WHY THE VENDORS HAVE TO LEAVE THE STREETS

Friday was the deadline Kampala City Council Authority (KCCA) gave to city vendors to leave the street peacefully.

Vendors had returned to the streets during the election period as law enforcement officers were loath to antagonise “voters”. Now that the campaigns are over sanity must be restored.

Of course the vendors are not on the streets to entertain themselves, they are looking for an income to support their families and finance their own ambitions. Better that, than they turn into metal bar wielding thugs at night.

"It will be no consolation to the evicted vendors but they need to leave the streets for the good of the country. It is their patriotic duty...

Hernando de Soto in his book “The Mystery of Capitalism” sought to explain why capitalism works in some parts of the world and not in others. His conclusion is that for capitalism to work there have to be strong property rights. 

That society recognises that when I own something it is mine and can only be transferred through mutual exchange of value or not at all. That the law and general practice recognises and defends these rights uniformly regardless of people’s status in society.

Land, from which all property is derived more especially.

If you think about it we do not really own the land we own – even if we have freeholds we have  finite lifespans, but we have the right to the land to do with it as we see for the duration that it is in our possession. What we really own is the rights to the land. Now if those rights are hazy, people are not sure I own the land, or even if they know I do they are not sure I will tomorrow, the value of my rights to the land are jeopardised.

This is detrimental to how much I can invest on the land. Why should I plant hundreds of millions of shillings in brick and mortar on a piece of land I am not sure is mine?

So if I am a shop owner who has leased, not only the space to sell my wares but also the right to be the only one to do so in a given space, I expect that everybody should recognise this right, that I have a right to defend it and the right to call on the authorities to defend it as well.

So If vendors camp on my door step to do their business, even if they are not selling the same things as I am, I should be able to defend or have my right to my space defended. Because their presence infringes on my rights and therefore lowers the value of my shop not to mention leads to lower and lower sales.

The issue of whether vendors are on the street or not has far reaching consequences than inconveniencing shop owners and their clients.

"Because if the rights of shop owners are being infringed on then it will be ok to, squat on anyone’s land, seat in a restaurant and not buy anything but just enjoy their air-conditioning on a hot day or plaster your neighbours wall with your campaign posters without his permission...

Basically all property rights will be in doubt, investors will shun our shores, jobs will not be created and the ticking of our time bomb will become ominously louder as we hurtle towards self-destruction.

The point is obvious if we are really serious as a country about our development ambitions there are somethings that we should not and must not compromise, property rights being right up there.

Of course the vendors are real people with real responsibilities but enforcing property rights benefit them as well. Enforcing property rights improves the general environment for doing business, attracts investment, creates jobs and generates revenues for government to improve social services like education and health which will allow people to climb up the social ladder.

Climbing the social ladder takes time but if society tries to take shortcuts they inevitably turn out to be costly.

"For many of us we would rather have stayed home and played all day. We forget but school was drudgery and we didn’t get the point of it. If it wasn’t for our parents insisting that we go to school we would have forgone long term gain for short term pleasure, with disastrous results...

Our parents showed leadership and that is what we require in dealing with street vendors.

We may like to pay less for goods and enjoy the convenience of buying off the street instead of walking into intimidating shops but that is short term pleasure at the risk of long term development.

WHILE WE SQUABBLE THE WORLD GOES ON

This week the Supreme Court challenge of President Yoweri Museveni’s victory in the recently concluded polls kicked off.

In a nutshell rival Amama Mbabazi wants the court to find that Museveni’s victory was fraudulently achieved and should be cancelled altogether.

The civil tones in which the debate is being conducted mask the high stakes involved.

Not to denigrate the importance of the process underway on its impact on the current events and its repercussions down the ages, but elsewhere issues of much wider importance are being contemplated.

This week more than 1000 people gathered in Dakar, Senegal for the first global gathering of African scientists, the “Next Einstein Forum”.

Uganda was very ably represented among the 15 young African “fellows” singled out for the impact of their work and to demonstrate to the world that the continent is not only about war, disease and poverty.

Our representative Noble Banadda, not a household name, is doing ground breaking work in bioprocessing engineering, one of which application would be the ability to predict the future based on biological observations, a skill which would be useful in predicting outbreaks. For countries without the resources to fight epidemics this science would be critical.

The other young scientists are inquiring into such other pressing subjects as waste management, cellular immunology to improve disease diagnosis, cyber security as a predictive tool for natural disasters, better therapeutic and diagnostic tools for HIV and optimisation of government resource allocation using mathematics through.

It is all Greek but will probably find wide application in our life time.

Most of us would be bored within an inch of our lives in a hall with all these geniuses but this conference is important for one critical reason.

"The inadequacy of our continent, mainly manifested by our sub human levels of poverty, is because we are unable to unlock the vast resources under, in and on our soils and our own human potential...

It is estimated that our continent – not only around east and central Africa, not only has traces of all know mineral resources but in proportions if properly exploited to banish world poverty for generations.

The key word is estimated, because no comprehensive exploration has been done except maybe in south and north Africa to map out these riches. That is a problem because the capital required to exploit this potential will not move unless there is a real commercial proposition to do so. Our adventures with oil are evidence enough of that.

But before we even try to scratch at our soils our won human potential has not been fully exploited for lack of education, sickness and bad government.

One may wonder about the next example but in the book “TheHalf Has Never Been Told” author Edward Baptist shows that slavery was the rock on which US capitalism was built. People have argued that the abolition of slavery in the US came about because it was an inefficient means of production, in fact Baptist shows that at its height the slave camps of the south were much more productive than the industries of the north.

Slavery was beaten back in order to neuter the slave owners who were politically powerful and in the way of rapid industrialisation of the northern states.

The point is that if our forefathers helped build America our human capacity to turn around our current plight is not in dispute. Never mind that the American slavers extracted productivity from their slaves by physical and mental torture the likes of which had never been seen before or since.

"In order for the continent to unlock its vast bounties for the benefit of its people we need to not only seat up and take notice when our youth are pressing against the boundaries of known science but to encourage them in any way possible because it is this new technologies honed at home that will be our salvation...

No one else is going to do it for us. For instance in the west most medical research goes to non-communicable diseases – heart disease, cancer and degenerative diseases, while in Africa our most pressing problems are Malaria, HIV-AIDS, Tuberculosis and Diarrhoea, and maybe add Ebola, which the west only commits a relatively small amount to.

Gatherings like the “Next Einstein Forum” are more than just a curiosity, they need to be taken seriously.

Somebody clearly is. At the gathering there were people from more than 100 countries represented. But there are only 54 countries in Africa!!!

THE MACRO ECONOMY IS TICKING ALONG BUT ….

It’s very easy to lose sight of the facts with the current tense political environment. Thankfully presidential candidate Amama Mbabazi has petitioned the Supreme Court to annul the presidential elections so we can expect that by the end of that process clarity will reign and we can go back to being the benign society we are known to be.

Last week this column suggested that given the experience of the just concluded campaigns, which were dominated, by angry, unemployed youth, it doesn’t take a rocket scientist to work out that we need to focus on creating jobs.

For that to go beyond political rhetoric the government has to ensure a stable macroeconomic environment – low inflation and continued growth. This should go hand in hand with determined efforts to improve the business environment – reduce red tape, widen markets and improve the quality of human resource, to make Uganda attractive for investors.

It is heartening to know while the rest of us were running around like the sky was going to fall on our heads some people were keeping their eye on the ball.

Last month the Bank of Uganda released its monthly policy report, which outlines the state of and the actions the central bank to regulate money supply. If money supply grows out of control price increases will not be far behind.

The central bank reported that money supply growth was subdued as a result of a determined tightening of supply by the bank of Uganda that begun in February last year.

According to the report growth, M2, which includes money in circulation, cash deposits and near money instruments grew by 5.2 percent. While during a similar period just after the elections in 2011 the same measure was growing at 26 percent.

"What this means is that inflationary pressures are much more contained than they were during a similar period five years ago...

Of course we remember that as a result of the central bank’s delay on clamping down on growing money in circulation inflation hit 30 percent, a 19-year high, in October later that year.

The shilling too held steady in the run up to the election but it is expected to continue its decline as importers return to the market.

Of course BOU’s vigilance has its short term downside. In an attempt to wrestle down in inflationary pressures they have raised the  policy Central Bank Rate (CBR) to 17 percent from 11 percent a year ago which has had the knock on effect of raising bank lending rates and put a damper on credit to the private sector.

Lower private sector activity has registered in lower economic growth projections to five percent from the previous 5.8 percent.

In the near term this is painful but the alternative scenario of runaway inflation is too horrendous to contemplate.

The Bank of Uganda was harangued  last year for beginning to tighten money supply in February when inflation stood at about two percent, but indicators pointed to rising inflationary pressure especially as a result of anticipated depreciation of the shilling.

In hindsight they were obviously wise to take pre-emptive action to put a lid on growth in money supply at the time because they would have been scrambling like they did in 2011, now to mop up all the campaign cash sloshing around right now.

But that was a short term intervention, although the last 12 months have lasted longer than normal!

Bank of Uganda’s role is not unlike first aid to bridge the gap between the accident and when the real medical care comes along and as such is not a permanent solution to our woes.

By definition inflation is too much money chasing too little goods. The way to bring inflation under control is to either reduce the money in circulation or produce more goods, a combination of both often does the trick.

Bank of Uganda does not produce any goods. So that is why the government needs to focus on creating the environment – beyond macroeconomic stability, that allows for the creation of more goods. More investment in the productive sectors like agriculture and manufacturing is key because these two sectors have the potential to suck up all our unemployed.

"It’s safe to say that the central bank has got its mandate under control, but we probably can’t say the same for government....

To entice new investment government has to be committed to a stable macroeconomic environment, in addition they need to, reduce red tape around registration of businesses, land and other properties, ease the process of paying for licenses and tax, smoothen the flow of goods and services in and out of Uganda, all while improving the quality of the human resource available in the market.

In addition government needs to take a more determined stand on corruption. Corruption exacerbates the issues of unemployment for example, by concentrating resources in a few hands to the detriment of the majority.

It is self-defeating for the central bank to be doing its best while the rest of the government is not and threatening the gains we have made so far as a country and the future gains that should be made.

THIS IS DEMOCRACY

During President Yoweri Museveni’s final campaign ahead of the February 18^th poll, while live on UrbanTV the host, after outlining a litany of wrongs that stood out during the last three months of campaigning asked me, “Is this democracy?”

“It is an evolving democracy,” was my reply.

The eager young host was obviously unimpressed by the response.

"Sometime into his first term President Barack Obama fighting to get support for healthcare legislation famously said “Democracy is a messy business,” and went on to paraphrase Winston Churchill, “It is the worst form of government except for all the other ones that have been tried.”...

And even then he was talking about the decision making process. The evolution of a democracy is even messier.

The challenge for many of our countries that aspire to higher forms of democracy, is that many of our elite watch tv, travel or even live in more developed democracies and are impatient for developments at home to keep up with what they see happening elsewhere.

This is a good thing and a bad thing.

To aspire to a higher state is essential, even critical for any form of development. However our impatience to improve quickly can make us miss some fundamental steps along the way. The problem with this is that you will inevitably have to retrace your steps to remedy the situation, often at great cost to society.

I remember when the 1995 constitution was promulgated, it was touted as one of the best constitutions in the world. It probably still ranks up there with the best but the same cannot be said of our democratic practice.

Democracy was not and cannot, be written into existence.

The American Declaration of Independence, which serves as the foundation on which the US Constitution was built, has the immortal declaration that “All men are created equal”.  But we know that that country’s black population never got to vote until 100 years after independence and segregation laws were still on the books well into the 20^th century.

The practice has had to catch up with the text and even now, there is still controversy whether “all men are created equal” given the political, social and economic struggles the African Americans and other minorities are engaged in daily to rise to their full potential.

As somebody said the other day, the constitution is a set of ideals to which we aspire, the question then becomes who is responsible for bringing these aspirations to fruition?

The knee jerk reaction is to point to the government, which is to put the responsibility where it should lie, but this would be to ignore the real nature of governments.

"To be in government is to wield power over society. Power by its nature is more likely to concentrate rather than diffuse power away from itself. To expect governments to open up democratic space for people out of the goodness of their hearts, is to misunderstand or ignore how power operates....

So then clearly democracy has to come from the actions of the potential beneficiaries who are the people.

The constitution says all power belongs to the people and we should take that on face value.

Getting out to vote, the ruling party caucusing to push laws or their views through parliament, political contestation along party lines and court challenges of the outcomes of the polls are helping moving our democratisation process forward.

As unbearable as it seems even the current standoff between the government and the opposition is part of the process. Of course its resolution can have disastrous consequences or not, but with the hindsight of history Ugandans (hopefully living in an even more democratic society) will be able to say all this was needed to happen for democracy to advance.

Evolution is messy business, advancing sometimes three steps forward and before taking two steps back, meandering off the true course before finding its way again and oftentimes at greater cost than was necessary.

For us who are in the thick of things, where we can’t tell the forest from the trees, we need to stay the course, even if through the fog of political bickering and manoeuvring we cannot see the next step on the ladder.

POST ELECTIONS, FOCUS ON JOB CREATION

As the dust from the just concluded polls settles it’s time to move on, use the lessons of the campaigns as a stepping stone to a better future for all Ugandans.

As far as I am concerned everything – political or social has its root in how the economy is faring, how it’s being run.

"Going by our per capita GDP of $800 we are a poor country, however that is to wildly discount the potential of our people and the bounty of our natural resources. We are poor because we have failed to mobilise ourselves to exploit these natural attributes for the benefit of our people...

Understandably we are only just emerging from the dark hole that was the 1970s and 1980s, when the productive sectors of our economy were gutted and we regressed into a subsistence economy. Since 1986 the economy has rebounded, posting prodigious growth figures year after year to the point that the economy has grown by a factor of seven since President Yoweri Museveni marched into Kampala at the head of the rebel National Resistance Army.

And there is the rub. Economic growth is critical for development – the upliftment of people’s wellbeing, but economic growth does not necessarily translate into development.

Currently we are seeing a widening in wealth inequalities as the rich get richer and the poor get poorer, a concentration of resources which manifests itself in angry urban youth and sub human rural poverty.

Economic growth for its sake is useless, economic growth has to be enjoyed by more and more people every year.

That is he challenge the new government has to face up to with increasing determination.

One way to do this to create an environment that encourages investment and therefore creates jobs.

Every first Friday of the month the US Bureau of Labour Statistics office puts out the Non-Farm Payroll (NFP) numbers. These represent the number of jobs created in the previous month excluding government and private household employees.

Over the last 12 months more than two million jobs have been created in the US. Job creation is important beyond having people gainfully employed and not engaging in running battles with the police, the more people employed means the more demand there is in the economy and the more attractive it is as an investment destination. And the more investment the more jobs that are created, a literal virtuous economic cycle.

Clearly we have done some good work on the macroeconomics front with our consistent growth figures, but clearly more work has to be done.

According to the latest World Bank’s Ease of Doing survey, Uganda jumped to 122 from 135, which is something although we were much nearer the bottom the 189 polled nations than the top.

To come up with the result the surveyors measured such things as how easy it is to set up a business, register property, pay taxes, enforcing contracts, access to credit, getting electricity, obtaining permits among other things.

Government can through a combination of sensitisation of its workers and adoption of new technologies go a long way to easing the regulatory processes around doing business in Uganda. For instance why should it take 10 procedures and one and a half months to register a property versus 5 procedures and less than a month in the more developed countries?

I find we are shooting to low when we compare ourselves with Sub-Saharan numbers as if we deserve a lower quality of life than human beings in the developed economies.

Like Rwanda did these regulatory stumbling blocks can be felled in a blink of an eye.

Understandably making these processes more cumbersome allows some public servants to take advantage of the situation, easing the going for those willing to part with a few thousands more.

Which brings me to the biggest factor behind concentrating wealth in a few hands to the detriment of the larger majority – corruption.

Undeniably corruption is making doing business in Uganda more and more difficult.

And we are not talking about the direct cost of bribing an official here and there but the indirect cost to businesses which manifests itself in a poorly educated workforce, high levels of absenteeism due to illness, pilferage that is hard to plug because law enforcement agencies are not performing and high transport costs because of the poor road network.

"Unfortunately some of these nefarious networks have ossified themselves into place over the last three decades. Uprooting them may be politically costly but ignoring them only means they spread their tentacles into every facet of society, making it harder and harder for economic actors to be productive and, not unlike running in molasses, the economy will eventually grind to a halt...

So going forward let us be lie the Americans let us track how many jobs the economy is creating every quarter to begin with. In trying to create jobs we will have to work backwards and remove the impediments to job creation.

They say when you focus on something it expands. Let us focus on creating jobs.

KEEP KCCA WORKING

In criminology there is something called the broken windows theory, which suggests that by controlling urban environment – through cleanliness, establishing order and fighting petty crime, it removes the environment for much more serious crimes.

That to wait until the big crimes begin to get hard on crime could be a case of shutting the door after the horse has bolted the barn.

In the last five years of the new KCCA this theory may have been confirmed at least by Mercer, the world’s largest human resource consulting firm.

In its annual Quality of living ranking released they put Kampala ahead of Nairobi, Dar es Salaam and Kigali when measured in terms of sense of personal safety, stability, crime and effectiveness of law enforcement. Of course the result was tempered by the fact that Kampala was ranked 169 out of the 230 cities that made up the survey.

These rankings are not only good for much needed back patting by KCCA but are also important because they informs investor perceptions. Investors – local and international, of course are the people who create jobs, the insufficiency of which is one of the biggest challenges for the city today.

Several observers have suggested that the President and the NRM’s dreary showing in the last election was due to attempts to bring order to Kampala which saw the vendors thrown off the street and the eviction of large populations to make way of the Naguru estate project.

Museveni won about 31 percent of the Kampala vote while opposition MPs swept all eight seats in the city.

"They say you cannot make an omelette without breaking eggs. We have lived in a state of anarchy in the capital for so long that interest groups have grown around maintaining that chaotic status quo. It was inevitable that there would be consequences...

It is a scandal that the beneficiaries of the old system were enough that they have inadvertently voted against the progressive changes happening in Kampala – it is inconceivable that somebody voted for dirty streets, port holed roads and unlit streets intentionally.

In fact what it reflects is that Kampala was masking a lot of disguised unemployment, people were getting by operating on the margins of society and when order was established they found themselves without a livelihood.

"To ally with this protest vote cannot be developmental. What is needed is real leadership by KCCA and the council, who while they can only promise that it will get worse before it gets better, have to stay the course knowing that in the medium to long term we the residents of Kampala and the nation as a whole will benefit from the qualitative improvements...

It is a thankless job, but that is what leadership is about, recognising that what is popular is not always right and what is right is not always popular.

There is still a lot to be done in Kampala including calling commercial building owners to order, collecting property rates and improving public transport all of which will have their political costs.

From a purely mathematical standpoint Kampala has always been hostile to the NRM – the last district leader being Christopher Iga, so there is little to no downside in continuing with planned projects.

It is imperative that the government does not waiver in its support for KCCA and its programs but KCCA needs to recognise too that it has to balance its technical role with cooperating with the political establishment.

KCCA is already involved in some income generating projects and job creation initiatives, in a bid to continue its good work KCCA may be well advised to scale these up to benefit more youth and unemployed citizens.

AFRICA'S PROGRESS CONTINUES

Paul Busharizi, interviewed Dr Ahmed Heikal, founder and chairman of Qalaa Holdings, the continent's biggest investment company, which runs RVR, about his thoughts on investing in Africa --- its challenges and prospects.

The theme of the conference continues with the narrative that Africa is on the rise. However, in recent years we have had multinationals express concern that the continent's rising is still many years down the road, what is your experience?

As far as Africa is concerned, you have demographics that are favourable.  You have resources that are available.  You have better governance: that is – by and large –taking hold, with more or less much better governance across the entire African continent. And, finally, you have a reverse brain drain.  You have a lot of people who are coming back from Europe into Africa.  Those four factors mean that Africa is going to continue to do well – although it will be challenged because of low commodity prices across the board, and a much reduced debt capacity of governments as a result of lower commodity prices, causing pressures on currencies throughout the continent.  Something that we’re already seeing starting from Nigeria, Angola, Kenya, Uganda, and across the board, you have pressure on currencies for commodity-producing countries across the continent.

My view is positive, on the short term you would be surprised, because whether it be the pressures in the Middle East or the pressures in Africa, this is a dynamic whereby the competitive landscape will be less competitive.  Meaning that people who are already established with businesses inside this part of the world will find themselves with relatively low competitive pressures, and businesses will be able to grow in the confines of their existing businesses.  I’m sure that is not positive in the long-term for the region as a whole, or for Africa as a whole.  But I think that there is a dynamic at this point in time whereby the existing businesses will be able to benefit and get larger within the confines of their existing investments. We have a region that is growing at very healthy levels. It is just that political risk is high thus affecting capital availability.

About $100b is required annually in new investment for the continent to bridge its infrastructure deficit soon. Some people argue that money can be raised on the continent, we have just not invested enough in resource mobilisation. What is your take on this and what would it take for us to raise this monies on the continent?

With the continent set to become home to the world’s largest working-age population at about same the time as China’s population begins to decline, there’s never been a better — or more important —  time to invest in infrastructure. You would almost-literally be buying in at the bottom of the market. The question is, how?” And the answer is to raise funding beyond the “usual” suspects. We are now witnessing the increased involvement of Development Finance Institutions (DFIs) in the region. Because there is very little growth globally, everybody wants to encourage growth, particularly in Africa so you will find a lot of the existing DFIs – I’m speaking here about the IFC, European Bank for Reconstruction and Development, FMO, China Exim, NEXI, JBIC, Korean Exim Bank, the US Exim Bank, etc. – all of whom want to get in on financing the region’s development are interested in financing the right opportunities in Africa. The prospects for the global economy are very low growth in the coming period. This is why we are seeing people go outside their normal geographies. As a result, financing will be available for Africa and the more stable parts of the Middle East.

In our experience however, attracting these types of investors is only possible when you de-risk the investment first and show your potential financial backers not just that you’re serious by committing from your own balance sheet, but that the project is one that could fly. You need to bring in the right expertise to run the project, abide by international environmental and sustainability standards, and make sure that the infrastructure project in question presents a win-win scenario that allows governments and regulators to back it from the word go. 

As a businessman from the continent what would you say is the biggest challenge doing business on the continent and how can this challenge be resolved?

Obviously there are enormous challenges that people need to be on the lookout for.  One is the direction of money in emerging markets in general.  Obviously with the expected rise in interest rates in the US, money flows out of emerging markets.  That cannot be good for emerging markets as a whole, or for our company specifically, that’s not something we like to see.  The demographics of the region are extremely worrying especially with high unemployment.  The social stability, the social fabric of society are going to be stretched thin. Unemployment is very high.  Income inequality is going to rise even further than it is right now. So I think there are certain dynamics that are cause for worry. So, the risks in this part of the world are definitely there, the key to success is to try to minimise and manage the associated risks.