INNOVATION IS WHERE THE ACTION IS, WILL BE

Hot on the heels of the National Science Week that ended last week, the Kampala Innovation week will kick off next week.

One may ask why the two weeks didn’t coincide –  after all science and innovation go hand in hand, but for emphasis alone, it is good that they are held on separate weeks.

What is of particular interest to me with upcoming innovation week is that it will bring together innovators, entrepreneurs, investors and government stakeholders to “explore the role of innovators and entrepreneurs in achieving Uganda’s development ambitions, deliberate on how innovation and entrepreneurship can be harnessed for job creation and employment.”

The best of innovation allows for more output from the same inputs. Innovation comes with improvements on an existing idea.

"The challenge for innovators is often how to commercialise their innovations. It is not true that if you create the best mouse trap all the world will make a beaten path to your door. On the rare occasion that this happens look out for a good business mind supporting the innovators. It happened at Microsoft with Bill Gates backing up Paul Allen or at Apple with Steve Jobs providing the environment for Steve Wozniak to do his thing.

Left to their own devices innovators’ work will never receive wide acceptability and the benefits lost to the wider world.

This is an important point to note, especially for a country like Uganda.

I heard years ago that after an aerial geosurvey for Uganda’s minerals, it was found we have so much mineral potential that were we to exploit it fully, we would have to move all Ugandans out of the way, essentially exile them. And that is all the natural endowment under the ground without considering that we have a fifth of the region’s arable land.

The reason we are a poor country – judging by our sub $1000 per capita income measure, is because we have failed to unlock this value. That we have failed to create an environment for our innovators to exploit this rich bounty.

We have seen the artisan miners from Busia to Buhweju, that the people are there, trying to exploit these mineral deposits. However, their innovation is not being backed up by an enabling environment or the business person.

This is just one example.

The point is, innovators cannot operate successfully in silos. They are part of a wider ecosystem that includes business people, financiers, academia and government and the sooner we appreciate this and act on it, the better.

Hence the importance of the innovation week. When all these members of the ecosystem find themselves in one place it can only be a good thing.

As always happens the private sector leads the way. While this week is sponsored largely by the UN Capital Development Fund and Startup Uganda, an association of innovation and entrepreneurship support organisations, in places from Kamwokya to Ntinda and Lubaga to Kanasanga there are private operators who have tried to create spaces for the innovation ecosystem to find root.

But beyond the lucky meeting of minds one week annually, government needs to take a more proactive role in creating the enabling environment to allow these players to not only survive, but thrive...

As stated earlier good innovation allows us to do more with less. In a country looking to take advantage of our youthful demographic, our appreciation of what it takes to make innovation work is more critical, if only because it can be an engine for job creation.

Also especially because the covid-19 pandemic has reset the way the world works. The reality is that many business models in trade, services and manufacturing have been disrupted for good. For one, we are moving towards more automation and digitization, minimizing the need for labour. The people who argue for manufacturing as a driver of job creation have forgotten or are ignoring the fact that fewer jobs than in the industrialization era, are required in modern factories.

Which all points to the fact that we are going to have to rely on our own ingenuity, to make paying work for ourselves.

"Government is always tempted to jump in and throw money at the problem, but this money will go a longer way if it is anchored by a good strategy that takes into account our endowments and capacities, our needs and the available markets in which we can compete...

The innovation week can be a good learning and networking opportunity for all concerned. See you there.

 

 

 

MUSK ADDS UGANDA ECONOMY TO WEALTH IN MINUTES, SO WHAT?

Two weeks ago South African born billionaire Elon Musk’s wealth jumped $36b after car renting company, Hertz announced it would order 100,000 cars from Musk’s company, Tesla.

The gain in his wealth was as a result of the market reacting to the news, sending Tesla shares past $1,000 each. In the process Musk’s interest in the company topped $300b.

These are just figures until you think that in

"Mr Musk’s gain last week is more than the total GDP of Uganda. And if that is not enough to make you seat up and take note, the World Food Program (WFP) boss, David Beasley said a sixth of Musk’s new gains would be able to save 42 million people around the world battling hunger...

Beyond trying to wrap our minds around these mind boggling numbers should be the question, how can we have our own Elon Musk’s in Uganda.

Why should we care about having comparable wealthy men and women? Because such people create jobs, foster innovation and can very well change the way our country is run, for the better.

Musk is first an innovator in how to mass produce electric cars, that will go some way in saving the planet with the use of clean energy – the subject the recent climate change conference, COP 26 grappled with. We need people who can take our innovations, for which they are many, scale up their production, distribution and create wide acceptance.

How did the US create Musk --- or Bill Gates or Warren Buffett or Mark Zuckerberg and at least another 400 billionaires?

"Infrastructure is key to the growth of these fortunes, but even more critical is the development of human resource and then creating the environment for them to able to actualize their inherent value...

Musk left the constrictions of apartheid South Africa as a boy to study in Canada and the US. While there he inserted himself into the technology ecosystem. PayPal, Tesla and Space X are the result.

This environment in which Musk found himself had, and has, thousands if not hundreds of thousands of innovators and scientists working in collaboration to solve the world’s challenges. But before they were experts they went through an education, especially at university, where they were encouraged to explore and invent. Even better, their innovations were not for the sake but were snapped up the private sector, people like Musk, who scaled up and commercialized them.

It is a model we can copy, never mind on a smaller scale. It starts with recognizing that human resource of all the factors of production -- capital and land are the others, is where emphasis should be placed. The other two are really enablers of our human resource.

This is particularly important since for starters, we have a huge agricultural endowment that we are not taking full advantage of, or squandering all together for lack of human capital to exploit it.

The argument can be made of course, that there is a lot of research going begging in all our major institutions, and if only we could reach for the files and dust them off, it could make a world of difference.

A decade or so ago Nile Breweries wanted to brew a beer from local inputs. They found the solution in a breed of sorghum, Epurpur, which was derived from our natural environment and enhanced in our labs years before. It took a business to have a need and to look around.

It means

our universities need to learn how to market themselves and their innovations deliberately, and not rely on luck to find them...

Interestingly our very same universities teach marketing.

In the US, Silicon Valley, where many of the innovations that run our increasingly connected world come from, has learnt not only how to market their new findings but gone a step further and discovered funders for these same projects.

While our financial system is still very shallow, dealing only with going concerns and not start ups, government would need to come in and hand hold these budding enterprises.

"Inevitably government will not do a good job of it, but it will at least open a new market that the private sector can then get into....

It has happened before. Government kicked off the fish export business when they set up a fish factory at Masese in Jinja, which flopped but was the foundation on which our current fish export industry is built.

Or even better, cleverer and cheaper, government can seek out these kind of financiers and work with them to create a whole new layer in the financial industry, government helping with some seed capital and enabling regulatory environment.

But whatever we do it will always come back to the people, the people who know how to do this and have some experience in doing it. Preferably if they were Ugandans, experienced in these particular sectors or building such value chains.

The legacy of post-independence Uganda is the number of Ugandans who have been flung around the world like the biblical Jews.

How about we start with an inventory of all Ugandans abroad, especially our specialists, we PhDs in everything from artificial intelligence to agriculture to waste management.

Former Nigerian president Olusegun Obassanjo took it a step further. He contacted all these experts and invited them back to Nigeria for a few days to give a paper on their fields and how Nigeria can employ their expertise or exploit the field. With this information a strategy was drawn up and things are happening.

Musk, by the way is worth more than $300b.

LESSONS FROM THE ETHIOPIA TRAGEDY

This week marked one year since the Ethiopian civil war begun.

What begun as a political dispute when current prime minster Abiy Ahmed rose to power and sidelined the once dominant Tigray People’s Liberation Front (TPLF) flared into a full blown civil war and now the imminent fall of Addis Ababa.

This is a tragedy on many fronts not least of all because these developments will set the continent’s second most populous nation back politically and economically.

The signs however have been staring us in the face. While rapid economic growth over the last twenty or so years – the size of their economy was doubling every eight years,  made it look like Ethiopia was on an irreversible path to development you cannot paper over the realities of poverty and inequitable development...

It is not news that Ethiopia has not been the best place for journalists to work in recent years and what triggered the recent uprising is the government’s alleged blockading of Tigray, preventing much needed relief aid from reaching the northern region which is being ravaged by drought.

The details are, of course much messier, but one can guess that Ethiopia’s politics, which is organised along tribal lines is at the heart of it.

And therein lies the challenge of running a developing country, at least in our part of the world.

The reality of power is such that you have to cobble together a power base to propel yourself to power and once there to maintain you there.

When a leader in our parts look around the easiest coalitions are family and tribe, not labour, landowners or industrialists as happens in more developed economies.

All the textbooks will tell you that the narrowness of such powerbases are a recipe for intolerance and instability and are not the best base from which to launch a democratic nation.

And for the while that it works everybody thinks “this time it will be different”, but you cannot subvert the laws of society for long before they turn around to bite you.

As Bill Clinton said when he run for the White House in 1992 “It’s the economy, stupid!”

Any leader worth his name in the world and more importantly in our neck of the woods, has to have the economy at the top of his agenda.

He has to make it his ambition to create the class structures that supersede the politics of tribe and ethnicity. They do this by creating the environment for economic growth, making it easy for business to thrive – you ensure safety of property rights, lay down business enabling infrastructure and allow the markets to thrive....

The cold war showed us, with the collapse of the communist block, that countries are only as credible as the viability of their private sectors.

The private sector creates the economic activity that can be taxed. With these taxes government can provide public goods and most especially education and health services. Education and health are critical because they are the rungs on the ladder required to allow for social climbing of even the lowest members of society. They improve the quality of your human resource.

Education, for one is a great equaliser, allowing students to criss cross the country, interact with other tribes and demystify all the myths surrounding our differences. It also allows them to transcend their ethnicity and causes collaborations that eventually lead to the creation of classes with wide cutting interests.

There are two reasons why leaders do not pursue this progressive course; it takes a long time for these transformations to take root and in the meanwhile they revert to their politics of ethnicity to hang on to power.  But also because it will very well mean working yourself out of a job as the people become more empowered and clamour for the share of power. It is inevitable.

But also, for the simple reason that political expediency does not allow for the selling of long term dreams that you will not be around to see through.

"A better educated, middle class dominated country is unlikely to revert to brute force to resolve political disagreement. They have too much to lose...

Better that than to encourage tribalism and fratricidal war as we are witnessing in Ethiopia, which bursts out and undoes all your good work.

LOCAL WISDOM AND UNDERSTANDING THE MTN IPO

In the ongoing battle to explain the MTN initial Public Offer (IPO) I got a call from a long lost source.

A banker of long standing, he is one of those who gave a young man learning to report business the time of day. Ordinarily he does not suffer fools gladly, but looking back he was painfully patient with my beginner’s ignorance.

He still has a lot to teach.

Our discussion was long and far reaching, but maybe of interest to some would be his take on the MTN IPO.

To simplify it for me he created an agricultural analogy.

Imagine that there was big open space in your locality, he begun. No one uses it, it has been a green grassy plain for a long time, for as long as you remember.

Then one day there was a lot of activity – fence building, grading of the land and roads. The story was that some people for far away, with money had gone to the district and had leased the land from the local government. They said they were going to set up a vineyard, grow grapes for wine making.

Of course the villagers laughed. Who had ever grown grapes here? What a waste of money.

The promoters however went along with their “crazy plans”, the vineyards were planted and it seemed like they flourished – the local man wouldn’t know how to tell anyway. Within a few years the owners of the vineyard started trucking cartons of wine, past the villagers and out to places unknown.

But in order to maintain local relations, they started marketing some limited bottles in the neighborhood. The locals developed a taste for the wine and became a major market....

In due course the lease for the land came up for renewal. The local authorities in their wisdom now insisted, as a condition of renewal that the vineyard owners should sell a share of the business to local investors. Their thinking was that apart from tax, some of the profits should stay in the local community.

There was some haggling, because the vineyard owners were making a lot of money and felt no need to have local partners. And they did not need to raise money for their business locally, which would have been another reason to try and bring in local investors.

They even argued that the sale be to the biggest local business man, Nasser Fadhul, locally known as NSSF (ok, that was my own addition). This would have been convenient for them to deal with one buyer rather than the whole district, but they argued too, that if NSSF bought it all, it would guarantee that the money would be retained locally. If they opened it up to all buyers people from other districts would come in and buy as well and the cause to keep money in the community would not stand. But the local authorities put their foot down and insisted that the villagers should get a share in their individual capacities.

Once they agreed they went out to the market. Given the prosperity of the vineyard/wine makers – the villagers used to see only four-wheel drive cars driving in and out of the compound, it seemed obvious that everyone would want a piece of the business.

But surprisingly stories started flying around that, the owners wanted to sell and leave the villagers with a shell of the company; money from the sale of shares was going to owners and not going to the business; the company status was not changed to allow it sell shares to the company and therefore the sale should be stopped; the vineyard had reached maturity and the profits would not be as heavy as before.

All these rumours, despite the owners describing their business to the public in a well laid out prospectus.

"The vineyard owners explained they were not going anywhere, after all they were only selling a fifth of the company and intended to be around long into the future to enjoy the returns of their sweat, which also put paid to the allegation that the business had hit its peak and was in decline. The payment to them for the shares they were selling would not affect the business and in fact in the future, given their projections for the company, it was a small amount of money. In effect they were forgoing future earnings and capital growth in selling their shares....

They did not know where to start in explaining that they were not selling shares legally. The deal had been struck with their own local leaders, looked over, over and over again to ensure it met all legal requirements locally and abroad. They were open to further scrutiny on this matter if people wanted.

My old friend has his own theories about why the rumours were running rife and he thought it was little to do with the financial illiteracy of the villagers. Maybe it was something to do with the fewer the buyers the few will get bigger individual shares?

After all he pointed out, if they did not get any buyers, the vineyard owners could report to local authorities that people did not buy and keep their share of the company to themselves. More than gladly.

My banker friend stopped there, ending his narration on a biblical note, “Many are called but few are chosen.”

 

OF TAXES AND CORRUPTION

Here are some rapid fire figures that you may or may not have known.

Uganda Revenue Authority (URA) is celebrating its 30 years of existence this year.

In the year URA opened its doors for business, the size of the Uganda economy was $3.32billion according to the World Bank.

Last financial year URA revenue collections came in at sh19trillion or about $5.3b.

So, URA last year collected one and a half times the economic output of Uganda in the year that it was launched. Assuming everything remains the same (Covid-19 emphasized how redundant such an assumption is), URA will collect at least, the equivalent of the country’s GDP in 1991 every year into the future...

That is an interesting statistic on several fronts but two leap to mind.

One, is that despite these consistent gains in revenue collection, we still need to collect more revenue as 13 percent of GDP, which last year’s collections represent, cannot support our development goals.

And secondly, to think how small the economy was in 1991 relative to today shows how far we have come. If all goes well, we will be saying the same thing 30 years from now about the size of the Uganda economy today.

Unfortunately, as it often is with Uganda every achievement comes up against an equal or more dramatic downside.

This week the new Inspector General of Government Betty Kamya reported that corruption accounts for sh20trillion annually. I thought there must have been a printing error because that would have been half of last year’s budget or as pointed above all our tax revenues gobbled up by rapacious public officials. It is inconceivable that government would have been able to function to any level, if half the budget was stolen.

Kamya explained that sh131.2b was due to lost taxes, sh233b in regulation related losses, sh451b losses in the education and health sectors, sh459.2b to misuse of public facilities, sh590b in procurements these are the ones we know and come up to about two trillion shillings. A heftier sum than estimates of a few years ago of sh500b lost to corruption annually. Clearly there has been some steady progress in this respect.

To this number the new IGG added losses due to absenteeism of about sh2trillion and to round it off sh15trillion in losses due to environmental degradation.

"While it was a relief to know that the rapacity of our public servants had not hyper inflated, there is still a lot of cause for worry....

In my book corruption is one of the biggest causes of inequitable distribution of the benefits of the growth of the last three decades.

The budget this year stands sh44trillion assuming a population of 44 million that means the government plans to spend a million shillings per Ugandan. So the two trillion lost in taxes, procurements and misuse of public facilities is the allocation for two million Ugandans gone into a handful of people’s pockets. And after denying the two million Ugandans security, infrastructure and social services what do this handful of officials do with their ill-gotten gains? They improve the security around their mansions, fly their children to school out of the country and themselves for annual health checks, that is before we talk about lavish holidays in the Seychelles, Cape Town or the French Riviera.

It is already bad enough that government is spending a miniscule million shillings annually on every citizen without some rapacious officials keeping for themselves the entitlement of thousands of Ugandans at a stroke of a pen.

But by widening the definition of corruption to absenteeism and environmental degradation the IGG is saying that corruption goes beyond stealing funds in the present to also the medium term effects of cutting work and the long term effects of environmental degradation.

The rich man who fills up the neighbourhood wetland today to build his apartment complex may not only be depriving the community of a water source today but is also causing flooding and its attendant effects on the community. The factory owner allowing untreated effluent into the lake is raising the cost of tap water and therefore denying poorer communities of safe drinking water. Cutting down trees to develop massive agricultural enterprises may contribute to climate changes that kick the ladder from under the poor. And on and on and on.

It is useful attempt to come to grips with the full extent of what constitutes corruption and hopefully then makes the fight against the vice more effective.

But it has been said before in this column that the fight against corruption will only begin to gather traction if we demonise to the point that the perpetrators are shirked like the man who defiles his infant daughter. There has to be social censure, we have to agree that this is a vice that affects us all even if the money is eaten in faraway Kampala...

As it is now our corrupt officials are given p[ride of place at Sunday service at our weddings and other functions. The message to all is that you have to take private advantage of your office wherever you are in order to be taken seriously in our society. Therein lies the problem.

 

THE OPPOSITION: ANOTHER SHAKING MY HEAD MOMENT

A week or so ago another political group, the People’s front for Transition (PFT) was launched and promptly announced Kizza Besigye as its leader.

Something had been brewing for some time. Besigye it has been reported, has been holding meetings with opposition leaders since the January election in which President Yoweri Museveni retained his seat and Robert Kyagulanyi came in second. This was the first election since 2001 that Besigye has not been on the ballot paper, an omission that maybe prompting his latest maneuvers.

The public reaction to this latest move is mixed. On one hand Besigye’s critics think he really cannot stand to be out of the center of Uganda’s political stage. People were clamouring for him to step aside, which he did and see what happened. His successor flag bearer at the forum for Democratic Change (FDC) Patrick Amuriat polled under five percent of the vote in the January presidential polls.

Those sympathetic to Besigye see him as the only credible counter to Museveni, never mind he has lost in all the four challenges he has mustered. They think he is too important a political figure to be left out in the cold as seemed was happening in recent months.

For the neutral observer Besigye’s most recent reincarnation raises some disturbing questions.

"If one of the biggest criticisms of the National Resistance Movement (NRM) is Museveni’s dominance, near omnipotence in the party and how it has stifled the upward mobility of other potential replacements to him. In Besigye they see a similar trajectory in the FDC and in the opposition as a whole....

Kyagulanyi’s challenge for the presidency while it ended in defeat, served to reconfigure the composition of parliament, with his nascent National Unity Platform (NUP) uprooting FDC as the leading opposition party, while at the same time engineering an ejection of all NRM’s bigwigs in central Uganda. That being said there are doubts about whether Kyagulanyi has the stature of Besigye and the ability to similarly carry the opposition on his shoulders.

Relatedly what does the opposition’s over dependence on Besigye do for attempts to build institutional capacity in the opposition? If there was any proof that FDC is institutionally weak was the dismal performance of the FDC at the beginning of this year.

It was a double loss for the opposition. By finessing Mugisha Muntu out of FDC and replacing him with Amuriat, the general was out at sea without FDC’s near top of mind awareness country wide and failed to make an impression.

This ambivalence has allowed Besigye to step back into the limelight in a way his predecessor Paul Ssemogerere was unable to do. Ssemogerere run for the presidency in 1996.

But Besigye is not the irresistible force to Museveni’s immovable object. A rethink of how to unseat Museveni has long been overdue and with Besigye’s reemergence we can expect such plans to build up party capacity will not get much voice...

 

Besigye it seems has worked out that all he has to do is bid his time, remain relevant for the day that Museveni steps off the stage. As the second most recognized politician in the country the presidency would be in better sight than before, whatever the NRM can throw against him.

Of course, whether Kyagulanyi can sustain his momentum for the next few years may very well put paid to Besigye’s assumed strategy.

So Besigye’s return to the center has a net negative effect on the opposition, especially the ability to build their internal capacity.

In recognition of this there is rumour that plans are afoot to cause a constitutional amendment that would return Uganda to a parliamentary system. Under this system there would be no direct elections of the President but the party with the most seats in the house would have the right to choose the country’s president.

With one stroke this change – if true, would force parties to build up internal capacity, while reducing reliance on dominant personalities. And very well play into the NRM’s hands.

MTN AND THE SHORT VERSUS THE LONG VIEW

Last Monday telecom company MTN opened the sale of 20 percent in itself to the general public.

The sale or Initial Public Offer (IPO) will last till 22 November 2021, during which it is expected about 4.5 billion shares will be sold to the general public. Each share goes for sh200 and 500 are the minimum number shares one can apply for.

"MTN has thrown in a further sweetener, that if you buy the shares using your MTN number you get a bonus ten shares for every 100 shares. If you buy via other means – direct through the brokers with payment done in cash or through the banks, you get an additional five shares for every 100 you buy.

This amounts to a five to ten percent discount on every share you buy...

Shares will go on sale on the Uganda Securities exchange (USE) on 6 December 2021.

Since the opening of the sale of shares the chattering masses have gone into overdrive, analyzing the share issue, nine times out of ten without even looking over the 90-page prospectus, available to all online.

So to that extent you can imagine what the quality of discussion was, showing how financially illiterate we generally are.

For one thing people cannot make the distinction between an investor and a trader, therefore arguing at cross purposes.

While both are looking to preserve capital the trader is looking to make quick gains due to price fluctuations, while the investor is looking to buy into a durable company that can be held for longer periods benefitting from dividends and capital gains – price increases in the share price over longer periods. The two have different mindsets on the same issue.

So the argument tended to take the tone of there is no short term gains to be made in the offer versus those looking to longer term gains and arguing there is good value in the offer.

Even among the latter group there was some disagreement about whether there is scope for long term gain or not.

"It was like a sprinter arguing with a marathon runner about what the average speed is ideal to win a medal. On the surface of it the argument should not arise...

It was also interesting how we suddenly had a proliferation of stock analysts. As of last week there were 40,000 Securities Central Depository (SCD) accounts – many of whom have come on board in recent weeks due to a recent initiative to make it easy to register online and using mobile phones. The SCD account allows one to trade on the Uganda Securities Exchange (USE).

Given those few SCD accounts as a proportion of the national population or even the population of Kampala, who are all these authorities jumping out of the woodwork?

But it was an interesting study in investment psychology. You know how it is, you put your money together and decide to open a shop. There is something to say about consulting widely but anyone who has committed his funds to any enterprise knows how you will mostly get negative feedback, the shrillest from those who have never opened a shop.

"It is a human condition and not only peculiar to Uganda. That is why 90 percent of any population’s wealth is controlled by five percent of those populations. This small number are the ones who can break above the chatter and do what the majority are not willing to do to succeed...

It’s the same way MTN took a chance on Uganda – their first market outside South Africa, when we had a per capital GDP of less than $300 and other investors thought Uganda could not sustain a mobile phone market.

Twenty-three years later as a $1b-plus company, MTN is coming to the market. They have done all the heavy lifting and been paid handsomely for it, so we are being offered the finished product with a lot of the startup risks managed. The company has not reached its peak, if the experience of Safaricom in Kenya is to be referred to, so there is still a lot value to be created and shared with new shareholders.

Risks still abound and to the extent that they can MTN has outlined them in the prospectus.

There are no sure deals in life. In Uganda only death is for sure. Investors in the new MTN offer will hopefully appraise themselves of all the risks and if they think they can stomach the risk they will buy shares if not they will wait for the next deal.