OF ENTEBBE AIRPORT, THE EU AND CHINA

Last week two news events far apart but very related caught my eye.

At home, there was an uproar about reports that China had taken over Entebbe International Airport, because we had defaulted on loans to expand the facility.

The story, which went global faster than it takes to say Shokolobangoshe, was dismissed by government who argued that the grace period on the facility only comes due next year and so it was technically impossible to default on a loan you haven’t started paying for.

My attitude to the whole hoolahbalooh is we needed money to expand the airport, which we did not have, we went out begging to the usual suspects and they turned us away, China offered and set their terms, otherwise we would not have got the money. That being said we are obliged to repay the loan – if only because it is good manners, rather than resort to cosmetic nationalism to get out of our obligations. But that is just me...

Later in the week the European Union announced a €300b (sh1,242trillion) plan to invest up to 2027, in the development of infrastructure abroad. All the commentators said that this was in response to China’s Belt and Road Initiative (BRI), a plan of more than 13,000 infrastructure projects across 165 countries to connect china to the rest of the world.

China’s intent announced in 2013 was clear, to gain access to the natural resources it so badly needs to fuel its own growth, gain some international influence as well and improve our connectedness.

So the analysts saying the EU are playing catch up suggest EU is seeing its influence, drawn from the colonial times, is fading or being eaten away by China looking to bankroll infrastructure in Africa, Asia, Latin America and Eastern Europe.

It’s an interesting twist of fate.

When Europe was colonizing everything that moved in the last century, extracting the resources that now underwrite their wealth, China was in isolation, its stature as the leading global power that it enjoyed in the middle ages long forgotten.

Colonial Europe built a lot of infrastructure around Africa, we have them to thank for the Uganda railways for instance, which infrastructure run unashamedly from high resource centers to the coast and on to the factories of Europe or the plantations of the West Indies and the US....

When they were building this infrastructure there were no conditions of democracy or human rights to set this up, these colonies after all were appendages of their home countries and democracy and human rights were only for them at home. The same standard was not upheld for the inhabitants of the  colonies.

China has serious considerations at home. It needs to grow its economy to improve the living conditions of its billion-plus people, to put off till the future this urgent would have serious repercussions to national stability there.

The infrastructure they are helping lay down across the world is not free, and the western media have warned against recipient countries falling into debt traps and have gleefully highlighted instances where the China’s lenders have had to come in to exact their pound of flesh.

Hence the disproportionate play on the half story about Entebbe airport received around the world last week.

China are not doing what they are doing for charity but out of self-interest, which often dovetails with our own interests. The massive infrastructure outlays we require to lift our people out of poverty is only denied by people who may not want the best for us.

Development history shows you cannot develop without transport an energy infrastructure of course this has to be underpinned by an educated and healthy population.

Many years ago I will never forget, then finance minister Saida Bbumba running around to get commitments from regional leaders, that they would take any excess power that Uganda would fail to consume from the 250 MW Bujagali Dam. This was a condition for the funding required to build the dam.

At the time we were suffering day long loadshedding, the Nalubale dam was creaking under the weight of our growing demand and yet we were barely 200,000 clients or less than one in 20 homes connected to the grid.

Somehow they thought we did not need more power and the Bujagali dam would only be viable if Kenya, Tanzania and Rwanda would promise to take the excess power! You had to wonder why someone would think that Ugandans do not need power. That there was no effective demand. Umeme’s financials over the last 16 years would beg to differ.

"Concerns about the opacity of some the Chinese dealings cannot be dismissed and given our public officials corrupt tendencies, it is right to scrutinize all and every deal we get into with China. But we should be careful not to throw out the baby with the bathwater...

And before I forget China is going to spend at least four times or €1.2trillion in their own BRI up to 2027.

 

THE CHALLENGE OF HOUSING THE UGANDA MASSES

Last week the Vision Group hosted its first Homes & Construction Expo.

The event that was carried out mostly virtually, explored the process of getting a home from buying the land to financing the build to construction and eventual  finishing.

The event a spinoff of the Saturday Vision's section of the same name, addresses a key aspect of our economy.

Interestingly, during the same week parliament was considering the landlord and tenancy bill, which among other things aims to curb the power of the landlord over the tenants on his property. The initial bill seeks to restrict  how much the landlord can demand as advance payment, prevent them from charging in hard currency and  arbitrarily evicting their tenants among other things.

The situation of housing remains inadequate, according to official figures there is a deficit of more than two million quality houses in the country.

This is a mind boggling number when you consider that,

the stock of housing has grown exponentially over the last 30 years to extend Kamapala beyond Ntinda, Wandegeya, Lubaga, Najjanakumbi, Muyenga and Nakawa...

One of the biggest drivers of the economy during the period has been the construction  boom. Construction currently accounts for 12 percent of GDP and the sector a doubling in size every decade.

This has not happened by mistake. In the early days of the NRM the argument was made to impose rent controls, as the few landlords were charging exorbitantly for even the most basic of hovels.

The government resisted these calls and for good reason.

By letting landlords charge what they wish it made the sector attractive for investment, first of all by the tenants who were suffering under the weight of the high rents and secondly by the real estate investors  who came in to the market to fill the gap.

As a result housing supply has risen to meet demand or at least tried. This too has resulted in greater choice with housing, for every economic segment now catered for.

Were government to have capitulated to the populists then the situation would have been so much worse.

"The populists have reared their heads again to try and restrain the landlords, in the process jeopardizing the viability of the sector and guaranteeing that bridging the housing deficit will be so much harder...

But why don’t we have huge housing developments like neighbours Kenya, who have doe a better job of keeping up with the rapid urbanisation?

It starts from our tenure system, which is convoluted at best and confused at worst. It raises the prices of the few pieces of land whose status is verifiable. No one is going to commit billions of shillings needed to develop the housing estates when they are not sure whether they own the land or not. Or if putting the necessary land together will throw the cost of land out of reason.

Secondly, we don’t have locally the large pools of long term capital required to finance these estates.

Lately, National Social Security Fund(NSSF) have embarked upon the development of their land in Lubowa and Temangalo, which will bring more than 5000 housing units to the market within the next ten years. The nearly sh15trillion fund has the long term money to do that, beyond them there is nobody.

In addition to the lack of long term money the cost of money is too prohibitive. Mortgage rates in the double digits do not have potential home owners running to the bank.

Many of our developers take out dollar loans, where they can enjoy sub 10 percent interest rates but then pass on the exchange risk to the potential buyers or tenants.

And finally government gives little to no incentive to developers meeting a key need. In the past developers have suggested that government underwrite the cost of infrastructure, a major cost, as a way to lower housing prices. Nothing has happened.

In other countries which recognise the importance of housing, governments has provided highly confessional funding for large scale developers. In some countries if you are a developer and the government provides financing and you fail to pay, as long as you have provided the housing as intended they can write off the money. Interestingly serious players rarely if ever take this exit route because it would jeopardize their access to the same facility in future.

"The government did a good thing to let market forces help it bridge the housing deficit, it’s own efforts through the troubled national housing corporation have not caused a dent in the situation.

That being said they time was yesterday when they should have jumped in determinedly to  facilitate the sector better...

 

pbusharizi@newvision.co.ug

Twitter @pbusharizi

 

 

NSSF MID TERM PASSED BUT NOT IN TIME FOR CHRISTMAS

This week two momentous announcements were reported.

This New Vision quoting informed sources reported that a January 3, 2022 opening for schools is being considered at the education ministry.

Hot on the heels of this was parliament passing of the new law governing the National Social Security Fund (NSSF). The new law’s major amendment, or at least the one that has captured the most attention is the allowing members mid-term access to their savings.

According to the new law, savers will be able to withdraw up to 20 percent of their savings when they attain the age of 45 and have saved for at least 10 years.

The bill still has to be assented to by the president and the finance minister will agree with the NSSF board how this new amendment will be executed. The commitment by government is that they will start paying out after two months from the passing of the bill.

Simple arithmetic suggests the money will not be available for Christmas merry making or paying school fees in January.

But therein lies the challenge. 

The supporters of the amendment argue that they should be given access to their savings to set up some investments before they grow too old – 55, to set them up and run them. That is the reason we told everybody and ourselves to justify the raid on our savings.

The truth, which will soon become apparent, is that we really want the money to consume. We are not unlike the man who has been on a long journey and just wants to lay his luggage down, rest and look back on far we have come even when they are just steps from completing the journey.

"We will buy cars, start or finish the construction of our home, take a holiday to places far and wide and god forbid, go and work up a tab at the bar to validate our place in society...

For the vast majority of us, our NSSF savings are the biggest asset on our balance sheets. It is so because government dragged you kicking and screaming to save, were it not for that, we would not have two shillings of our own to rub together.

The management of NSSF’s argument that this move, which could cost about a trillion shillings would hinder their ability to continue paying out double digit interest rates into the future. Not in those exact words but the sh1.8trillion pay out this year, which includes money to those who due their payment at retirement, means either they have to liquidate some of their investments and hence forgo those profits or borrow the money, lowering their profitability and hence the interest they can afford to pay.

NSSF has grown into the biggest fund of its kind in the region, a lot of this is due to better compliance from employers but also because they have been allowed to retain most of their profits, which they reinvested. Under the new scenario NSSF will have less to play with and it can be argued then, that Richard Byarugaba and his troops will have to really earn their keep now, because crazy as it sounds while hobbling NSSF we will still expect the stellar returns of the last few years.

For the rest of us, if we do invest, I can guarantee we will not find investments that net us more than 10 percent a year and hence we would have been better off leaving our money in NSSF. But of course we will take comfort from the fact that we have our money close to ourselves – even if its dwindling to nothingness, rather than have it managed by a faceless institution.

Think about it, if mid-term access never came up and NSSF managed ten percent interest for the next ten years, the money you have now in your account will have more than doubled – would have grown 2.594 times to be more precise. So if you have a sh100m in your account today and never added a cent of your or employer’s money in the ten years, when you are retiring at 55 you will have sh259m to take home.

But we argue that what if something happens to NSSF in that time and we lose all our money?

Well I remember someone who collected his sh100m in 2006. While NSSF has not managed double digit interest since then, let us assume they averaged eight percent during the period, my friend would be looking at more than sh300m in his account now, assuming he never contributed a cent since.

"Obviously it’s a case of better a bird in the hand than two in the bush....

Give us our money we eat it and the future shall take care of itself.

 

OUR SECURITY IS TOO IMPORTANT TO BE LEFT TO THE POLICE

On the night of July 11, 2010 two bombs were set off at Kyadondo Rugby grounds and the Ethiopian Village in Kabalagala, leading to the death of 76 and injuring dozens more, in the worst terror attack in Kampala.

Six years later, then high court Judge Owiny Dollo convicted 13 people for the attacks. During the trial a conspiracy that stretched from Ahghanistan to Somalia, that roped in Kenyan and Tanzanian accomplices was uncovered.

Three bombs were meant to go off that night, but one in Makindye malfunctioned and was discovered in an abandoned bag by staff the next day. The two that went off were detonated by suspected Somali suicide bombers.

That was the last we heard about suicide bombers in Uganda, until three weeks ago when one Matovu Muzafari blew himself up and killed one other passenger, travelling in bus heading west on the Kampala-Masaka road.

"At the risk of understating the obvious, signing up to be a suicide bomber is not for the faint hearted...

. From what is known suicide bombers are often young, and their trainers have exploited some past injustice against them or their families to brainwash them into giving up their lives for a cause. So the Muzarafi incident threw up some interesting questions. Had we started breeding our own suicide bombers?

The Tuesday attacks seemed to confirm that. Seen on CCTV camera one bomber, with a backpack was seen walking past the entrance to the Central Police Station (CPS) before he is engulfed in a orange ball of flame and smoke. The second bomber was seen riding up parliament avenue towards parliament before he and his boda rider exploded.

"By definition, no one knows how a suicide bomber behaves before he presses the button. But security minster Major General Jim Muhwezi suggested the bombers may have been unknowing accomplices to the crime. Using the CPS bomber as an example Muhwezi said he was on the phone when the blast went off, his body language suggesting he was still moving on to another destination. 

In the earlier case on the bus it was reported that Muzarafi’s accomplice Nsubuga Muhammad, alighted from the bus minutes before the bomb blast. In hindsight Muzarafi may have been oblivious to his eventual mission and that Nsubuga may have detonated his bomb remotely. We will not know for sure as Nsubuga was killed soon after by security agents.

Given our experience, where suicide bombers have been the most lethal, it should bring some relief that we may not have suicide bomber cells in Uganda.

That being said, if we needed any confirmation that security issues cannot be left to the security agents, this week was it.

The attackers live among us and they can attack at any time of the day or night. It may be added that previous bob attacks were during the night but possibly because the curfew restrictions the bombers have decided there are not enough targets at night.

Now not only should be on the lookout for luggage left unattended but also for unusual behavior from our neighbours and desist from helping carrying unknown luggage around.

The village councils need to be reactivated. They need know who all the residents in their areas are, where there have come from and other relevant details.

"The point is personal vigilance is more important than ever. The war is being brought to our doorsteps...

The police are pointing at the Allied Democratic Forces (ADF) and this too is interesting. In the 1999 spate of bombings in Kampala the story was that the ADF, under pressure in their bases in the Rwenzori mountains were hoping to divert security attention from operations in western Uganda.

These attacks may suggest the ADF are suffering unwanted pressure in the eastern Democratic Republic of Congo (DRC) bases and these attacks it is hoped can ease their pain.

Stay safe!

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.