IS THE ECONOMY LOSING MOMENTUM?

Last week the World Bank released its annual Ease of Doing Business survey and Uganda had dropped five places to 127 out of the 190 economies surveyed.

It is common sense that for businessmen to operate or thrive in an economy certain things have to be in place like macroeconomic stability, predictable policy environment, an efficient bureaucracy, usable infrastructure and  quality human resource.

The World Bank annually goes around measuring these and other metrics to determine whether a country’s environment is suited to doing business.

Being who they are, their judgement on a country’s economy is carries some weight in many circles.

The story is told of how MTN happy playing second fiddle to Vodafone in South Africa, had to convinced to invest in Uganda because the official reports on the economy  -- we had a per capita GDP at the time of just under $300, did not reflect the suppressed demand for everything from phone services to electricity.

When they finally made their way here --- not kicking and screaming, they were pleasantly surprised to an economy more than ready for mobile phone services.

"So while you are advised not to take all the World Bank and other donor agencies at face value there are certain fundamentals that cannot be ignored...

So say you are investor with billions of shillings to spare, rather to invest and you decide to take a punt at Uganda.

When your assistant plops the report on your desk, you decide it’s really not much to look at.

I mean they have a GDP of $25b, which can fit in a corner of Boston; an urban population of under 10 million, little industry and not enough energy to power a city in the US. Nothing really jumps out at you.

Maybe they are in advanced stages of forging an East African federation of about 140 million people, with an urban population of 40 million.

In the country’s lack there is opportunities to be had all over the place of course.

Maybe you could be involved in power generation, the potential on the River Nile of about 4000 MW has barely been tapped. Or maybe you could get involved in the hotel business, they barely have 5,000 beds. Or maybe you could dabble in agriculture, produce beef say? Can you believe they only produce 107,000 tonnes of beef annually. Texas alone produces at least $10b worth of beef annually – or about half the size of Uganda economy.

But somehow you find yourself at the carousel at Entebbe Airport one morning, watching it going around and around, waiting for your luggage. Just when you think it may be lost or stolen (you have heard such stories about Africa) it pops out and you are off to see what Uganda has to offer.

It helps that you can hail an Uber at the airport. It helps too that you can get to your air conditioned hotel room in under an hour, though half the time was spent in traffic after you exited the swanky new expressway to your hotel. It helps too that they have clean, bot overpriced hotel rooms and the food is recognisable to your palate.

You decided to hit the ground running with a series of meetings in the afternoon but no one is on time or meetings have been shifted around or worse cancelled.

To fill up the time you try to ask around, investigate how long it takes to get anything going and you realise your three day stay ( you were worried about the mosquitos) will be embarrassingly  less than adequate to get anything done.

The facilitating agencies and associations you are used to at home are clueless or non-existent altogether. No one really knows what works and can explain it to you in a way you can understand for consumption by your business managers.

Potential is all around you can tell, but little evidence of the facilitators to unlock this energy.

How many opportunities for this country have gone begging because we can’t keep time? That is before you realise you cannot get any actionable information from anyone and this is even before someone has tried to shake you down.

Many years ago I visited Mauritius and was shocked that everyone wanted to help me with directions. It was obvious I was a visitor, my colour of course. My impression was that everyone was wired to make visitors comfortable because tourism is a big thing on that small island of four million. They have 300 five start hotels – real five star hotels!

"The point is, the attraction and retention of investment – local or foreign,  is not the job of one agency or another. It has to be a collective effort. And if your agencies work in silos like they do here, it will show straight from the airport carousel....

So the World Bank ease of doing business, its shortcomings notwithstanding, is a measure of how coordinated as a country you are to helping business along and we are not only talking foreign investors.

ALLOW UNRA TO BECOME ANOTHER NWSC

When history is written one of the best things the NRM did to this country was to privatise the state owned enterprises and break up their monopolies in everything from telecommunications to produce marketing to power generation.

At the time these things were happening in the 1990s the hecklers said we the economy was being handed over to the foreigners, they would gut it, bury it and hand us back the scraps.

If these people had their way we should never have privatised these companies, just injected more capital in them (from where your guess is as good as mine), if not hand it over to local businessmen and keep the companies in local hands.

In life there are things that look good but don’t work and things that don’t look good but work. Which side of the table would you like to be.

We forget that for the first four years the NRM listened to these “nationalistic” voices – some of them are still shamelessly among us, and in order to support this baggage of non-performing companies, government was haemorrhaging the little money it had – we were collecting less than five percent of a very small GDP, in revenues. And if that failed the government printed money to support these carcasses which sent inflation shooting through the roof.

"In the budgets of those years the finance minister, embarrassed to report the annual inflation figures, would talk about inflation in months. So you would hear that inflation had dropped to 25 percent per month, which was actually about 300 percent a year. Now when inflation reaches 30 percent a year like it did in October 2011 we “walk to work”...

Inflation comes when there is too much money chasing too few goods. So government was printing money to pay salaries for companies that were not producing.

The problem was not that these companies did not have money, they lacked management –an executive floor full of MBAs is not necessarily good management and the context or environment in which to manage well.

Culling these shells from the government budget did a number of things but more importantly, it saved the government billions of shillings – in the case of Uganda Airlines Sh10b monthly or about $10m at the time, that they could deploy to other more pressing needs and secondly, and just as important, in released the new owners and management of these institutions from the stifling, often corrosive burden of government oversight.

I shudder to think what the situation would be today if government still had a strangle hold over the electricity, telecommunication and produce marketing sectors. It would be a disaster.

However there were exceptions to the rule.

Last week the Global Credit Ratings company, a leading emerging markets credit rating agency, judged National Water & Sewerage Corporation (NWSC) a good credit risk, essentially that money lent to them has a better than good chance of being repaid.

You cannot wish such things into existence. These rating agencies check not only your financials, but the systems and structures that deliver these results as well as the market one operates in.

This is a culmination of work that started with Dr William Muhairwe’s  promise, nearly 20 years ago to turn the company, which was on its last legs, around in a 100 days. Truth be told Muhairwe, as with other managers of the time, was charged with preparing the company for privatisation. His mission got lost in translation and he did not play to the script.

The import of that credit rating is that NWSC has access to unlimited funds in a way that few other companies in Uganda – public or private, do.

It is an outlier.

"For national pride or whatever you want to call it, it would do us good to identify credible management teams that deliver on their mandate and let them run with the ball...

Which brings me around to the rationalisation of government departments and particularly the reabsorption of Uganda National Roads Authority (UNRA) into the works ministry.

Despite struggling to restructure the authority over the last three or so years, the management has managed to deliver projects, in time and cheaper than previously, and is on the verge of achieving take off. It has not reached the level of NWSC but has revived lender confidence in its capacity to absorb funds and deliver on projects.

If things go as planned the momentum they have built will be invariably lost with a return to a ministry they were hived off from for exactly the reasons it should not go back.

UNRA is not any agency. It is charged with widening and maintaining our national road network. In the absence of credible railway network, it is imperative that our road network be in tip top shape. The need is there, we have a road network five times as small as neighbour Kenya’s per unit of land area, what we need is access to funds and the capacity to build these roads.

It has gone silent on this restructuring talk, which in my experience is never a good thing and means they are going ahead with it anyway. I would like to be wrong on that.

FINANCIAL INCLUSION HELPING ROLL BACK POVERTY, INEQUALITY

If you are reading this paper issues of financial inclusion do not directly affect you. Or so you think.

You probably suffer a short memory or are too young to remember the days when having a bank account was a status symbol. Or that getting a loan was for a select few who had titled land in Kampala they could serve up as collateral. Or at an even more basic level that access to financial services was restricted by geography – in the capital all banks were located on or near Kampala road. 

Or that banking services were only accessible between 9 am and 1 pm and good luck to you if you miss the Friday close of business. Not only did no bank open on weekends there were no ATMs.

Your challenges with the banks now is the high lending rates and their inability to support your start up business – commercial banks are not designed for that.

The proliferation of banks now means more and more people have bank accounts today – about five million accounts in the 24 commercial banks today.

"While banks have expanded their activities dramatically in the last two decades or so, by far the most prevalent traditional financial service available, they still struggle to reach the majority at the bottom of the pyramid....

This week is financial inclusion week and the theme is “Getting Inclusion right”.

The emergence of mobile money has with one blow answered the challenge of lowering the cost of and providing wider accessibility of financial services.

So much so that in a recent survey where respondents were asked about their usage of financial services in the previous three months, usage of mobile financial services was reported at 36 percent last year up ten percentage points from 2013. Banks on the other hand so active usage fall to seven 

percent of respondents in 2017 from 10 percent in 2013.

Improved technology is improving access to financial services – mobile money accounts have exploded to 22 million in the last ten years or so, and already credit, insurance and hire purchase services are being offered over the phone.

But there is still a long way to go. While we have improved financial inclusion from 22 percent in 2006 to the current 43 percent, the full benefits of this shift are not widely appreciated or enjoyed.

So what? Why should financial inclusion – accessibility to a variety of financial services, be so important to you and I.

On a macro level it does several things among which it aggregates more and more of those little monies lodged under our mattresses, in our socks and bras for use among more people. And relatedly it increases the speed with which money moves around in the economy generating more and more economic activity.

On a personal level it improves safety of our money, carrying all your savings around with you is an accident waiting to happen. It increases the ease with which we can do transactions – increasingly now we don’t need to walk around with cash to buy anything. We don’t know it but that convenience represent savings of time which can be gainfully employed on other endeavours.

But it also allows us to have access to leverage or debt, which in effect increases our capacity to do more with less. If you were to buy a plot of land which would cost you sh10m to try and save the money from your income would not only take time but there is no guarantee the plot would still be sh10m by the time you have saved up. Borrowing would hasten the process and therefore the speed of wealth accumulation.

So for the economy as a whole and our own individual improvements in standard of living, the importance of having as many people as possible with access to financial services cannot be over emphasised...

There has to be a discussion between the policy makers, regulators, market actors and intended beneficiaries on how to further this agenda in way that while it maximises on the benefits, guards against the possible risks of a large financial sector.

The major challenge for countries like Uganda and at the heart of the poverty question, is the inability to unlock the full value of our land, human and capital resources. In all these cases but for purposes of this argument, our financial resources are not aggregated in meaningful sums for them to be deployed to finance projects that create jobs that transform economies.

Financial inclusion therefore is a means to an end. For quality, sustainable   economic growth financial inclusion is imperative.

OF GUN BUTTING AND STOLEN ROAD RAILS

A few days ago a few individuals decided to help themselves to the road rails on the recently done Mukono-Katosi-Nyenga road.

In the dead of the night these people parked their by the road side and helped themselves to 42 pieces of the guard rails. They would have got away with were it not for some vigilant residents who hid in the nearby bushes to witness the deed, in the process taking down the number plate and identifying the perpetrators of the crime.

Sometime during the process they got in touch with the nearby OC station to alert her to what was happening. But as it turned out she gave them the run around, didn’t turn up and failed to catch the culprits in the act.

It took the intervention from the OC’s superior the following day to get to the bottom of the crime rounding up the culprits and arresting the OC and another policeman as an accomplice.

You might have missed this story because we were all still reeling from the brutal arrest of Yusuf Kawooya last Friday.

"Kawooya was pounced upon by gun wielding men in broad daylight on a Kampala street. It is assumed that in his attempt to defend himself he may have put up a fight. Most of us wouldn’t know because the footage we saw started with Kawooya writhing on the ground as the gun toting (its on the tip of my tongue to say thugs) men half dragged him on the tarmac road, while gun butting his sides, which seemed like an attempt to inflict damage on his kidneys...

Within minutes of the afternoon incident the footage had torn up social media and given much fodder to the critics of the government.

On Saturday the security agents, as it turned out, were hauled before a disciplinary committee to answer for their sins before being carted off to jail. We await the conclusion of that case.

The two incidents are related in more ways than one.

In both incidents there was active involvement of security agents. These law enforcers were actively involved in breaking the very law they were sworn to uphold.

In both incidents it is hard to argue that these security agents had not done this before.

In Mukono it was suggested that the road-rail thieves were warned off by the same police who the crime was reported too. If that had not happened they may have stolen more road rails. So the police officers’ roll in the caper was to look the other way and ensure no interference from themselves as the resident law enforcement agents.

In the Kawooya arrest, except for the clumsiness with which they went about it --  the waiting vehicles, the arms and the numbers marshalled to arrest poor Kawooya all suggest they had done this before.

And in both instances they would have got away with had they not been “caught”.

In the road rail theft we would have dismissed it as old granny tales had the residents tried to insist that the police were in cohorts with the thieves. Or maybe not. But we would have thought the story had gone too far, to suggest the police knew about the incident and pointedly ignored calls to come and arrest the situation.

Had we not seen the footage in the second incident, we might have thought it was just a routine arrest of a suspect. Attempts to provide the detail of the arrest would have been dismissed as being melodramatic.

For starters we have to commend those who brought the incidents to light. It is obvious that without them both incidents would have been swept under the rag and far out of sight of the public conscience.

But more importantly it should be a signal to the security agencies that it cannot be business as usual.
Incidents in our immediate past with – the killing of senior police officers , the terror attack on Kyadondo in 2011 and other incidents offer enough proof that there people out there with designs to cause terror or at least public disturbance. So there is a need for security agencies in their various permutations...

We neither downplay nor dismiss these threats.

But is it too much to ask that our security agents stay out of criminality?

And secondly that in the pursuit of their business that they adhere to the laid out procedures and stick to the law? Onlookers would have been hard pressed to see how arresting the rotund Kawooya necessitated the show of armed force that we saw displayed in the minute long operation.

OF THE SOURCE OF THE NILE BRIDGE & KANYE WEST

To much pomp and fanfair last week, the new bridge across the Nile was commissioned.

The bridge with its dual carriage way and increased speed limit, will at the bare minimum, shorten the time it takes to and from eastern Uganda. Of the more than $7b (27trillion) that makes up Uganda’s external trade, easily two-thirds of it rumbles up and down our eastern corridor. While there are other bottlenecks, the 20 kmh speed limit on a single carriageway, enforced across the Nalubale dam should not be underestimated, backing up traffic for miles at the worst of times.

What we need now is for the Kampala-Jinja expressway to be commissioned too, to get the full advantage of the new bridge.

It will also serve as a tourist attraction and may possibly and in lieu of a more distinctive man made structure, serve as the symbol of Jinja – the adventure capital of the region. Not on par with Kenyatta International Conference Center (KICC) in Nairobi or the pyramids of Giza or the Burj el Arab in Dubai, the Source of the Nile Bridge if well leveraged can help Uganda gain top of mind awareness for intending visitors...

Which brings mevaround to the visit of US rapper Kanye West and his wife, reality TV show star Kim Kardashian.

Nothing serves better than third party endorsements in trying to sell anything.

If you went out and told everyone how brilliant you were, they would put it down to bragging and dismiss you out of hand. But if someone else says you are brilliant, depending on how well regarded he is, your credentials will receive an added boost.

Hence the advantage of people like Kanye and Kim coming around to see for themselves. Between them they have more than 200 million followers on social media. And that is to wildly understate the eyeballs on them. If only two million of all these followers relayed the information to their followers and even just ten of each followers’ followers relayed the information and another ten of the followers’ followers …. You get the point.

"Priceless exposure you cannot even put a monetary value to. Because believe it or not, the first hurdle many of us African countries have to vault is to just create awareness. You will be shocked how many potential visitors to this country cannot point it out on a map...

Thankfully the celebrity couple left without incident and hopefully they have fond memories of their stay here. Coming from the concrete jungles they inhabit, it is safe to say they couldn’t fail to notice all the green and naturalness around them.

That being said as a country we need to be more deliberate about these things. While most of these celebrities would prefer that their trips are private events, there has to be a more strategic way to attract them to our shores.

This business of finding on the morning of their arrival that there are in town and people start scrambling to create engagements – which is what it looks like to onlookers, is really a waste of a good opportunity.

But even more importantly we need to really beef up our local tourism. We need to market our own country to Ugandans, who would not think much of traveling to Mombasa, Zanzibar or Dubai. And it is not about familiarity breeding contempt, as many of these gallivanters have never come close to the mountain gorillas of Bwindi or the climbing lions of Queen Elizabeth National Park or the white water rapids of the Nile. Believe it or not, it often times is that they don’t know about these things.

The advantage too of having a strong locally driven tourism industry is that in the event of such freak occurrences as the ongoing Ebola outbreak in neighbouring DRC, which often leads to cancellations by foreign tourists, local travellers can help the industry stay afloat.

These third party endorsements from foreign and local tourists cannot be underestimated. They will often make the difference between negatives perceptions dominating people’s conscience or not.

To illustrate. According to the Neighbourhood Scout website, which serves investors and property managers Miami, Florida has one of the most violent crime rates in the US. Crimes that include murder, rape, armed robbery and aggravated assault all of which are widely reported in the Miami media.
But for us looking in that is not the Miami we know. Our images of Miami are of white beaches, beautiful Latinos and an all-around fun time. Make no mistake, the predominantly positive image has not happened by mistake....

For example hundreds of millions of dollars annually in film projects are attracted to Miami --$150m in 2015 alone. The producers of these projects are incentivised to shoot in Miami and in the process often perpetuate the happy-go-lucky-white-beaches image of Miami we have come to associate with the city never mind that the sunny city’s crime rate may dwarf all of Uganda’s in a year.

Apart from a deliberate and persistent image shaping effort, may it not have something to do with the fact that of the 10 million visitors to the city 55 percent of them come from the US itself?

JENNIFER MUSISI; CAN WE GET THE JOB DONE?

On Monday it went out that Kampala Capital City Authority (KCCA) boss Jennifer Musisi had thrown in the towel.

The news was received with muted shock because it is safe to say, that we generally knew her days were numbered from the time when it was reported she had cost the NRM victory in Kampala in the last election. Never mind that we would be hard pressed to remember the last time the NRM won in the capital city.

So despite the visible improvements done on the city during her seven year tenure and the future plans lined up, there were few if any people publically begging Musisi to reconsider her position.

"At the bar, weddings and funerals, we nod our heads knowingly and mutter to ourselves how she was wise to leave as the forces lined up against her … Eh! Eh!

The conversation always ends in unfinished sentences.

It is very possible Musisi jumped before she was pushed for any number of reasons. She is not an angel.

But the feeling cannot be helped that competence cannot be tolerated wherever it raises it head in this country. And that when it does and refuses to succumb to compromise, more drastic measures come in to play.

There are people uncomfortable with systematic ways of doing things and would rather allow the chaos or at least ambivalence in government processes, because they benefit from it, because they cannot operate in an orderly environment. Probably the irritating guys who create 7 lanes in traffic.

"This is worrying because while on a material level it means we will never get things done in this country, on a perception level, an emotional level, it creates despondency, hopelessness, a feeling that the good things are for other people and not for us...

It also perpetuates the feeling that hard work – especially in government, is for the losers and that the way to get ahead is to dip your fingers in the till. And when you have access turn up with a spade not a tea spoon.

A senior official lamented recently that the younger generations are in too much of a hurry.

They see more established people driving European luxury vehicles and they want to have them by their second pay check. They have developed a taste for fine wines and spirits before drinking the baser alcohols, an important rite of passage in days gone by. They want to party abroad in the celebrity haunts they have seen on TV, before they have toured our country.

It probably explains why we think that for Musisi seven years at the top of the capital city is enough, never mind that she was working to reverse decades of rot.

It is clear that though we speak passable English, wear cheap suits and fly every so often to far off countries, we still come from a third world country, not only in our physical environment, but in the way we do things and in our mindsets.

The city’s comical mayor Erias Lukwago broke into song on the news, as if to accentuate this point.

But one can see the logic.

The islands of competence make the rest of us look bad and therefore we need to cut them down to size, so that we can all continue to wallow in mediocrity or worse. These islands of competence raise the expectations of all of us, in the public and private sectors.

Musisi never saw a camera she did not like and in the heat of the moment she did not suffer fools gladly, but one cannot help feeling that her major shortfall is that she thought she would be allowed to get the job done.

A sad commentary on us rather than on the good lady from Mukono.

WE ARE CORRUPT BECAUSE WE DON’T PAY TAXES

In recent weeks, those who have been agitating against new taxes, have argued that the government does not deserve their money because it is corrupt to the bone and it will not be unlike throwing good money after bad.

Last week parliament amended the excise duty act which retained mobile money duty but reduced its rate to 0.5 percent and maintained it only on withdrawals. They also retained the tax on social media services, which had attracted a disproportionate amount of noise, given the relatively few users compared to mobile money services.

When the two taxes were initiated, government projected that about sh400b would be collected. 

The downward revision in the mobile money rates will reduce that significantly.

In July after one month of implementation URA announced they had collected sh27b for both.

The opposers of the new taxes point to poor government service delivery, wasteful spending on questionable projects and the lavish lifestyles of poorly paid technocrats as evidence that their hard earned taxes are going to waste.

"First of all as was reported there are only about million out of 11 million workers paying income tax, hence our low revenue collections to GDP of about 14 percent. The sub-Saharan average is a lowly 18 percent...

In sub-Sahara Africa the highest revenue collector is Lesotho with 42 percent of GDP.

Clearly there are too many people not carrying their weight, yet they earn incomes.

And the opposers may have got it backwards. In order to see an improvement of services and a lowering of corruption we need more people to pay taxes not less.

First off, because we pay so little tax in relation to the total economic activity inside our borders government this year will spend sh800,000 per Ugandan, that's the national budget per Ugandan. Of this sh400,00 comes from our taxes and the rest from loans and grants.

The amount government commits to spending is pitifully small compared to the countries we dream of living in, like Finland where government spends the equivalent of sh40m per citizen or Norway sh107m or even South Africa where it splurges sh77m per person.

And when you break down our budget even further, government has earmarked only sh57,000 per person for health, of this only sh20,000 per Ugandan will actually be spent on health worker wages and medicines. 

Clearly we expect too much from our budget. And this is before we factor in corruption.

It is obvious government is working with too little money, trying to spread it all around and doing little effectively.

"Interestingly if you did a cursory comparison of countries’ revenue collections to GDP and
Transparency International’s corruption index, the argument can be made that the countries which pay the least taxes in relation to their GDP are also among the most corrupt in the world...

And the opposite seems to be true, the countries with the highest revenue levels are the least corrupt.

So on the downside of this possible correlation are the backwaters of the world like Chad, Nigeria, Democratic Republic of Congo and yours truly, Uganda, while on the other side of the pendulum you have Denmark, New Zealand, Finland, Sweden and Switzerland.

It makes sense. If you are a country that to deliver services has to rely on its people for revenue, rather than rely on donor monies or huge commodity exports, maximisation of collected revenues to ensure service delivery will be critical.

If you collect people’s taxes and don’t deliver, your political longevity will be that much shorter. To collect more revenues you not only have to tax people adequately but you also have to make sure more and more people, ideally everybody is paying their dues.

But if you are a country like our own, where only one out of 11 million workers are paying taxes, the political noise that the payers may muster can easily be drowned out by the indifference of the non-payers.

Hence you have a situation where MPS, paid through the treasury, decampaign an initiative to broaden the tax base.

It is true, those few who pay taxes are up to their eyelashes in tax. What is needed is for more and more people to carry the burden.

"Taxes is a political time bomb wherever you go. No one wants to pay taxes even in Finland or Sweden. The difference is that in those countries they have the mechanism and political will to enforce tax laws, compliance is not voluntary...

This is not to say there is no corruption in those countries, but because everyone has an interest in getting more value for their money in taxes, this tempers public officials’ greed. Their officials are not necessarily more morally upright than our goons, it’s just that they know that wages of sin are as good as death.