THE ELUSIVE QUEST FOR DEVELOPMENT

In recent weeks the press has been awash with updates on ongoing projects.

The Entebbe Express highway is months away from completion. East Africa’s biggest hydro-electric power dam the 700MW Karuma Dam will in 12 months bring 200 MW to the grid. The 183 MW Isimba dam will come on line by the end of next year.

In addition a revamping of the health system’s infrastructure is coming to a head with the completion of renovation and expansion of Mulago hospital. One of the centrepieces of the new development is 320-bed maternal and neonatal complex.

Meanwhile there is an ongoing exercise to revamp secondary schools too.

There is also work going on roads, bridges, flyovers, railways and ports. A veritable explosion of activity that if completed on time is bound to change not only the way the country looks but the economy as well.

"Improvements in infrastructure should lead to the quicker movement of goods and services around. These efficiencies translate into economic growth...

Given the benefits of such infrastructure – any economic student can count them off his fingers, why has it taken so long to get around to it?

There are many reasons but financing is at the top of the list.

Two things have happened.

Locally our revenue collections have grown. Secondly and related to the first, the financing options have increased with the rise of China as a major financier of development across the globe.

In the early 2000s the government wanted to build two dams simultaneously at Bujagala and Kalagala. Western financiers objected to the building of two dams at the same time arguing that there was not enough demand for the power.

Secondly, bowing to the environmental lobby they cancelled the development of Kalagala if Bujagali was to go ahead. Around the same time the prospect of a dam at Karuma was mooted by a consortium led by Norwegian developers.

But the financiers stuck to their guns refusing to back to projects simultaneously.

Even for Bujagali with its meagre 250 MW of power hey had then energy minister Saida Bumba scrambling around the region, jumping through hoops, to get written commitments from our neighbours that they would be willing to take on any surplus that Uganda was unable to consume.

"With the Chinese has come a difference of perspective of what drives growth and therefore development, as they had had first-hand experience from 1978. The western donors’ experience with driving development around the world is far from laudable...

A graph of the growth of Chinese GDP per capita shows a curve inching up, only hitting $2000 in 1990 where a tipping point seems to have been reached, with per capita GDP quadrupling over the next three decades to the current $8,000. No western economy mirrors such progress in the careers of existing development aid democrats.

As I f the statistics are not enough previous experience with telecommunications, road networks and even power consumption suggests that there is huge suppressed demand in the population for the services that come with infrastructure.

That being said it’s important that we get value for money in all these new projects that costs are not inflated, good quality work is done and works are completed.

However infrastructure can spur economic activity the challenge still remains that this growth is spread equitably across the population.

If there is growth but widening disparities in income and wealth it is often an indictment of the government of the day, and jeopardises the chances of long term growth too.

Government through effective taxation of the wealth created finances not only the infrastructure to keep the wealth growing but also social services like education, health and social security to ensure that more people benefit from the growth than the captain of industry and their lieutenants.

An educated and healthy population is a more productive one.

"What gets in the way of this service delivery is corruption. Corruption has the effect of concentrating resources in a few hands....

A few years ago it was reported that at least sh500b is lost annually that would have been the equivalent of treating about three million in patients at Mulago. Currently Mulago budgets for less than 200,000 inpatients annually.

Even if 3000 corrupt officials an their accomplices helped themselves to sh500b it means that each was wolfing down the resources of a thousand Ugandans in need of urgent medical care.

Related to that all this spanking new infrastructure is good to show off on social media but it needs to be manned or optimally used for all of us to benefit.

During a tour of Mulago last week NRM officials were told that the nearly half of the 3000 staff complement of the “new” Mulago remained unfilled.

Beautiful buildings, roads and airports are all very nice but if hey are not manned then we will be as good as having done no work.

IN POLITICS HOPE IS NOT A STRATEGY

In the last few weeks there have been three important votes taken on the continent.

Neighbour Rwanda went to the polls last week. Predictably President Paul Kagame won the election with consensus figures.

On Tuesday this week South Africa’s President Jacob Zuma faced down his critics in his eighth no confidence vote in parliament, winning but not coming through unscathed, prompting the BBC to cheekily declare that he was now on his ninth life.

On the same day Kenyan President Uhuru Kenyatta stood for re-election, running against perennial contender Raila Odinga in an election that many pollsters said was too close to call.

"In each case the incumbent came through. And in each case we were taken by “surprise”. But we shouldn’t have been surprised...

In the case of the Rwanda Kagame’s hold on power seems not to suffer from the attrition of time. It was a different case in South Africa. While Zuma continues to confound the critics, this time a court ruled that the vote should be by secret ballot emboldening some of his own party members – about 30, to vote against him.

On Wednesday Kenya’s Independent Electoral and borders Commission (IEBC) had ruled that they would announce the final result next week. This came after Odinga announced that the IEBC’s system had been hacked after initial results streaming in had Uhuru firmly in the lead.

At the time of writing this column with 1,000 of the 40,883 polling stations’ results yet to be announced the IEBC website reported that Uhuru had crossed the eight million vote mark. Raila was at about 6.6m votes of the 19 million registered voters.

Except in the Rwanda case, in the other two votes the thought was widely entertained that there maybe an upset.

"Clearly we got suckered by the media or the loudest voices on social media....

In Kenya results showed that both houses in Kenya – the national assembly and Senate will be controlled by Uhuru’s Jubillee party overturning the majority that Raila’s ODM held in both houses. A situation Raila has not challenged so far, but which lends credence to a fair and square Uhuru victory.

It is a development we have seen in Uganda since 1996. The media and now social media, is a useful ground to occupy but actual work on the ground is more important. Proof that not enough work has been done on the ground shows up in the parliamentary numbers.

It seems because we have not learnt the lesson we continue to take the class.

The opposition in all these cases, except Rwanda, manage to create a perception that the incumbent is weak and on their last legs, only to suffer “shock” defeats when the votes are tallied. The defeats are often comprehensive enough that it is difficult to sustain the rigging narrative.

Either because resources are in short supply or a lack of willingness to do the work needed to create a genuine groundswell of opposition to incumbents – or both, the opposition takes to the media and now even more, social media to create the perception that they are credible, strong and able to upset the applecart.

"The strategy seems to be, if we create a perception in the public that we are winning, this perception will lead the public to vote for us. A kind of feedback loop between cause and effect...

Either they are not executing the strategy very well or it doesn’t stand up to rough and tumble of real time politics. Either way the result is the same.

A worse crime is that they begin to believe their own press.

In South Africa the opposition called upon the ANC MPs to vote with their conscience and not the party. They hoped that the secret ballot would convince enough of them to break ranks against the party and Zuma’s presidency. They were left to put a positive spin on a loss, that while it may have weakened Zuma in the perception of the press and social media, still left him firmly in charge of Africa’s largest economy.

The point is, in politics, as in many other aspects of life, hope is not a strategy.

WITH BUSINESS YOUR BEGINNING MAKES OR BREAKS YOU

It had a promising start. The business tapped into the growing need of the now affluent middle aged, middle class to get healthy. It grew by word of mouth and had generated a loyal enough following that it had begun to show a positive cash flow.

Then the founders fell out.

Differences about how to run the business, the long term vision and of course how to share the spoils put paid to the dream.

So they have broken up. One of the founders swears that from here on now there will be no partnerships without written, formal agreements.

Business is not unlike pumping water out of a borehole. In the beginning with the airlock having grown in the pump the first pumps are hard, near impossible. But once the airlock has been worked out the pump lever can be worked by a child.

"The way we start our businesses, selecting partners, financing the business, demarcating roles and determining how the benefits from the business will be distributed – in the event that we start making money, often determine the long term viability of a business....

Ordinarily we see an opportunity, do some cursory brainstorming around the subject we the nearest person around and we jump in with both feet, our eyes firmly placed on the future pot of gold at the end of the rainbow.

Soon reality sets in.

In his book The Start up J-Curve, Howard Love says that the progress of a start up follows the trajectory of a J-curve. Soon after you start you descend into “the valley of death”, the market’s acceptance of the “revolutionary” product can at best be described as luke warm, the expected sales are not coming through and even if they do, the cash is not flowing because – as we quickly find out, no one pays cash.

This is where most businesses fail. “The valley of death” tests the resolve of the business owner or owners, disagreements erupt, some slink quietly off to do other things. Friendships have been shattered in the “valley of death”.

Coming out the other side only happens if the product has gained wide acceptance by the market and a business model – how the money will be made, has been established. There is no standard time frame for going through the “valley of death“ but all business experience it, whether the promoters are experienced or not.

Oftentimes a business succeeds because despite all external experiences it is able to hang on long enough to come out the other side. Not that problems are over once you have.

"At the start all the business promoters should seat around and really thrash out what their motives are, what their responsibilities will be, what each’s contribution will be – often a mixture of cash and some sweat equity and when and if, the cash taps start flowing how they will pay themselves....

The founders of health promotion business above, should have sat down, detailed all the above before going into business and they would have had a better chance of surviving.

Synergy – the sum of the whole is greater than the sum of the individual parts has been lost.

My money is on one over the other to survive and maybe even thrive in the long term. But I know neither of the break up businesses will be as good a concern as if they had not broken up. Reducing either’s chance of survival.

No doubt that to survive “the valley of death” it helps if you don’t do it alone. But there has to be a unity of purpose beyond greed, the desire for enrichment, to hold it together.

A plan to eventually sell the business – either in whole or partially as a way to get paid is a good motive. Delayed gratification will have to be exercised as the promoters of the business go about building the systems that will make it attractive to a future investor.

A deeply held philosophy or far reaching goal, shared by the promoters -- to alleviate poverty through financial services for instance, may be strong enough to not only ensure your business services the “valley of death” but ensure your partnership is not dashed upon the rocks of unfulfilled expectation.

Even for sole proprietors the time comes when you need to expand or grow out of the “valley of death” and the selection of partners would make or break your business.

A friend is in such a situation. He thinks he has the business model sorted out and now wants to scale up his operations. However he is careful to get only partners who can share his long term vision of the business.

Barring any desperate need for a huge chunk of cash soon, which wold see him stampeded into taking on the fast moneybags or selling the business altogether, I am confident he will find the right partners in due course.

FOR EVERYONE'S GOOD, KAMPALA BOSSES SHOULD RESOLVE THEIR ISSUES

The tarmacking of the Kitala-Komambogo road has been in the works for a few months now. So it was with much relief that the contractors set to work a few weeks ago and we can now drive on a smooth road.

And now horror of horrors, we even have street lighting now.

This is the latest in the tarmarking of three roads – Bukoto-Kisasi, Bahai road, Komabogo-Bahai-Kyadondo road, Kyebando Ring road, in the area that have come since the Kampala Capital City Authority (KCCA) came into force in 2011.

"As residents of the area we are ecstatic and half under our breaths we think that anything else KCCA does for the area will be a bonus. We are fine....

Interestingly we are not the only ones. All the divisions of Kampala can report an improvement in the road network and general cleanliness over the last six years or so.

It doesn’t take a genius to map these sorely needed development to KCCA executive director Jenniffer Musisi’s tenure at White Hall.

We can therefore not be the only one disturbed by  reports such the recent one where KCCA councillors want President Yoweri Museveni to terminate executive director Jennifer Musisi’s contract for defying a directive by minister Beti Kamya to raise their salaries.

Never mind that the finance ministry rejected a request for a supplementary budget from Musisi of sh3.6b to give the councillors a 30 percent bump in their pay.

And now the minister has threatened to institute a probe against the executive of KCCA following stories she has heard of their being a lack of transparency and professionalism in how KCCA goes about its work.

Just when we thought we had put the days of malaise in Kampala City behind us then this. One cannot help but feel there is a malevolent spirit hovering over Uganda’s capital city, determined to keep it in chaos, disrepair and confusion.

The idea between the creation of the KCCA was broadly to extract the running of the city away from the vagaries of politics. Politics was getting in the way of implementation of much needed development projects in the city which was fast deteriorating into a filthy, congested and insecure hovel, not befitting of the country’s centrepiece.

KCCA has got off to good start and the residents of Kampala were holding their breath that it may last a little bit longer.

"Musisi and her lieutenants have faced down many challenges, all of which had the cynics rolling out the silver and gloating that competence can never be allowed to thrive...

In the last term a knotty contest between Mayor Erias Lukwago and Musisi, while it did not bring progress to a standstill, hung like a dark cloud over the city’s affairs. An obliteration of the ruling party in the city, as has become tradition, had local politicians pointing fingers at KCCA, the argument being that the Authority’s good work in cleaning up the streets, putting UTODA in its place and generally improving our collective wellbeing cost them votes!

KCCA is living testament to that saying that, “No good deed goes unpunished!”

KCCA’s corridors are not populated by angels. The people of kampala would care less how the most recent impasse is resolved as long as the authority can be allowed to keep doing and better, what it has been doing.

We cannot be blamed for looking upon anyone who seems to be in the way of this development with a jaundiced eye.

Never the less blood need not flow in the streets over this. Let Kampala’s top bosses, who incidentally are ladies – Thank God! Resolve what seem sto be a breakdown in communication and get on with the job of making Kampala great again!

BE PROFITABLE BUT DON’T FORGET NET WORTH

I am deep into Brad Stone’s, “The Everything Store: Jeff Bezos and the age of Amazon” a fast paced narrative of how Amazon, which started as a bookseller and now sells almost everything, was built.

The company which survived the dotcom meltdown of earlier this century has grown over the last 23 years to the point that last week, for about half a day, founder Bezos was the richest man in the world last week.

But just before that I also read “Alibaba: The House that Jack Ma Built” which as kind of prescient because the richest man in China visited Nairobi and Kigali only days later.  Alibaba is a giant website which brings vendors and customers together to facilitate trade in almost anything. What makes the Alibaba story so interesting is that it was founded in China on five years after Amazon and it’s not inconceivable that in less than a decade it may be the biggest internet company in the world.

There are quite a few similarities in the growth of these two companies and just as any dissimilarities.

"But the common denominator between the two is the way they have been managed to gain market share, with profitability coming years later. The loss making was not caused by the wastefulness of the founders...

Related and also of interest is how both founders extended the personal frugality in their lives to the company, which allowed them to focus resources on building the company rather than themselves with the eventual outcome that they became exceedingly wealthy from their shareholding in their respective companies.

For Amazon more than for Alibaba, their very existence was threatened when the markets in the west went sour on the dotcom companies, for which Amazon, was a poster boy. Were it not for the company’s focus on customer satisfaction it might have gone the way of the thousands of dotcom companies that burnt through billions of dollars, flaming out before they showed a profit for their investors.

In Uganda we don’t need a dotcom boom and burst cycle to know about business failure. Only one in 10 companies make it to their fifth birthday. Beyond the issue of the questionable products or getting into crowded markets, the failure of the Uganda company can be seen in the financial statements.

The key difference between Amazon and Alibaba and our local floundering businessman is that while the former shift revenues increasingly towards building their assets bases – hardware and distribution networks, with the expectation that these will not only lead to the capturing of more and more market share and an eventual rise in revenues, our local businessman however tends to keep these much needed funds, needed for expansion, for himself. They pay themselves first, rather than the business they should be trying to build.

"So for instance our local shop keeper who while he makes a profit, given the margin on every good he sales, fritters off this profit by dipping his hands into the till every so often to finance his personal needs. Unfortunately these needs grow with his growing sales and rarely fall back if sales begin to falter...

Given a similar scenario Bezos or Ma, would restrict their raiding of the shop till, while pushing more funds into growing his stock, the size of his shop or the area that he dominates. In very real terms this means that he will put off to a later date the move to a more expensive neighbourhood or the VX he has been dreaming of or the visit to Old Trafford to see Manchester United play.

But we don’t have to look to the US or China for lessons how to improve the durability of our companies.

The Asian community were dispossessed of everything nearly half a century ago. They returned in the 1980s and 1990s, rebuilt their businesses and now account for almost seven in every ten shillings of revenue paid to the taxman today.

Interestingly many of our more successful businessmen have apprenticed at the feet of one Asian businessman or another.

It should be clear by now that a basic understanding of how financial statements work is imperative for any businessman.

How do I pay salaries? How do I replenish stock? What happens when I withdraw money? What happens when I bring money into the business (as many of our corporate types do)?  How do I pay taxes? How can I minimise my tax liability (without evading it all together)? Should I take a salary? How should my books look like to make them attractive to bankers, investors?

It is not rocket science. But it is the one thing that is dooming our businesses to short life spans.

"Even the businessmen with the best of intentions, who are not extravagant or even allocate assets properly, run into trouble because they are not thinking from a financial statements perspective. If they are doing badly, they can do well. And if they are doing well, they can do better....

And the beauty of it is that unlike a two decades or so ago there are a lot of young accountants around who can help make sense of any business’ numbers.

It bears repeating. While profit is good building a business’ book value is better. That is where company durability comes from.

POOR POLICING TO BLAME FOR MULTIPLE UGANDA MURDERS

In the last three months or so 11 women have died gruesome deaths at the hands of, what seems to be, a criminal gang in the Kampala-Wakiso area.

The latest on Monday this week was Rosette Nakimuli, a salon operator who was waylaid in the dead of the night, raped and murdered, her body dumped in a banana plantation in Kitala zone, Katabi town council.

"The fact that the criminals are seemingly going about their business unmolested points to a failure of security, beyond the narrow confines of the police force’s mandate...

In terms of fighting crime the police serve three broad purposes – they act as a deterrent, their presence dissuading any criminal activity. Secondly they are meant to foil crimes as they are being committed, which would be a function of their intelligence gathering capabilities and finally once a crime is committed they should be able to catch the perpetrators, a function of their ability to investigate crime.

It would be safe to say that where there is a police presence they serve as enough of deterrent to criminal activity. Witness how very little thuggery happens in broad daylight. This could also be a function of the fact that the Ugandan public tends to mete out swift and brutal justice if criminals are caught in the act. I suspect it’s more because of the latter than the former.

Criminal activity increases during the night for the obvious reason that the cover of darkness is convenient for the perpetrators.

Beyond that is the fact that once a criminal gets away with the act it is more likely than not that they will not be apprehended.

We never cease to hear stories of how the police are undermanned, underfunded and under resourced and a sequencing of how to distribute the merger resources to bridge these deficits gives headache to its top brass. But evidently there needs to be greater investment in intelligence and investigation.

"As it is now when a major crime is committed and the police are in danger of being embarrassed they swoop on the affected area and detain dozens of people to help them with investigations. Talk about using a sledge hammer to kill a fly. This hit-or-miss style suggests a failure in intelligence and investigation with the police trying to eke, or beat out, out confessions than use available evidence to pin the crooks...

Such action arguably causes disgruntlement with the police and establishment, which would make police work more difficult in future.

But beyond the police, such frequent and clearly not random acts of violence points to a failure of community policing. The breakdown of the LC system could be blamed for this, as local authorities used to provide some leadership in keeping neighbourhoods safe.

Reports indicate that residents of the affected areas have reported the presence of some unknown men in the areas around the time of the perpetration of these crimes but their seems to be a slow response to the reports or, even worse, no follow through after the crimes have been committed. And this goes for other crimes as well.

In the absence of civilian organisation, the responsibility to mobilise local populations for popular vigilance would still fall to the police.

In some areas around the Kampala the use of social media among residents, led by the respective police posts in their areas, even with the slow response times of the police, has proved useful. It does not cost much to mobilise people for their own security what is clearly lacking is the leadership.

While we have individual responsibility for our own security, the building of the police’s capacity to stop crime from happening or apprehending the perpetrators when it has happened needs to be looked into urgently.

"As an aside a revisiting of the issue of payment of graduated tax too needs to be looked into. As it is now we have a lot of youth hanging around doing nothing except honing their Ludo skills in our trading centres...

One wonders how they make a living in the day?

DATA IS THE NEW SLICED BREAD

In his first press interview in 2010 after taking over the helm of Kenyan telecommunications firm Safaricom, CEO Bob Collymore said that in the future voice services will be an add-on – will be given away free. That data services is where the money would be.

He has been proven right several times over. While revenues from mobile data have not yet outstripped revenues from voice services it is just a matter of time.

Last year data revenues grew by 46 percent compared to voice revenues which grew by just over one percent. And you are not even talking about revenues from mobile money, considered data services, which on their own grew 34 percent last year. Data and mobile money revenues came in at Kshs39b (sh1.2 trillion) and one can expect they will soon outrun voice service receipts, which stood at Ksh46b last year. The company’s total revenues came in at just under Kshs100b last year.

Compare this with the Kshs3 billion data, M-Pesa and SMS revenues brought in 2010, against a company revenue of Kshs84b then.

It is no wonder then that in our own market discussion over data services has been kicking up dust in recent weeks.

Earlier this month telecom company MTN announced a new data offer that while raising the cost expanded what subscribers could do with the service.

The regulator, The Uganda Communications Commission (UCC) took issue with the rate changes arguing that all such changes must be past by them first before being offered to the public.

MTN argued however unlike a tariff – a cost of service that all mobile users are affected by, an offer is optional with subscribers taking it up if it suits their needs and therefore they had no legal obligation to inform UCC in any change it may choose to make.

As with most of such spats it is often that each has a point and a seat down around a table would bring the discussion to a happy middle ground.

"It does not take a rocket scientist to see with more and more people hooking up to the net via their mobile phones, tablets and laptops that Collymore’s prophecy will come through in our market.The fact that some telecom companies have decided to curve out a niche for themselves in data provision and not voice is another pointer....

The point too can be made, that you don’t hear the regulator complaining about similar offers on voice services which are being launched at every turn.

The context for the regulator’s concern is not misplaced, if data services are to get wider adoption.

Clarity in the sector is needed sooner than later seeing as data services are going to be a major driver of growth in coming years.

At the beginning of the month a law allowing for agency banking came into force. Under the law banks will be able to contract retailers, petrol stations and other businessmen to help the collect deposits and pay out monies from their clients’ accounts. Advancements in communication technology, more specifically data services, means this service is more easily available now than even five years ago.

The various uses to which data services can be employed are already being seen --- transport and logistics management, financial services, health and educational services.

For a society that likes to talk a lot, it may be hard to wrap our minds around the revolution that data services herald, but they will come with or without our understanding of the subject.

Think of it like the paradigm shift that came with the invention of the printing press, which took the written word out of the exclusive enclaves of royalty and the monastery to the everyday man. What this meant is that information’s storage and distribution was no longer the preserve of a select few. It actually diffused their power, led to the downfall of kings and queens and the rise of democracy and also other kinds of despots.

Data services will ensure the storage of information within easy reach of every one with access to the net, as well as the rapid transmission of that same information.

Think of it.

Small businessmen, like consultants had to saddle themselves with getting physical offices to not least of all house their telephone, fax machines, the petulant receptionist and generally look serious. 

"Data means that when you really boil it down to the bare essentials, a physical office is fast becoming redundant for certain sections of the economy...

This is important because down history wealth has accrued to people and societies that had knowledge --- distribute it and employ it for their benefit. Now with the democratization of communication things are set to change, hopefully for the better. More and more people will have a shot at social climbing than ever before.

Already The Economist magazine has already announced that data is the new oil, coupled with Collymore’s prophecy and one can see why the battle lines are already been drawn around data.

Whereas it was the UCC seeking clarification on the matter, one can expect market leader MTN, which for its own very survival needs to dominate the data space will be the target of a lot of competitive action from its market rivals above and below the table.

We can expect more of these kind of spats in coming times as competitors, both existing and yet to come jostle for position in this new market of the future.

Watch this space.