CORUPTION IS VERY DECEPTIVE

You might have heard the story. This guy owns a fumigation service. One day some gentlemen call him and say he comes highly recommended and that they have a job for him. They describe the nature of the job and they agreed on a price. The next day they pick him up but insist on blind folding him all the way to site. When they eventually take off the blind fold our fumigator finds himself in a garage stacked up to the ceiling with bank notes.

And this was in Kampala.

Last week a website Silicon Africa run a story “The New Rich in Africa” the article made the revelation that there are at least 100,000 dollar millionaires on the continent and that 20,000 are created every three years. Thankfully most of these are hardworking entrepreneurs and less and less public officials.

But it also described a new class in Africa who have enriched themselves off stolen public funds. The article went on to say that the African public official is not more corrupt than his counterparts in Asia or South America. However unlike his counterparts who invest in industry and building businesses the African fat cat consumes his money and squirrels the rest away in Swiss bank accounts.

Corruption is bad whichever way you look at it and even if the corrupt invest their ill-gotten wealth in the productive sectors of the economy there is still a negative consequence of this course of action.

Say for instance the thief got his money and built himself a chicken feeds factory. To begin with he has no cost of money and has a choice either to sell at the market price and make a huge profit or undercut existing players. Either way he distorts the market putting genuine entrepreneurs out of business and when the corrupt official’s access to free money is cut off – as often is the case, he will be unable to operate without the state “subsidy” and he will go the way of his competitors. This will disruptive to the chicken industry and cost a lot of jobs in the process.

Our guys of course gorge themselves on land and real estate, making Kampala’s real estate among the most dear in the region and placing it out of the reach of the average Ugandan.

The return of the Bad Black makes you think about illicitly gained wealth.

Her flight and eventual recapture has some interesting lessons for those who clamour for wealth by any means necessary.

First, that there is no money that cannot be finished. Secondly that fleeing the country to live abroad, where there are relatively higher costs of living means the money will get finished quicker and thirdly, if you do not have a genuine way of making money here you will be exposed faster abroad.

It is basic economics; money is a store of value but has no real value of its own. 

To keep the money coming you have to keep creating value.  If you are employee your income increases according to the increasing value you can show your boss you are creating for him – you might be able to hoodwink for a while but somehow they eventually catch on. You increase the value by adding to the stock of knowledge you have and can deploy for the benefit of your employer.

If you are a business man the value create is often in the needs you are meeting. To earn more you have to serve more people or show how much more valuable your service or product is to your existing client so you can charge him more or all of the above. The moment your market determines you are not adding value to their lives is the day you are out of business.

There is no value addition with stealing money from the public, which is why you never hear of a corrupt official who stole a few millions resigned and went off to start a business. It’s always that they get caught. Luckily for them in this country we don’t seem to able to convict these white collar criminals even if we found them hands dripping red. So they run off grumbling for public effect how they have been treated badly and that they are taking their skills elsewhere, to start business. Spoilt on the easy pickings of their public office they quickly find out they have no clue how to create value for which they will be paid.

Beyond the moral issue of taking that that does not belong to you, its next to impossible for corrupt individuals to do any value to our society – they even take more space than is necessary.

Okay maybe they put the odd kid through school, they provide some wages for the porters at their construction sites, buy a few beers at the bar but that’s about it.

It’s embarrassing but when they fall from grace the corrupt come up against the harsh reality that making money is hard enough but making that money work for you is even harder. You almost want to feel pity on them!

IS MO IBRAHIM BARKING UP THE WRONG TREE?

Last week the Mo Ibrahim Foundation made its annual announcement on the Ibrahim Prize for Achievement in African Leadership and the Ibrahim Index of African Governance.

For the fourth in five years no recently retired president won the African leadership prize -- the world's biggest individual prize. The award carries a $5m prize paid out over 10 years and $200,000 annually for life from then on. In addition there is another $200,000 per year for a decade to go to good causes backed by the winner.

Previous winners were former presidents Joachim Chisano of Mozambique, Festo Mogae of Botswana and Pedro Pires of Cape Verde. the To be eligible, a leader should have stepped down in the last three years, come to power democratically and demonstrated exceptional leadership during his mandated term.

Senior members of the foundation said the standards are quite high and even if they were applied to western democracies they doubt they would have a winner annually and as such they do not foresee a lowering of the bar to have an annual winner.

Ibrahim is one of the continent’s few billionaires. A telecom engineer – a few patents in the mobile phone industry hold his name, he made his pile by selling a part of his interest in the mobile phone company Celtel, which became Zain and which we now know as Airtel.

As an investor on the continent the Sudanese born Ibrahim has documented his frustration with corrupt, incompetent and obstructionist bureaucracies around the continent and his analysis is essentially that the fish starts rotting from the head. So if you can improve the quality of the leadership the improvements can trickle down the ranks make his home continent a much better place.

His foundation and the awards are his attempt to harry this progress along.

For a politician the main measure of good leadership is if he did good by his people. This would mean he improved the standard of living during his time, through the policies his government pursued in creating an enabling environment for his citizens.

The Ibrahim Index of African Governance, ranking 52 countries according to 94 indicators grouped under safety and the rule of law, participation and human rights, sustainable economic opportunity and human development, attempts to create this measure.

Incidentally this year the foundation’s index suggests that governance as measured by these indices has improved generally on the continent, so we might see some winners in the future from the current crop of our leaders.

This index should be maintained and the leadership award scrapped, if only because the leadership award is playing to the motivation of that there should be pay back for public service, which is a wrong motivation to encourage and perpetuate.

But the award also falls flat on its face because if the intention is to “bribe” these men and women to relinquish power, then the $5m is a pittance compared to what they can squirrel away during their time in office.

The logic behind the award seems to be that many of our leaders hang on like grim death to their positions because they know after their term of office they cannot sustain themselves and their extended families in the manner that they are accustomed to.

Not only that, but that that the fear is very real that they are unemployable and cannot run even a corner shop to save their lives.

What happens to the US President, UK Prime Minister or German Chancellor when they finally leave office?

To begin with they continue to enjoy considerable benefits from the state, but over and above this there are million dollar book deals, several-thousand-dollars-a-pop speaking engagements and board positions on corporations to ensure the former leaders lack for nothing. The same cannot be said for retired leaders on our continent.

But probably more importantly is their loss of power after they leave office. After being in power for so long, where your word is the law, you operate above the law and money is no object, to relinquish that is understandably a big deal. It actually maybe more useful to pay for soon-to-retire presidents’ psychological and financial counselling just before and after retirement to better help them cope with seismic shift in their lives.

And finally even the bribe takers never want to seem like they take bribes, there is a fringe element that is absolutely shameless in their pursuit of the kick back but they are in the minority – I think. They will take the money if you offered it but they can’t be seen to be clamouring for it. This is probably a lesser point as there is no guarantee that you will get the prize if you leave office anyway.

Ibrahim’s intentions were obviously noble, but his analysis may have been clouded by his business background where value is assigned a monetary meaning. Politics of course is a whole different ball game. I would like to be wrong but I fear Ibrahim is barking up the wrong tree.

WE ARE OUR OWN WORST ENEMY

Last week President Yoweri Museveni launched the long overdue Naguru-Nakawa Housing Estate.

The project has been seven years in the making, running into a lot of headwinds from politicians and rival developers all looking to cash in on the 165 acre piece of prime property.

Under the plan a 1,700 unit estate is to be developed with all the amenities of a modern community.

At the ground breaking ceremony Museveni was visibly upset at the delays that made this project take so long from conceptualisation to the present day.

The speech was a throwback to another speech made about ten years ago on the banks of the river Nile.

Then, in January 2002, Museveni harangued his officials for delaying the ground breaking of the Bujagali dam. It was then a project sponsored by American firm AES Nile Power, which had been conceived seven years prior.

The dam had been stalled by sniping from the environmental lobby who argued that preservation of the Bujagali falls was more important than generating electricity for Ugandans.

AES Nile Power didn’t eventually build the dam as the run in to financial trouble, which forced it to give up their Bujagali project.

We and I suspect, Museveni knows what goes on with these projects and what delays them.

Anecdotes abound of investors flying into Entebbe airport, charmed by the greenery of the land and beginning to get comfortable when they run into the first grubby fingered official looking for his cut to make a potential project move to the next level. And these officials do not entertain talk of payment on completion, they want their money up front and in cash, thank you very much!

Some of the bigger companies quoted in foreign stock exchanges, governed by stringent transparency requirements give up—the risk-reward ratio for a small market like Uganda’s not being worth the pain.

Smaller investors for whom an investment in Uganda may have significant implications for their balance sheet or serve a useful springboard into the region, soldier own finding ways to play ball whichever way they can.

The net effect is that projects with transformative benefits for this economy are delayed unnecessarily or when they come on line their viability is so badly compromised they totter and not long after, grind to an unceremonious halt.

We wonder how such things happen under the President’s watch. How officials with impunity run rings around the President and even his endorsement of a project is not a guarantee of smooth sailing thereafter.

The President argues that he needs evidence to deal with these errant officials, the chattering classes grumble into their beers that he should at least suspend them on suspicion and the president’s men counter were that to happen government would be paralysed and not because every other official has his hand in the till but because a lot accusations of this or that official are instigated by the official’s rivals or worse still someone who wants to bring down the government.

It paints a very gloomy picture going forward.

The truth is that after 27 years of rehabilitation and reconstruction the big projects, the billion dollar infrastructure projects are going to start kicking in. It does not take a biblical prophet to tell what’s going to happen in coming years with projects being delayed or frustrated.

Albert Einstein said doing the same thing over and over again and hoping for a different result is the definition of insanity.

Something has to give. Because as it stands now we may want this country to go forward and take us along with it but we clearly we are our very own worst enemy.

TREAD CAREFULY ON LABOUR, MANAGEMENT TENSIONS

The case of Mukwano Industries former employee Kasim Ssuuna beaten senseless by three policemen for alleged trespass was in the news last week.

Ssuuna, had lost two fingers while working for the company in December 2012 and was compensated for the injury. He was later dismissed for indiscipline. Ssuuna went to the factory to demand more money for his injury and was set upon by the three.

The policemen should answer for their action, but it still leaves the issue of Ssuuna and his former employers hanging and raises the wider question of employee-employer relations.

The tension between the employers and labour are an ever present one.

On the one hand are the managers, who oversee capital on behalf of the owners, their main interest is to manipulate labour, capital and land in such a way as to show a profit and therefore a return on the capital invested. The do this by maximising the output from the factors of production while minimising the cost of generating this output.

The workers on the other hand want to be paid as much as possible for their labour. This pay depends on several factors including the workers’ skill levels, the going market rates for the workers’ skill and not least of all the owners’ need to pay as little as possible for as much output as possible.

The relationship between the workers and the owners of capital is not an equal partnership with the advantage often skewed towards company owners, hence the reason for labour laws meant to more evenly balance the relationship, but even more importantly the presence of labour unions.

Labour unions seek to leverage the numbers of the workers against the power of the owners to ensure that in the search for profit the workers are not treated unfairly.

However the unions in looking out for their members rights have to balance this against the viability of the business. If they push for salaries and benefits that are too high the company will prove unsustainable and eventually shut down. No profits. No jobs. Everybody loses.

It would be utopian to expect that capitalists and the labour unions can be best of friends, if they are there is something wrong. The practical thing would be for both sides to appreciate the mutuality of their relationship and operate with that in mind.

Back to present day.

According to testimony from the labour unions and corroborated by management, Ssuuna was compensated sh1.1m for his injuries. One may argue about the amount paid out but that would be an issue for the law on workers’ compensation and the insurance company which paid out the compensation, with payments paid according to a formula incorporated in the law and is a factor of his income.

By the time the compensation is paid out it is endorsed by the labour office, in the gender and labour ministry.

There is a law of dealing with these issues and for all intents and purposes it seems to have been followed to the letter.

There is a temptation in this country to resort to extra-judicial means to resolve our issues.

They may afford us short term relief, remove the inconvenience of going through laid out processes and may even win one some small PR gains. But for every time that we cut corners it is a weakening of the processes that serves to protect us.

My favourite example is the police. When we are robbed or have an incident that requires police attention many times we ignore it looking to resolve issues without enrolling the police. So when budgets in the police are doled out, they will check your police stations case load and decide to allocate it less money than it probably needs diminishing its capacity to respond effectively. A self-fulfilling prophecy.

For fear of being accused of blaming the victim, Ssuuna by taking the law into his own hands -- bypassing the channels open to him to protest his case threatens the viability of Mukwano Industries and puts hundreds more jobs at risk in so doing.

Is that stretching the issue too much? Maybe it is. But if you think about with the speed of communication today deals are scuttled by averse publicity. For a company like Mukwano which exports to and sources finance from foreign markets this can have a real bearing on operations.

The workers’ rights should be the protected to the full extent of the law, if the law is inadequate we should change. While it might not be fashionable to see the capitalists’ point of view on disputes with workers we have to remember they are the generators of wealth, jobs and taxes we so badly crave and they like all of us deserve the benefit of doubt.

UGANDA'S CAPITAL SHOWING “YES WE CAN”

Last week was a big week for KCCA.

There was the now annual Kampala Carnival, a colourful parade up and down the city’s main thoroughfare, which culminated in fireworks display. There was the commissioning of the Wandegeya market, a multi storied complex which stands, where once was a dingy, congested market that accounted for a significant part of Kampala’s food needs. And then there was the commissioning of the rehabilitated New Taxi park.

While these events have been greeted with much pomp and fanfare, quietly in the suburbs of the city developments have been going on almost unnoticed (probably drowned by the heckling of politicians) – garbage is being collected, roads have been laid and lit and the army of yellow cleaners every morning have become a ubiquitous sight. Slowly but surely our city is styling up.

And we the residents of Kampala wonder where has Jennifer (she is now in the league of people who are known by their first names only!) been all our lives.

But the improving respectability of the city is the visible change, under the surface a lot of heavy lifting is going on at the authority.

Last week it was announced that Kampala’s revenue collections had almost doubled to sh56b last year from sh30b the previous year. Interestingly taxis – those road users we love to hate, accounted for sh12b of this while in the previous year they forked out less than sh5b. As if that is not enough the city expects to collect about sh70b this financial year.

To say that these jumps in revenue collections are impressive would count as the understatement of the century and points to the vast potential of this city, which accounts for more than 50% of the country’s economic activity. 

But the question has to be asked so where was all this money going? Because it’s not as if economic activity has doubled in the last year to justify this jump? At worst these revenues were collected and stolen by public officials, probably explains the 151 accounts the city used to run prior to KCCA. At best the businessmen of these city were not paying their dues and these served as a subsidy to their business.

Either way the party is clearly over and we the residents of Kampala think it did not end soon enough.

“Great spirits have always encountered violent opposition from mediocre minds," Albert Einstein once said.

That maybe true of the friction KCCA has come against in trying to set things straight, but it’s probably more a function of the entrenched interest groups that have held the people of Kampala hostage for decades fighting to keep their privileges.

The irony of it is that KCCA is being lauded for doing what it is supposed to do. The city’s administration had sunk so low that now when somebody comes and does the basics – keeping the city clean, repairing roads, collecting revenues they look like superheroes.

It reminds me of former National Water & Sewerage Corporation (NWSC) boss Dr William Muhairwe who sometimes was amused at some of the publicity he got, because as he said, “We are just doing what we are supposed to do.”

The history aside what KCCA is showing is that we as a city, as a nation as a people are more capable than we think. That resources for our own transformation are within reach if only we can have the vision and will to reach out and take them.

There is still a lot of work to be done, after all you do not unwind decades of neglect, incompetence and corruption in a year or two, but the momentum being set is promising.

A few years ago some people looked the organisation of KCC at the time with a view to raising money via bonds for the city council to finance some of its urgent development projects. What they found was a morass of -- to put it mildly bad accounting, it was not clear how much the city collected in revenue, and if it did whether it was charging optimal rates and the expenses were a deliberate labyrinth, impossible to make sense. But they had an inkling of the revenue potential of the city and advised that the day administration gets its act together the sky will be the limit.

That time might have come.

But we know that the special interest groups have only made a tactical withdrawal and are likely to come back with even more vehemence than before. Whether they take back the city is really up to the ordinary citizens of Kampala.