LESSONS FROM ACROSS THE BORDER

Recognising that Kenya’s public service wage bill had ballooned out of control last week Kenyan president Uhuru Kenyatta and his deputy William Ruto volunteered to forgo a fifth of their salary and urged other top executives in government to do the same.

The cabinet secretaries—the equivalent of ministers seem to have grudgingly passed on 10 percent of their salaries by the time of writing this.

According to official figures about 55 percent of the budget goes to paying public servants’ salaries. 

According to the record there are 700,000 public servants, a figure some say is half full of ghost workers, who cost their economy Kshs1.8b or sh54b a year in our money.

This is a pressing issue because

years of mismanagement of the economy means that Kenya has fallen behind in building infrastructure to service its growing population. As it is now our eastern neighbour should be spending $2.1b a year for the ten years to just be current with its citizens' needs.

So that is why Kenyatta and his team have taken the unprecedented step of taking a pay cut. In effect leading by example.

In order to find resources to keep up with the country’s obligations they know, and Uhuru made it an election pledge that they are going to go at the public service wage bill with machetes, maybe chainsaws.

One suspects that this ballooning payroll has its roots in euphoria following the ejection of KANU – the party that had ruled Kenya since independence in 1963. For every KANU sympathiser who was shown the door at least two people were hired into the public service.

In addition the new constitution created new layers of government, with the two houses and the devolution of power to the counties. Not to mention the affirmative action stipulations to guarantee that public service positions show at least a one-to-two ratio of the sexes...

From a political standpoint Kenyatta has to move quickly to fulfil this pledge, do it early enough that it does not cause problems at the next elections and also because the sooner they get working on expanding key infrastructure the sooner they can get the economy growing and reduce the disgruntlement at the current state of affairs.

Last year economic growth fell short of the targeted 5.7 percent, coming in at 5.1 percent.

The two places where politicians seek to reward supporters is in government jobs and public contracts.

More government jobs just lowers efficiency and this added injection into the economy often goes towards consumption rather than production, which has relatively small effect on the economy. If the public contracts involve infrastructure development however and they are carried out well enough the benefits to the economy can be massive.

So the Uhuru’s have their brains in the right place. If they can only shift more and more resources to infrastructure development they can go back to a bigger public sector and everybody will be happy.

President Yoweri Museveni said as much during a recent EAC meeting where he alluded to how the east Asian countries held the wage bill down while pumping massive resources into infrastructure and social services.

In the short term it can be a politically unpopular trade off but not to do it now will only increase social tensions that will threaten Kenya’s stability. While it is the largest economy in the region it has the widest wealth disparities in the region too. A formula for chaos if it persists.

"Great wealth disparities in an economy are an indictment on the government of the day. It often means while they may be generating economic growth they are not spreading around the love by taxing the producers to fund public goods like physical and social infrastructure adequately to allow more people to climb the social ladder...

You can actually have a big economy, even  have mouth-watering GDP per capita figures while the largest proportion of your people are living in abject poverty. Ask the people of Equatorial Guinea.

In Uganda official figures show that we have been more prudent with our public wage bill, with it accounting for under 30 percent of the total budget. We should maintain our vigilance on this number, regardless of the political pressure and focus on uplifting our physical and social infrastructure for long term sustainable development.

THE GUNS HAVE FALLEN SILENT BUT THE WAR IS NOT OVER

Last week former Lord’s Resistance Army (LRA) captives petitioned parliament. The former captives, all women, were seeking reparations from government, many of them had mothered children with LRA fighters, ostracised by the community for it and had no access to resources to bring up the children.

They were therefore seeking compensation from government for the suffering they had gone through during their captivity.

The lawyers may contest the legality of such a claim but from a purely humanitarian standpoint it is a claim that would be hard to reject, if only because more flimsy and unwarranted claims have been rushed through our systems at breakneck speed.

"The war in northern Uganda is only over for people who do not come from the region, because they are not confronted with the after effects of lost relatives, broken homes and sub –human levels of poverty. However the country, whether we acknowledge it or not, is still reeling from the more than two-decade long insurgency in terms of lack of national cohesion, continued suspicion against the government and the continued losses to the economy that come with a significant portion of our population not fulfilling their economic potential...

The LRA insurgency started as retreating soldiers of the UNLA made a last stand in northern Uganda against the NRA, who had captured Kampala in January 1986. Along the way the rebellion was hijacked, finally coming under the control of Joseph Kony, who wasted no time with trying to win the hearts and minds of his tribesmen, but set upon a campaign of terror, conscripting children into his ranks as sex slaves and child soldiers.

The NRA cannot be exonerated. It had its lapses in discipline – as President Yoweri Museveni acknowledged earlier this year, with the general population stuck in the middle with nowhere to go. War is messy business, a far cry from the sanitised images we see beamed down to us from Hollywood.

A coincidence of events triggered by the Al Qaeda attack on New York’s Twin Towers in 2001 led to the labelling of the LRA as a terrorist organisation, forcing Khartoum to cut off support to Kony and allow the UPDF to take the fight to the rebels in Southern Sudan.

The LRA’s operations in Uganda ended around 2002 but the UPDF has continued to pursue and harass Kony and his bands through southern Sudan, eastern Congo and into the Central African Republic.

The war left in its wake a dislocated society and an economy on its knees.

Last week one foreign report warned that Kony still remains a menace hundreds of miles away from home.

With this background a case for the victims of the war is not difficult to sustain, if only to prevent a future generation growing with bitterness in their hearts and vengeance on their minds.

"No amount of money can replace the lost childhoods of these young mothers or the unimaginable suffering they endured in the bush or the irreparable damage to their kids who have lived their formative years in a state of hunger and deprivation, their future prospects already compromised...

But as a gesture of the country’s solidarity with the region and collective determination to overcome the horrors of the insurgency it is as good as any.

"Capturing or even killing Kony will serve only as an opportunity for political chest thumping, it may even serve as an opportunity to poke around his mouth and study his unique case of psychosis but it does nothing to set the issue to rest...

When we recognise that, progress can begin to be made.

Unfortunately too our brothers in the north have learnt the habits of theft and corruption and funds being channeled to the reconstruction of northern Uganda are finding their way into the pockets of a few connected Kampalans. They shall get their just rewards. 

But we should not dismiss it as their problem, because as long as one part of the country is not benefiting from the economic growth, is the extent to which this progress is not sustainable. Poverty is a recipe for instability and without stability there can be no economic growth or development.

The honourable lady member from Pader MP Lowila Oketayot couldn’t have said it better when she said, “guns have gone silent, but the war is not over.”

NSSF PROVES IT DOES NOT TAKE MONEY TO MAKE MONEY

Last week National Social Security Fund (NSSF) released their half-year results in which they showed a 26.5% jump in profits.

These are figures their counterparts in the financial industry will be envious of. The expectation is that bad loans affected the banking industry last year and that the results will not be as rosy as they usually are. We will know by the end of April.

"But on closer scrutiny one can see that NSSF is not doing a good job, a function of a small economy, political interference and inadequate managerial capacity...

NSSF collects member savings over the length of their working lives with the promise that they will provide them a soft landing in the evening of their days.

They seek to fulfill this promise by investing the monies in a way that they grow over time. They have to display enough investment skill that the funds weather the occasional losses, ever present inflation and the cost of managing the money.

So if for instance I deposit sh100,000 with NSSF at the beginning of my career, I would expect that this has grown faster than inflation during the say 20 years of my career, at least. For ease of calculation assume an average annual inflation of seven percent that means prices will have quadrupled during my career and my initial sh100,000 would have lost 75 % of its value.

The government's has a five percent inflation target, we are only just recovering from double digit inflation. The drought might however see us struggling to keep it in single digits for the rest of the year.

In addition, any long term investor knows they will make some bad bets during their career not to mention some years you will not manage a better than inflation return on your investments. And of course there are costs involved in managing this money -- salaries, rent, bank charges among others.

Given these parameters one would expect that NSSF is making more than double digit returns on their asset base year-to-year to cover inflation costs at least. But getting a return on investment is not entirely in the management's hands. What is more in their control is the costs of operation, these have to be kept to a bare minimum.

Given the information in the press, NSSF falls short on giving us the annual returns required to make them a worthwhile investment proposition. Even if one adds depreciation costs--the annual amount fixed assets like buildings lose value for accounting purposes, the return on invested capital barely makes five percent.

They seem to be managing costs better, with a two percentage point drop in the ratio of cost to income compared to the previous year.

Then clearly there are not investing our savings for the most optimal return.

When one looks at what they are invested in one begins to see the problem. 

Eight in every ten shillings the fund has at its disposal is in fixed income assets -- fixed deposits, treasury bills & bonds. This is not so bad given that yields on bills and bonds with a maturity of more than ten percent, but these are the safest investments on offer meaning there are other investments that promise a higher return.

Of course these are workers' savings and managers can not be trigger happy with them.

The unbalanced portfolio is a function of a lack of investment opportunities and managers who were content to pile money into government debt, for fear of getting unwanted attention by sticking their head out on more lucrative but riskier investments.

To cut a long story short for the workers to get a better deal the Fund's portfolio has to be rebalanced with more funds going to real estate and shares, the last two management's had recognized this and were making efforts to redress this imbalance.

But it's like turning a huge ship around, it takes time. For instance if we were to pare the fixed income assets to half of the total portfolio you would have to look for investments equivalent to 20 Workers' Houses.

The challenge is that NSSF has outgrown this economy. It has to either look abroad for investments, which while safe may not meet the criteria of double digit returns, or create its own investments here. That too is tricky because the market for commercial property is fast getting saturated and the returns on residential accommodation are thin, their immediate options.

As workers we shouldn't compromise on how much we demand for NSSF holding our money, what it means is that the managers at the Fund must justify the top salaries we are paying them, with real returns for us.

LUPITA NYONG’O: IT WASN’T ONLY ABOUT THE OSCAR

Last week Kenyan actress Lupita Nyong’o won the Oscar for best supporting actress for her portrayal of slave girl, Patsey in the film Twelve years a slave.

The main plot revolved around the kidnap of Solomon Northup, and his travails as a slave for 12 years, hence the title, but arguably the film would have been nothing without the harrowing tragedy that was Patsey’s life.

I have a theory about black Oscar winners.

Whenever I hear a black actor has been nominated for the Oscar, I am always eager to see what role he or she portrays. Invariably it is a role that perpetuates a stereotype as, flawed entertainers, obsequious servants, sex objects, as a foil for a main white character or depraved gangsters.

A casual perusal down the list of black winners will more than bear that out. This not to take away from the acting skills of Sydney Poitier, Morgan Freeman, Denzel Washington or Forest Whitaker.

It seems to me that the Academy of Motion Picture Arts & Sciences, the institution that awards the Oscars, would experience some cognitive dissonance in trying to award a black actor who portrays a heroic soldier or devious Wall Street broker or a lovable idiot savant.  I am sure back actors have played these roles before and carried them with distinction.

I confess an ignorance of the processes employed by The Academy in nominating its potential weinners, but we judge them by their fruits. It’s a pattern I will be glad to be wrong about.

Which brings us to Lupita’s performance. In the 134 minutes of the film I will be surprised if her parts put end-to-end last 20 minutes – that’s why her Oscar was for supporting actress.

Two things stood out for me.

Patsey called for a character out of Joseph Conrad’s Heart of Darkness, a primitive, gullible, hopeless figure who it is hard to like or pity. That Lupita, a worldly lady, born abroad of middle class parents – she did not fall of the turnip truck by any means, found it in herself to portray this tragic heroine was a feat fit for high praise.

Her portrayal of this African caricature was so compelling it left me thinking the producers of the film should have turned the script around to be about her.

But it also left me wondering – with my theory as a backdrop, whether the esteemed judges of the 

Academy did not see her performance and think, “Ya! That’s what we can relate to as what blacks are about!”

Related to that I cannot remember any other mainstream production in which a character was subjected to the depraved brutality as Lupita’s character endured in one five-minute clip of vicious lashing. Jesus’ flogging in The Passion of the Christ may have come close.

Secondly, while the film was sprinkled with some real psychopathic characters, surreal episodes all through the film reminded you that this was a way of life, supported by a system of administration, authored and supported by some of the fathers of modern democracy.

It was also a scary reminder that a system can be engineered for one purpose – cheap labour in this case and justified to and gain acceptance in a wider society a totally different way: blacks needed civilising and this was the way to do it.

There were a few surreal scenes with one slave master leading his household --- family and slaves, in church service and you had to wonder.

It is a watch-through-your-fingers film, a thought provoking film and when it is all over you slink out of the theatre as if you had witnessed or been party to a crime whose story you will not repeat elsewhere.

The hype surrounding the film may have detracted from its impact but it is a moving snapshot of one of the darkest periods in human history that some would understandably not want to rehash.

This a game changer for Lupita’s budding career, but it is hard to see how it opens the doors for other African aspirants to Hollywood. There are some subjects that just don’t play out well for the money making moguls of Hollywood or for money spending movie goers. 

In the 20 weeks since its release “12 years a slave” has brought in $50m. Gravity an action/adventure film that was released around the same time and in fewer theatres had, by the time of writing, made $270m.

Congratulations again to Lupita, whose latest movie “Non-Stop” opened last week and has already earned $28m, her talent is undeniable, now she can get on with the business of making money.