shouldering the bulk of the taxes and yet their were people in the informal sector who were minting money, hand over fist and not paying their just dues.

But as long as government could fall back on the donors there was no incentive to work at widening the tax bases quicker...

Beyond the increased revenues a large population of our businessmen will get into the habit of paying taxes. Government can expect some sabre rattling from the traders just as they did with introduction of VAT, but they should expect little sympathy from the working classes who have paid their taxes while the traders lived it up.

Government has borrowed from the public using treasury bills and more recently treasury bonds for years, but that was mainly to mop up excess liquidity in the market and keep inflation under control. While everyone acknowledges the importance of this exercise, there has been some criticism of it, with critics arguing that it has been a waste of money sterilizing this money in the central bank’s vaults instead of doing something with it, build infrastructure for instance.

There is a place and time for everything, and the government paper’s roll in keeping inflation in check will always be there.

But this new initiative where we could see government borrowing from the public to finance roads, dams and other investments has been long overdue. We need to develop a culture of being able to call upon our people to finance major investments that will benefit the nation. We need to feel a sense of ownership for our roads, railways, bridges and dams.

Of course the detractors of this kind of initiative argue that borrowing from the Ugandan public is more expensive than borrowing from the World Bank which often gives 40 years loans, with a ten year grace period charging a small administrative fee for the trouble, but that is to ignore the priceless value that you can put on the ability to have a mechanism to borrow internally....

Donors will not always agree with us on our development priorities – they have frowned on building Karuma, UPE and our military spending in the past, even when we knew better. We have not been equals in that arrangement.

Let us not fool ourselves, there is pain that comes with nation building. If we are not willing to pay the price we should be prepared for those who are willing to pay to benefit more than we do.

What would have been icing on the cake for me would have been a more definite time table on the pension sector reform – another local resource mobilization move, but more especially an increase in mandatory savings for workers, maybe a percentage point more, employer contributions can be held to 10%.

But then again we cannot get all we wish for can we?

A FOOL AND HIS MONEY ARE SOON PARTED

 

Last week it was revealed that more than a 100 properties believed to belong to former city socialites Shanita Namuyimbwa (Bad Black) and Meddie Ssentongo had been ceased by court.

The seizure was ordered following a case last year in which the two former high fliers were convicted of fraud. They were sentenced to jail terms but also ordered to refund sh11b.

The properties include buildings and land in prime locations in Uganda, UK, US, cars and bank accounts.

The scope of the investments would be impressive by any standards, but it is even more so when you consider Meddie and Bad Black’s humble beginnings as barber and alleged lady of the night respectively.

"This pair has thrown the rule book of wealth creation out of the top floor window. In the space of less than five years they managed to accumulate billions of shillings in properties and by the look of it they paid cash!

To put this in perspective. A salary earner who grosses sh100m a year earns a monthly salary of about sh8m therefore to earn one billion a year you would therefore earn just under sh85m a month.

It is safe to say that you would be in the top five salary earners in this town with a salary like that; More than executives who have slogged through hours of classroom time, survived years of corporate politics, fended off numerous boardroom assaults on their position and are now looking forward to hundreds of millions of shillings in gratuity and pension from their decades of savings with NSSF and their in-house provident funds when they retire.

So these “kids” short circuited the process and in less than five years started, caught up and overtook all these venerable, hardworking and wisened executives? All the while leaving it up in our night clubs and bars on a daily basis, giving new meaning to the term burning the midnight oil.

But forget Bad Black and her side kick Meddie, they are actually just a figment of a larger problem in our society.

First of all serious questions have to be asked about Mr David Greenhalgh, what does he do? Where does he come from? What kind of business is he running that seems to have survived a $5m loss and is presumably still standing? And that he lost it to business associates – to use the term very loosely, with no prior experience in even running a one million shilling business ( I am probably understating the value of a barber shop or a ….!)?

That aside, so these billions were being funneled through our financial system with no questions asked by the industry or security?

To stretch the logic a bit further this, Uganda’s answer to Bonny and Clyde, judging by the way their property acquisitions were spread around the city may have been the single reason land speculation became such a hot potato in the last several years?

But okay, let’s take their story with a sack of salt, let’s try and conjure up a scenario where we could make the billions they have made in five years. What would we sell? Who would we sell it to? What would be our profit margins?

Think about it let’s say we sell a kabalagala at sh200 to the 1.4 billion Chinese, we would gross sh280b. Assuming an ambitious 5% profit margin that would net us sh14b! Even with such an incredulous hypothetical situation we would only just scrape through, with a few billions to spare!

Jokes aside, what does this say about our society and country?

To begin with because their ostentatious display of wealth Black and Meddie become the role models for impressionable youth in the night spots that they patronized. We will have an army of kids who think being “shrewd” beats being honest, that the quick buck is better than the honest shilling made from hard and diligent work and investment over years, that life is to be leaved at 100 kph rather than at a more staid speed, which is sustainable and replicable...

Forget the youth, this cancer would soon co-opt other age groups, who for fear of being laughed out of this town for not getting with the program, would join the band wagon.

You have to wonder about a country that allows such shenanigans to blossom and flourish in full sight of everybody. Where the earnings from organized crime are celebrated and the villains turn heros.

But then again maybe I am just a grumpy old man, stuck in an older time who cannot handle the pace of modern day living, maybe?