Uganda: gifted but not competitive
By James Abola
The person or people who came up with the slogan "Uganda, gifted by nature" could not have come up with a better phrase. How else could you describe a country that has oil deposits, is home to a variety of animals and plants - some so rare that they can only be viewed from Uganda? Then there natural gifts like Uganda being the source of the River Nile, the wonderful climate that spans most of the country, the fertile soils and many other attributes.
The renowned author and speaker, Brian Tracy says that humans are by nature lazy, greedy, ambitious, selfish, ignorant and vain. It is testament to human nature that despite the incredible gifts that nature has bestowed upon the country, many Ugandans continue in an existence of deprivation characterised by illiteracy, hunger, sickness and insecurity.
Abundance of natural resources or sound macroeconomic policies and stable political and legal institutions are not sufficient for a nation to become prosperous. A nation's prosperity depends on its competitiveness, which is based on the productivity with which it produces goods and services. Competitiveness is rooted in a nation's micro economic fundamentals-the sophistication of company operations and strategies and the quality of the micro economic business environment in which companies compete.
Take the case of electricity power supply. Before the country had one monopoly; the Uganda Electricity Board that was responsible for power generation, distribution and billing. The people in authority had the wisdom of breaking UEB into three different monopolies handling the different roles of generation, distribution and billing. The result is that Uganda now produces less power which is poorly distributed and attracts a very high tariff.
Because electricity supply has become erratic and expensive, many cottage industries have been forced to either close down or move to other countries. Those that have opted to stay within the country have to live with the reality of diminished production at a high cost.
Internet access is an area where Ugandan consumers are literally being robbed. Two or so years ago, some prospective investor from the USA asked me to advice him on effective but affordable Internet connectivity. Given the requirements, the best price I could come up with would set them back by $2,000 per month. The man did his own research which basically confirmed that a service that he was paying $50 per month for in the USA would cost 40 times more in Uganda.
The other area that ought to make our blood boil is the level of filth; I mean physical filth in the society. One day I observed a man and a woman eating yoghurt in a taxi. When the man was done he casually tossed the empty polythene sachet into the street. Minutes later the woman also tossed her cup through the window of the now moving taxi. Ben Kiwanuka Street in Kampala, which is near the biggest taxi park in Uganda, is half buried under a pile of rubbish.
The filth I witnessed on that city road or the yoghurt containers that were tossed out of the taxi are the work of adults with no sense of right behaviour and who are being "silently" watched by other adults. Instead of hiring people to clean the city, it would be more cost effective if the city council and other municipal councils passed and implemented by-laws that forced people like the two taxi passengers to work for a half day clearing the garbage that their ilk so thoughtlessly continue to throw around. We can not successfully promote Uganda as a destination for tourists or business meetings when the major roads in the capital city are buried in garbage.
The other area of concern is the manner in which our school system is teaching early learners. Instead of equipping learners to know how and where to find answers our school system is drilling children to cram the right answers.
Many of our current graduates already cannot command management positions; take any 10 leading businesses in the country and you will be shocked to learn that the number of Ugandans in top management is about two out of 10 or even less! If we continue with the present rote learning system in education then in 20 years time Ugandans will not even hold operational jobs.
As a man known to me likes to say, "Let us stop committing silence." It is about time citizens began breaking the culture of silence and started to speak openly and positively about the micro economic conditions that are hampering Uganda from becoming competitive.
The person or people who came up with the slogan "Uganda, gifted by nature" could not have come up with a better phrase. How else could you describe a country that has oil deposits, is home to a variety of animals and plants - some so rare that they can only be viewed from Uganda? Then there natural gifts like Uganda being the source of the River Nile, the wonderful climate that spans most of the country, the fertile soils and many other attributes.
The renowned author and speaker, Brian Tracy says that humans are by nature lazy, greedy, ambitious, selfish, ignorant and vain. It is testament to human nature that despite the incredible gifts that nature has bestowed upon the country, many Ugandans continue in an existence of deprivation characterised by illiteracy, hunger, sickness and insecurity.
Abundance of natural resources or sound macroeconomic policies and stable political and legal institutions are not sufficient for a nation to become prosperous. A nation's prosperity depends on its competitiveness, which is based on the productivity with which it produces goods and services. Competitiveness is rooted in a nation's micro economic fundamentals-the sophistication of company operations and strategies and the quality of the micro economic business environment in which companies compete.
Take the case of electricity power supply. Before the country had one monopoly; the Uganda Electricity Board that was responsible for power generation, distribution and billing. The people in authority had the wisdom of breaking UEB into three different monopolies handling the different roles of generation, distribution and billing. The result is that Uganda now produces less power which is poorly distributed and attracts a very high tariff.
Because electricity supply has become erratic and expensive, many cottage industries have been forced to either close down or move to other countries. Those that have opted to stay within the country have to live with the reality of diminished production at a high cost.
Internet access is an area where Ugandan consumers are literally being robbed. Two or so years ago, some prospective investor from the USA asked me to advice him on effective but affordable Internet connectivity. Given the requirements, the best price I could come up with would set them back by $2,000 per month. The man did his own research which basically confirmed that a service that he was paying $50 per month for in the USA would cost 40 times more in Uganda.
The other area that ought to make our blood boil is the level of filth; I mean physical filth in the society. One day I observed a man and a woman eating yoghurt in a taxi. When the man was done he casually tossed the empty polythene sachet into the street. Minutes later the woman also tossed her cup through the window of the now moving taxi. Ben Kiwanuka Street in Kampala, which is near the biggest taxi park in Uganda, is half buried under a pile of rubbish.
The filth I witnessed on that city road or the yoghurt containers that were tossed out of the taxi are the work of adults with no sense of right behaviour and who are being "silently" watched by other adults. Instead of hiring people to clean the city, it would be more cost effective if the city council and other municipal councils passed and implemented by-laws that forced people like the two taxi passengers to work for a half day clearing the garbage that their ilk so thoughtlessly continue to throw around. We can not successfully promote Uganda as a destination for tourists or business meetings when the major roads in the capital city are buried in garbage.
The other area of concern is the manner in which our school system is teaching early learners. Instead of equipping learners to know how and where to find answers our school system is drilling children to cram the right answers.
Many of our current graduates already cannot command management positions; take any 10 leading businesses in the country and you will be shocked to learn that the number of Ugandans in top management is about two out of 10 or even less! If we continue with the present rote learning system in education then in 20 years time Ugandans will not even hold operational jobs.
As a man known to me likes to say, "Let us stop committing silence." It is about time citizens began breaking the culture of silence and started to speak openly and positively about the micro economic conditions that are hampering Uganda from becoming competitive.
All the economic crimes of this nation have led to what you have written as an economist. Environmentally, economically and socially we have ceased to become an economy of any sort by the virtue if our poor leadership skills.
ReplyDeleteToday all our management styles are too poor to engage our minds to another level. It could be true that we the graduates have failed to measure up in management levels, but have we been given the opportunity? What is the retirement age in Uganda & how many have honoured that?
How productive have the so called profs in ministries been? What about the MPs?
Hi James
ReplyDeleteVery happy about your articles which are full of business sense and yet put in simple plain English.
I would like to invite you to the Management Express online community.
Please visit and register at www.managementexpress.org.
The Uganda section.
Patrick Mutumba
Moderator Online Community / IT Network Manager
British Council
Plot 2 and 4a Nakasero Road
Rwenzori Courts
P O Box 7070, Kampala, Uganda
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Email: patrick.mutumba@britishcouncil.or.ug
Thank you, somebody finally said it!
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www.taekwondosupplies.com and www.blackbeltshop.com.
There seem to be views by some quarters (including Karoli Semogerere, Daily Monitor Columnist) to the effect that the capital absorption capacity in Uganda is low. I believe they got issues mixed up!
ReplyDeleteOne take away from the recent ASEA conference is that we need to generate new financial instruments to mobilize domestic finance better. There was strong emphasis on the catalytic role of alternative investment segments to cater for smaller companies or entities with little or no financial history. Also there was emphasis on the role of SMEs in economic transformation. The drift was that new businesses are largely more successful if they depend on equity financing rather than debt. Debt is seen to be more stringent and of course less rewarding to the investor incase the business is successful. This logically led to the importance of Venture Capital and Angel investors in Africa’s emerging economies.
But back to how long term finance can change our Economy, one realizes that poor road network leads to delivery constraints regarding agricultural outputs. During this year’s budget speech the Finance Minister Dr Suruma stated that previous efforts at road maintenance and building of new roads have been hampered by lack of finance at the proper time. He attributed this to the high dependency on donor funding for road construction and the fact that donor priorities may not be fully aligned with Government priorities, leading to time lags and subsequently inefficiencies. Government’s response is to take on the infrastructure bull by the horns and ensure that Uganda has more control over its road network development and maintenance. The Uganda National Roads Authority has been established for this purpose. In this case we need about Ushs 1.5 Trillion in year one alone.
The other issue regards power shortages and the resulting high cost of production. Uganda is naturally endowed with high potential hydro electricity generation capacity. Interestingly as we talk about agricultural modernization, one critical step is agricultural mechanization and agro processing industries. These require cheap and widely distributed electric energy and water. But only 5% of Ugandans Access electric energy! In such a case can one say there is no demand for electricity? I don’t think so. IMF in a 22nd May 2008 survey found that in 2007 alone, nearly two-thirds of the countries in sub-Saharan Africa experienced an acute energy crisis with frequent and extended electricity outages. We need long term financing to build hydro dams. This is more demand for long term capital. Government has expressed intention to take the lead as explained by the Finance Minister in his budget speech. We could be talking about Ushs 500 Billion for a start.
Consider also that UMEME, the power distribution utility company is losing about 30% of its energy to power thefts. The problem was diagnosed along time ago and the solution has been prescribed as installation of prepaid meters, just like it is done in neighboring Rwanda. According to press reports, the problem was lack of funding – long term funding. If UMEME could access funding they would install prepaid meters and put an end to the power thefts. Is it really not available in Uganda?
The housing shortage in Uganda has been put at 522,000 units by some estimates. This is due to lack of adequate long term financing to execute the relevant mortgages. Most of the deposits of the commercial Banks in Uganda are short term nature, making it inappropriate for them to lend long term. If one puts an average price of a housing unit at 50 Million shillings, we need at least 28 trillion in long term financing just for the backlog! The aggregate total loans and advances in Uganda is at about 2.5 Trillion, or 10% of our GDP of 24.8 Trillion. %. This includes all loans , not just housing loans. The Ugandan Banks probably attribute this to lack of stable long term deposits. Pension fund assets could provide this stable long term funding that will finance the growth of the mortgage sector. By comparison the Credit /GDP ratio in several countries has been estimated by the world development indicators database(2005 data) as follows: Iceland – 255%, USA-194%, UK – 165%, China - 114%, Kenya -26%, South Africa 143%, Ghana 16%, and Nigeria 15%. Most of the developed world has credit to the private sector at ratios above 100% of GDP.
I see a scenario where entities like those mentioned above raise long term finance n Uganda’s Capital Markets. A high loan/GDP ratio implies expansionary stance. There would also be competition, likely to bring interest rates lower. New business would be established, creating employment, generating taxable revenue and expanding Uganda’s formal sector. So, we would do better to recognize that we need more capital than what is currently available in the pension assets. The argument that the economy lacks capacity to absorb long term capital is absolutely flawed.
Patrick C Mutimba.
mutimbap@yahoo.com
+256772523681