THE REINVENTION OF KAMPALA CITY

This weekend Kampala Capital City Authority (KCCA) will take one more step in reinventing the image of the capital’s government from the poster boy for everything that is wrong with the country to one that gives hope for a brighter future.

The fourth edition of the Kampala City Carnival will set off from Buganda road travel the length of Kampala road before finishing at Kololo airstrip.

Sponsors have ponied up more than a billion shillings to make the event a success.

If you had fallen asleep in for the last five years and happened to wake up in time for this year’s carnival you may would be forgiven for suffering some disorientation caused by how much the city has changed.

 "This public display of affection is intended to make us feel good about our city. Is it working? Time will tell...

We are a cleaner, tidier city, we have a few roads that have been resurfaced and lit at night. We now take these for granted. The irony of life is that when people take certain things for granted you know you are doing a good job, even if no one thanks you for it.

The rebranding of the city is not unlike previous efforts by National Water & Sewerage Corporation under former managing director William Muhairwe or Uganda Revenue Authority under outgoing commissioner general Allen Kagina or at the Uganda Police Force under Major General Kale Kayihura.

For all of the above their naysayers rubbished these efforts as mere window dressing but in hindsight one can see that when followed up with consistent action or service delivery has made a lasting impression on the general population.

In the case of KCCA the fact we are greeted at sun rise by yellow workers sweeping our roads, that roads that have gone years in a state of disrepair are finally getting fixed and that the leadership of the City looks more focussed, coherent and dare I say, attractive, suggests there has been a fundamental change in the affairs of Kampala.

Of course the running battles with Lord Mayor Erias Lukwago have taken some sheen off the image of the KCCA but the consensus seems to be for the first time in living memory Kampala residents are happy with the progress being made.

A lot still has to be done. 

For instance the security of the city cannot be left to the good will of its residents. KCCA’s role, apart from forging greater collaboration with the security agencies, would be to better map the city, have every nook, cranny and side road be properly labelled and marked. 

Finances remain short but by regularising its revenue streams KCCA set the stage for a great financing opportunity. These verifiable revenue streams can now be leveraged to borrow from the markets to fund many critical projects.

But back to Kampala City Carnival. Essentially executive director Jennifer Musisi and team have put their reputations on the line. Year-on-year they need to keep working so when the carnival comes around they can know in the back of their heads that there are visible improvements to justify the merriment on one Sunday in October.

It is also a useful exercise in winning corporate Uganda to their plans. KCCA is raising the bar of how public institutions should interact with the general public, based on the appreciation that the public bankrolls them (public institutions) and they (the public) need to be accounted to.

They are telling the people of Kampala there is something to celebrate and by extension things are getting better. 

This public display of affection is intended to make us feel good about our city. Is it working? Time will tell.

NSSF SHOWS GOOD RESULT BUT ….

Yesterday Finance Minister Maria Kiwanuka an 11.5% interest for savers at National Social Security Fund (NSSF) but observers could not help but wonder what could have been had the fund not been hobbled by bureaucracy and red tape.

In total the Fund will payout sh366b in interest.This is the highest rate of the return members have enjoyed since the 14% they earned in 2007. Last year the Fund paid its members 11.23%

In addition the fund grew to sh4.38 trillion from sh3.5 trillion in June 2013. 

But more importantly the interest of member savings have kept ahead of the average inflation over the last ten years of about 9%.

"On the surface of it this laudable performance but on closer scrutiny the Fund is probably underperforming, given the privileged position it enjoys...

Last year NSSF’s investments were split between fixed income assets (bank accounts and government securities), Equity and real estate. A conservative enough mix the problem is in the mix of these various assets.

Last year the fund’s portfolio was biased spectacularly towards fixed income assets, which accounted for at eight in every ten shillings the Fund held. The rest of the monies were parcelled out to equities and real estate on a ratio of about two-to-one.

Industry experts suggest that if the portfolio was rebalanced so that fixed income accounted for half the portfolio and equities and real estate took up 35 and 15 percent respectively NSSF would be able to pay out at least 18%.

“Fixed income is safe but the returns are not optimum. NSSF has an extremely conservative asset mix. If they shifted the balance, a few more percentage points could be managed without risking members money unnecessarily,” a senior industry official told Business Vision.

"Two of the last three managements at NSSF have made it their goal to rebalance the portfolio but have come up against too much bureaucracy and political sniping...

The development of Temangalo and Pension Towers have been frozen by invetsigations. Construction on Pension Towers started around the same time as Centenary Bank’s Mapeera House and before dfcu’s spanking new headquarters in Nakasero, both of which are now occupied while Pension towers is barely off the foundation.

Currently parliament is probing the acquisition of power distributor Umeme’s shares, which NSSF holds about 15% stake. Allegations of insider trading and connivance by the board and management have been bandied around on the basis of whistleblower allegations.

A planned acquisition of a significant interest in a Tanzanian firm fell through a few years ago after NSSF failed to meet the deadline due to delays in regulatory approvals. The company has since seen its shares appreciate significantly and NSSF has missed billions of shillings in dividend payouts.

In addition there are requirements that the Fund’s investments be vetted by the Public Procurement and Disposal of Assets Authority (PPDA), another layer of scrutiny NSSF has argued is unnecessary in the case of potential investments. PPDA should be overseeing consumption items.

Former NSSF boss Richard Byarugaba appearing before parliament recently reported that in addition to the red tape, competing interests are always looking to frustrate deals if they fail to get contracted.

Nevertheless the Fund has continued to execute its other mandates. 

Income is up 14.1% to sh479b from sh420b last year. Member contributions had risen to sh638b from sh558b last year and compliance stood at around 79%. The cost income ratio – a measure of management’s efficiency stands at 15% lower than the banking industry’s average figure of 55%. 

Also since 2010 the Fund has managed to bring down the time it takes to process cl aims to about five days from 1005 days at the beginning of the decade.

THE LESSON OF ALIBABA FOR OUR BUSINESSMEN

Last week Chinese E-commerce site Alibaba sold its shares on the New York Stock Exchange raising more than $20b or equivalent of the size of the Ugandan economy, in a sign of things to come.

In the same week I sat in a meeting where the point was made that, how is it possible that National 

Social Security Fund (NSSF), with its sh4 trillion war chest is investing abroad when local businessmen are crying for a source of cheap capital.

On the one hand the Chinese businessmen in moves to get wider international acceptance are selling their shares abroad, while here our biggest financial institution is investing abroad.

For Jack Ma – the founder of Alibaba, which in market capitalisation is bigger than more established e-commerce sites Amazon and ebay combined, to be able to sell his shares in US he had to organise his company to be acceptable to investors there.

Could he have raised the $20b in China? Most probably. But with wider international acceptance he can tap into a bigger pool of finance, human resource and innovation. Remember that name, Jack Ma, because with the Chinese market tied down, expect him and his company to be jostling for space on the front covers of the leading business publications for years to come. He is 50.

NSSF argues that it has to invest abroad because they are few investment opportunities at home. Before you drop your mouth and slap your head at the apparent absurdity of this claim lets examine look at it again.

Using a rough calculation if NSSF paid its savers last year 11% on their money, they need to make more than that in profit on their sh4.2trillion hoard. They would need investments that would give them double digit returns on their money at least.

"NSSF is not a charitable organisation and as a saving member I would expect them to be very exacting in how they choose their investments and partners...

Imagine if NSSF stood on their street corner and announced they had a trillion shillings to lend out or invest and can people present their proposals. Say they just want to deal with just 100 investors so they would be willing to invest at least sh10b or $4m with each investor. Whereas the line may stretch around the corner onto Kampala road, the short list of promoters may not fill the Fund’s reception area.

This is why?

NSSF’s mind set is(or should be) locked on the Return on Investment or how quickly will it get its initial capital back. In making this judgement he will evaluate the quality of the management, the potential for growth in the company’s market, the competitiveness of the applying company in that market and whether they are getting the investment at a fair value.

These parameters are important in determining what to invest in, especially since NSSF is dealing with people’s pensions or retirement funds. It is unlikely and shouldn’t be, looking for the riskiest propositions, no matter how high a return they promise. So straight off NSSF is not going to be lending to startups it will be looking for solid, established companies that can absorb sh10b and show a return in relatively short order.

In our example, to be of interest to NSSF a company needs to be able to absorb a sh10b injection. With that you knock off 95 percent of our companies.

But even for those remaining five percent they may still have a few more hurdles to jump.

NSSF is not a bank so does not lend to the general public. So interested parties would have to sell shares to the Fund or issue a bond, a form of borrowing. To do either they would have to get their books in order and their books and processes audited by a reputable firm.

In saying there are few projects to invest in what NSSF is saying is, it has looked and not found enough businesses in Uganda that are willing or can jump through all those hoops to interest them.

 Whose fault is that?

Back To Jack Ma and his Alibaba. By listing in New York, Ma’s message to the world is that my company meets the highest known standards of business practice. He has entered an exclusive club of businessmen and businesses that can tap resources from around the world. He did this because he wants to play on a wider stage than China and that is the cost of entry.

NSSF is not a charitable organisation and as a saving member I would expect them to be very exacting in how they choose their investments and partners.

You are a Ugandan businessman, thank you very much. But you need more than proof of citizenship to make you interesting. If you do not live up to best business practice I really don’t want to see my money thrown down your black hole.

Get your house in order. Show some ambition, at least grow out of Kampala for God’s sake. Then you can begin to lay claim to NSSF’s billions.