Title: Uganda, The Dynamics of Neoliberal Transformation
Editors: Jörg Wiegratz, Giuliano Martiniello and Elisa Greco
Pub.r: Zed Books, 2018
Reviewer: Mary Serumaga, January 2019
Any political debate about Uganda tends to become polarised very quickly. Champions of the prevailing economic orthodoxy speak of the past 30 years as an almost unqualified development success. Critics of the establishment point to the absence of tangible benefits for a broad range of the population. These positions came into sharp focus in 2018 when the People Power movement gained momentum following the international outcry triggered by the abduction and torture of its de facto leader, R. Kyagulanyi, MP.
It is possible to argue either position depending on where one sits on a sliding timeline between 1986 and the present. After four coups d’état in the 24 years following independence – a time when, as was often pointed out to me by an NRM diehard, ‘Even Kampala Road was murram!’ – the economic developments after the NRM takeover in 1986 look like miracles: the introduction and spread of mobile telephony and the internet, construction and tarmacking of major highways, the availability of foreign currency, freedom to travel abroad, etc. It is this contrast, with its racist undertones – what more does a Third World country expect? – on which the ‘Uganda as a success story’ argument is built. It is the line adopted by champions of neoliberal policies, the IMF (“This is an African success story”, Lagarde in 2017), the ruling junta and the bilateral partners and foreign investors who benefit from the liberalization of key sectors of the economy and dismantling of the public service. They are positioned in or close to 1986.
After four coups d’état in the 24 years following independence the economic developments after the NRM takeover in 1986 look like miracles.
Those outside that elite circle, referred to by the authors of this timely collection of essays on the neoliberal project in Uganda, as ‘the wretched of the earth’, are located in the present day. Economically and spatially removed from elite society, what they witness and experience 33 years after the NRM took power is described thus: “High levels of suicide (especially among the youth), poverty-driven deaths, preventable illnesses and generalised destitution.” There is more: 80% youth unemployment, collapse of the education system, ever-recurring stock outs of essential drugs, high maternal and neo-natal death rates, land-grabbing by the rich, embezzlement of public funds, fraudulent grabbing of commercial banks by the Central Bank for sale to the competition or elimination from the market.
In 2018, President Museveni and his Foreign Minister, Sam Kutesa, were cited in a New York criminal court for receiving bribes in exchange of access to public assets. These things are all connected, and held in place by state brutality.
Those outside that elite circle…’the wretched of the earth’, are located in the present day. Economically and spatially removed from elite society, what they witness and experience 33 years after the NRM took power…is “high levels of suicide (especially among the youth), poverty-driven deaths, preventable illnesses and generalised destitution.”
For ‘the wretched of the earth’, this is the story of ‘Uganda in crisis’.
While affirming the physical, political and economic transformation of Uganda since 1986, the authors interrogate both the drivers of the changes (the regime or its foreign financiers?) and identify the beneficiaries.
First the changes. Taking Nystrand and Tamm’s definition of neoliberal interventions, they can be summed up as: “downsizing of the public sector, including retrenchment of staff; privatisation of social services and social protections; and decentralisation or devolution of state power.”
The main premise of the collection is that in addition to the sliding timeline, the discourse is skewed by the lack of scholarly attention to the ongoing processes of transformation. One important dynamic remarked on is that much of the existing social science analyses has been carried out by donor-funded academics and consultants who have in turn produced studies that have tended to support the ‘Uganda as a success story’ point of view. Their collective check-list has included progress in: governance, poverty reduction and political power dynamics including political settlements, political emergencies, party and electoral politics, patronage politics, conflict management, humanitarian assistance, or peace-making. Testing this proposition, it is clear to see how apologists for the military junta that rules Uganda can be portrayed as developmental. For example, poverty as measured by the neoliberals (dubbed by the authors as ‘official poverty’) fell sharply in the first decade reaching a low of 19% from a high of over 50%. (It has risen two percentage points to over 21% in recent years.)
In 2018, President Museveni and his Foreign Minister, Sam Kutesa, were cited in a New York criminal court for receiving bribes in exchange of access to public assets. These things are all connected, and held in place by state brutality.
However the recent sharp rise in undernourishment of 13% between 2006 and 2015 went largely unremarked. Similarly, wealth inequalities created by the restructuring were overlooked in the celebrations. As with the health sector, analyses of governance have been managed by gatekeepers and reported in Bank-speak. For example, small shifts in Uganda’s Transparency International rankings based on the perceptions of foreign investors have been reported as progress, regardless of the facts presented by Uganda’s own Auditor General, Ombudsman, local media and the public. (Note: Transparency International was discredited by its 2018 award to President Museveni for his ‘fight’ against corruption in the same year that he was named as a recipient of a bribe from the now convicted Patrick Ho.)
Much of the existing social science analyses has been carried out by donor-funded academics and consultants who have in turn produced studies that have tended to support the ‘Uganda as a success story’ point of view.
This narrow approach excludes areas of research that would address the issues raised by the increasingly vocal and genuinely suffering majority:
“The first gap is the impact of global capitalism and global political economy on Uganda. This requires a study of the dynamics of Western and Eastern imperialism and their political, economic and cultural dimensions. The second under-researched area concerns the processes of societal transformation, including class formation, consolidation, struggle and compromise (and related core aspects such as dispossession, exploitation etc.), and the ways in which they shape, for instance, political power and market structures. A third overlooked area is the interaction of local and national power structures and dynamics with international political economic patterns.”
More directly put, the impact of Western and Eastern imperialism manifested in the debt-trap, privatization and the foreign direct investment for which privatization made room, and which provides free assets, has not been adequately scrutinized. Indeed, the emergence of a ruling oligarchy (beneficiaries of said privatization, and FDI), and a faux middle class (founded on patronage and corruption – not production), is treated as anecdotal evidence of something amiss rather than a serious existential issue for the majority. This book is timely in pointing out a lack of interrogation of capital accumulation by the politically connected and its impact on the rest of the population by current social science studies on Uganda.
Nor is due attention paid to the fact that 60 years after independence Uganda is still an exporter of primary commodities because that is what her ‘development partners’ require for their own development. All of this occurs alongside the ‘successes’ such as regular elections, ‘concessions’ or ‘reforms’ such as decentralization, expenditure on civil service reform (without actual civil service reform) and the universal primary education programme (which fewer than 50% of programme pupils complete) and which in turn trigger further disbursements of foreign loans and grants.
The emergence of a ruling oligarchy (beneficiaries of said privatization, and FDI), and a faux middle class (founded on patronage and corruption – not production), is treated as anecdotal evidence of something amiss rather than a serious existential issue for the majority.
The authors confirm this reviewer’s assertions elsewhere that the facts were deliberately distorted. For example, the Bank publishes impressive statistics for vaccination coverage in Uganda ranging between 82% and 93% (Source: World Bank database – Health Nutrition and Population Statistics as updated on 12/18/2017). It has stopped publishing the percentage of immunizations actually paid for by the government of the country which is nowhere near as impressive. If the percentage of coverage funded by government resources is stagnant or falling, that is not just a development issue. It is a crisis. And with changing funding priorities owing to the rise of nationalism in Europe and America, will most likely result in further reductions in health sector aid.
The authors predict a future of ‘enclave economies’: large-scale plantations – tracts of land are already being distributed free of charge to foreign investors – tax and other concessions for ‘investors’ in mining, oil and gas. These enclave economies will have minimal linkages to the rest of the economy and will aggravate poverty and accelerate environmental degradation. A proposal for a Chinese fishing project on River Katonga is a case in point. It will come with 300 Chinese staff precluding any possibilities of indigenous job creation, and adding to the current trend of imported unskilled and semi-skilled labour. Fiscal delinking occurs when foreign investors are given tax holidays.
60 years after independence Uganda is still an exporter of primary commodities because that is what her ‘development partners’ require for their own development.
In his December 2018 report, the Auditor General points out for the second time in three years that there is no clear policy regarding tax waivers for investors. In 2016 one hotel was in its fifth year of an open-ended tax holiday. In 2018:
“[…] because of lack of a proper policy, tax incentives are given to Investors without an accompanying budget. Close of financial year debts for the incentives had grown by 83% to UGX 153.6 billion up from UGX 83.8 billion in the previous year.”
Therefore, a lot of development is not accompanied by jobs and only yields limited tax revenues. Activists find that discussions of the impact of corruption on lives unsupported by relevant studies are easily and routinely derailed with one or a selection of approved Bank statistics. It is gratifying to see apologist denials of these simple facts revealed as mere political gaslighting of opposition politicians and activists. The World Bank, through its monopoly of knowledge production about its clients has developed what is called here “Bank Speak’ with which it disseminates “severely a-historical, abstract and flawed accounts” of Uganda’s political-economic history (Mitchell 2002 cited by Wiegratz et al). By becoming the gatekeeper, the Bank has succeeded in manufacturing consents to their global programme of which Uganda has been made a partner through the NRM ruling class, itself a product of the Bank.
The authors confirm this reviewer’s assertions elsewhere that the facts were deliberately distorted.
Apart from important omissions in telling the Uganda story, the veracity of Bank statistics is questioned. Note the authors say ‘veracity’ as well as ‘accuracy,’ again suggesting intent.
Their finding that the World Bank minimizes embezzlement and incompetence in the public service is in line with the misreporting of planning, implementation and outcomes of Uganda’s foundational economic and social reform programmes comprehensively documented in The Case for Repudiation of Uganda’s Public Debt (Serumaga, cadtm.org, 2017). This book makes it clear that in addition to relevant studies, there is a need for an audit to establish completeness, accuracy and timeliness of World Bank and IMF data and other information on which Uganda’s development policies are based.
The authors predict a future of ‘enclave economies’: large-scale plantations – tracts of land are already being distributed free of charge to foreign investors – tax and other concessions for ‘investors’ in mining, oil and gas…[with] minimal linkages to the rest of the economy…
Also debunked is the link between public service reform and poverty reduction claimed by earlier studies. They are inapplicable in much of Eastern and Northern Uganda where poverty has barely been dented. In these studies, deep wealth inequality; wealth concentration among politically powerful beneficiaries of reform programmes, unemployment (and under-employment), and food insecurity is found to be a characteristic of neoliberalised countries (say WB/IMF clients) the world over.
In Uganda, corruption and incompetence, major barriers to implementation of the planned transformation from a peasant to an industrialized economy has created the opportunity to transfer public service delivery functions to the military. Notably Operation Wealth Creation (OWC) which has over the past five years edged out NAADS, the government agency responsible for distribution of and sensitisation about farm inputs (Wiegratz et al). NAADS was established with a repayable US$50 million loan (and the same amount in grants). OWC is run by the President’s brother and, unsurprisingly, has featured strongly in reports of the Auditor General. In 2016 deliveries of farm inputs worth close to UGX 3 billion were unverified; UGX 1.1 billion said to be expenditure on fuel lacked supporting documents. The fisheries department of the Ministry of Agriculture is now also under military command.
The World Bank, through its monopoly of knowledge production about its clients has developed what is called here “Bank Speak’ with which it disseminates “severely a-historical, abstract and flawed accounts” of Uganda’s political-economic history.
In the meantime, accumulated wealth has driven up land speculation, making it unavailable for productive investment.
What is interesting is that the current crop of political commentators and activists, the punditocracy increasingly visible in debates around politics, governance and development happen to have been founded, financed or otherwise supported by International Financial Institutions (IFIs). Advocates Coalition for Development and Environment (ACODE), Anti-Corruption Coalition Uganda (ACCU), Uganda Debt Network (UDN), Civil Society Budget Advocacy Group (CSBAG), Private Sector Foundation Uganda (PSFU).
Apart from important omissions in telling the Uganda story, the veracity of Bank statistics is questioned…Their finding that the World Bank minimizes embezzlement and incompetence in the public service is in line with the misreporting of planning, implementation and outcomes of Uganda’s foundational economic and social reform programmes.
While the book was produced primarily as a source to enable future scholars to avoid the omissions and errors of the past, the introduction alone is invaluable for navigating the miasma of Ugandan political affairs. It goes some way in answering the rhetorical demand put to activists: what are your policy alternatives? After reading this it should become evident what needs to be done.
Part I. The State, donors and development aid
Although much is made of the purported partnership between Uganda and the WB and indeed other development partners, Lie is of the view that the concept of partnership is merely a cover for the WB’s indirect rule over Uganda through its poverty reduction strategy mechanisms. In Donor-driven State Formation: Friction in the WB–Uganda Partnership he demonstrates with evidence that partnership “‘exists when they [government] do as we [WB] want them to do, but they do so voluntarily’” (Lie citing Randel et al. 2002: 8)
The current crop of political commentators and activists, the punditocracy increasingly visible in debates around politics, governance and development happen to have been founded, financed or otherwise supported by International Financial Institutions (IFIs).
He uses the gradual displacement of Uganda government’s Poverty Eradication Action Plan by the WB’s Poverty Reduction Strategy Paper (PRSP) to demonstrate this unequal relationship. The author reveals how Bank staff evaluate the implementation in four visits made during the year, putting a gloss on unfavourable outcomes to allow further disbursements for budget support yet sending messages of disapproval by reducing the amounts released (and disrupting implementation). He calls this process ‘developmentality.’
It is a little irksome that Lie’s chosen example dates from 1999 and no attention is given to the beginning of the relationship, the Economic Recovery Programme circa 1987. It is under this umbrella that work meant to provide the administrative foundation for future work like PEAP and PRSP was done with frankly disastrous results and undermined the possibility of success of later work.
Most importantly the legal implications of ‘developmentality’ are not addressed in the essay, namely that the appearance of voluntary cooperation gives the unsustainable loan agreements some legal standing in the event of attempted repudiation in the future. Lie’s conclusion after he has so ably demonstrated indirect rule by the WB, is that the WB is not hegemonic and that the government has not fallen prey to the donor community is perverse.
Readers of this collection will find a vocabulary with which to capture Uganda’s situation and to relate it to countries facing the same predicament – particularly useful are concepts such as ‘procedural democracy” as opposed substantial democracy. Rubongoya in his essay ‘Movement Legacy’ and neoliberalism as political settlement in Uganda’s political economy describes a transaction between the junta and foreign implementers of neoliberalism. In return for a free hand in forming and introducing policies favourable to their own constituencies, foreign actors provide the NRM the means to consolidate and prolong its grip on the State.
A related transaction took place in Acholi. There, even though the armed conflict continued for two decades after 1986, there was an agreement to treat it as a post-conflict zone. In Our Friends at the Bank? The Adverse Effects of Neoliberalism in Acholi Atkinson reveals that development partners turned a blind eye as increasing amounts of aid intended for development of the ‘post-conflict’ zone were channeled to the armed coercion of the Acholi.
Readers of this collection will find a vocabulary with which to capture Uganda’s situation and to relate it to countries facing the same predicament – particularly useful are concepts such as ‘procedural democracy” as opposed substantial democracy.
Without the more recent experience of the Arua Atrocities in 2018 and the internet connectivity that allowed the news to spread across the country it would be difficult to believe that foreign actors could be so cynical. Yet in August 2018, the donor community that had armed the junta sat silent as elected leaders were abducted and tortured. These essays serve to open eyes and minds to the magnitude of what is at stake for them and why in fact their cynicism is to be expected.
African dependency is a myth created to gain access to resources without which Western populations would have to live within their means and in relative austerity. The myth allows austerity and poverty to be permanently transferred to Uganda and other African countries via neoliberal policies. This reviewer has argued elsewhere that this manufactured poverty is mitigated by emergency aid, post-conflict aid, humanitarian aid and non-specific aid from Western tax-payers. The fears surrounding Brexit and the stocking up of emergency drugs and foodstuffs are a further indication that they enjoy a standard of living subsidized for example by Ugandan farmers, that would be otherwise impossible to maintain.
African dependency is a myth created to gain access to resources without which Western populations would have to live within their means and in relative austerity.
But they are secondary beneficiaries. The primary beneficiaries of neoliberalism are a class unto themselves: the Davos elite which includes individuals in autocratic regimes like the NRM, IFIs and foreign investors all of who became fabulously wealthy and influential via the proceeds from this system. Like their counterparts in other African IMF outposts, billionaires Museveni, Sam Kutesa, Muhwezi were all penniless in their pre-regime lives.
Part II: Economic restructuring and social services
As with many of the findings of these studies, the basic facts will not be new to Ugandans, for instance the rise in poverty alongside increasingly visible trappings of extreme wealth of the oligarchs. In The Impact of neo-liberal reforms on Uganda’s Socio-economic Landscape Asiimwe throws light on the mystery of how development by-passed some and benefited others.:
“Asiimwe’s chapter shows that the economic growth miracle was to a significant extent based on the effect of large sums of aid, which sometimes constituted half of the national budget, creating public-expenditure-driven growth. The reforms induced stagnation, decline or minimal growth in key productive sectors, such as agriculture and industry. Small-scale producers and workers –mostly youth and women – were systematically marginalised by the policy reforms. Asiimwe argues that Uganda’s growth is not based on a structural transformation of the economy, but rather on a deepening of primitive accumulation occurring through corruption – which is the use of extra-economic force to access and control resources – aid dependence, widespread economic trickery and the dumping of low quality foreign products that crowd out local products. Asiimwe observes that donors’ policy preferences systematically produced anti-poor and anti-development effects, as the commodification of health and education left the majority of the population with sub-par access, or denied access altogether.” (Wiegratz et al).
The primary beneficiaries of neoliberalism are a class unto themselves: the Davos elite which includes individuals in autocratic regimes like the NRM, IFIs and foreign investors all of who became fabulously wealthy and influential via the proceeds from this system. Like their counterparts in other African IMF outposts, billionaires Museveni, Sam Kutesa, Muhwezi were all penniless in their pre-regime lives.
The impact of neoliberal reforms on social services has been equally damaging. In Social service provision and social security in Uganda: entrenched inequality under a neoliberal regime Nystrand and Tamm describe how the commodification of basic healthcare and education – they are now consumer products rather than citizen entitlements – has increased inequalities along class, regional and urban/rural lines. Those locked out from access to the services evolve into the ‘chronic poor’.
“Those who have gained from neoliberal reform are, for example, not primarily the Ugandan business sector at large – as the domestic private sector is very weak with the exception of a few large companies and individual businesspersons close to the ruling elite – but rather the ruling elite, which has been able to use donor funding to preserve their power through patronage.” (Nystrand and Tamm citing Whitfield et al. 2015)
Primary health and education, two of what used to be known as priority programme areas, are reviewed in detail, restating familiar data showing low completion rate, high teacher absenteeism (60 percent on any given day), and demonstrating how the majority of UPE pupils never attain functional literacy or numeracy. The result has been migration to proliferating private services to avoid the deterioration and the gradual fall in the quality of public education. The authors thus demonstrate that migration was the goal of neoliberalisation but that decentralized government has failed to either improve or maintain quality.
Ssali in Neoliberal health reforms and citizenship in Uganda also states that quality as well as availability of health services has suffered. Although expenditure per capita on healthcare has increased threefold, service delivery has not improved. Her essay highlights the way in which governments surrendered health services to market forces thus creating two streams, a service for the spatially marginal (the rural population) and poor, and one for the rich. This is borne out by the previously known fact that even where maternal and neo-natal services are available, less than 20 percent of women use them opting for reliance on the extended family and other support networks.
Those who have gained from neoliberal reform are…not primarily the Ugandan business sector at large – as the domestic private sector is very weak with the exception of a few large companies and individual businesspersons close to the ruling elite – but rather the ruling elite, which has been able to use donor funding to preserve their power through patronage.
As with education, so with health. The sector is characterised by inadequate resources and high absenteeism (50 per cent no-shows on any given day). Competence is a major challenge: “It was found that only 35 per cent of public health providers can correctly diagnose at least four out of five of the most common conditions, and only one out of five knew how to manage the most common maternal and neo-natal complications.” Public health and education services have thus become the preserve of the poorest and most physically marginalized. Heavily dependent on donor funding, they are assessed to be unsustainable in the long run. (Nystrand and Tamm)
Part III: Extractivism and enclosures
Commodification of forests was executed via the doling out of concessions to private sector players for management. It has had the same result, namely, privileging of capitalist interests over smallholder indigenous interests. Readers may find Nel’s Neoliberalisation as Ugandan Forestry Discourse useful in understanding the impact of privatization on the crater lakes of Kabarole in 2017, which left fishermen without a livelihood and made the lakes vulnerable to environmental degradation. Wedig discusses this in relation to Lake Nalubaale (Victoria) in Water-grabbing or Sustainable Development? The same applies to more recent sand-mining concessions granted by the President’s brother, Caleb Akandwanaho (aka Gen Salim Saleh) to Chinese investors to the exclusion of indigenous artisanal miners.
As Smith and Van Alstine show in Neoliberal oil development in Uganda, any resistance to rampant dispossession is prevented by the deployment of the armed forces. In the case of oil, it has been the presidential elite Special Forces Command armed and trained by the United States. Military deployment together with the use of Public Order Management legislation to subdue populations that make the debt incurred during this phase of history odious and liable to repudiation.
There is similar commercial pressure for land and similar dispossession for the implementation of the envisaged transformation to an industrialized economy as discussed by Nakayi in The politics of land law reform in neoliberal Uganda.
Race, culture and commoditization
A new proposition is that even cultural identity has been commoditized in the neoliberal dispensation. Youth, race and faith are looked at from this perspective. In Youth as ‘Identity Entrepreneurs’; Emerging Neoliberal Subjectivities in Uganda, Vorhöller studies a group of dancers in Northern Uganda and concludes that: “They tend to prioritise short-termism, instrumentalism, flexibility, pragmatism and self-interest and often switch cultural styles and political allegiances depending on situational contexts and according to calculations of expected benefits.”
The youth market their youth to the myriad NGOs promoting neoliberal policies and looking for exemplars of how they support and are embraced by the youth. Once sponsored, the youth adapt to the required value system of their sponsors. Another example would be the youth marketing their youth and numbers to political parties. They form savings groups at the behest of the President, which groups are then given cash at public events to demonstrate the regime’s interest in the youth. New enterprises such as radio calling, telephoning radio discussion programmes to push propaganda are performed by groups such as the Lango Radio Callers group. That the group is short-termist and not rooted in ideology or any belief is clear from the fact that it publicly announced its intention to desert the NRM for the opposition if it was not paid the millions of shillings and iron roofing sheets promised before the elections. Besides ethnicity, other identities emerging from youth celebrity culture, academic qualifications and even internet presence are also available for political branding.
The role of Pentecostal-charismatic churches in politics and their rise to prominence (originating in the rise of NGOs and faith-based organisations, the result of the government’s withdrawal from its role as principal driver of development) is covered by Barbara Bompani in Religious Economics: Pentecostal-charismatic Churches and the Framing of a New Moral Order. Bompani posits that PCCs endorsed neoliberal policies by their close relationship with the ruling class, legitimising neoliberalism and provide a moral framework within which those living (or enduring) the neoliberal experience can maintain hope in a country in crisis. It is further argued that they share an exclusionary world view with neoliberalism in which “the sinful, immoral, non-conforming are to be targeted for discipline, reform and legal action.”
The framework provided by this book, its definitions of neoliberal policy and examination of its effects, will facilitate public discussion even of issues as sensitive as race. The elitism created by the exaltation of FDI, where those with access to foreign capital are perpetually entitled to special favours such as tax waivers, is analysed in African Asians and South Asians in Neoliberal Uganda: Culture, History and Political Economy in which Anneeth Kaur Hundle proposes that “the FDI policy opens up new possibilities for racial elite class formation.”
Taken together, this collection of essays is a commendable effort in achieving its objective of determining by whom, why, how and to what effect Uganda was transformed since 1986. A criticism might be that few Ugandan analysts were cited by any of the contributors even where the same ground has been extensively covered by them. Secondly, the book may be slightly behind the curve. Much of this data has been available but is only being published in this context when the effects of the reported activities are leading to seismic changes. The great value of the collection is that it finally ‘mainstreams’ the discourse and will perhaps provoke debate on those issues of which Ugandans have been aware but which have languished in the ‘informal sector’ of scholarship and public debate.
#PayInterns: Further Reflections on Millennial Angst, Crony Capitalism and the Privilege Economy
As I argued in Social Mobility and the Enclave Economy, today’s university graduate is a victim of a legacy of privilege of those halcyon days of matunda ya uhuru (fruits of independence) when it was an automatic ticket to high-status public sector jobs. Every graduate was automatically employed. What Kenyans seem not to appreciate is this status was not merited, and had no relationship whatsoever with the economic value of university graduates. It was a case of replacing a white with black privilege.
Two weeks ago, I waded into an emotive Twitter exchange on the subject of unpaid internships for university graduates. It quickly became evident that this was not in fact a debate but the outpouring of pent-up frustrations that is all too common among the youth generally – and more so among the better educated – that was the subject of two recent eReview articles (Hustler Nation: Jobless youth, millennial angst and the political economy of underachievement; Education, Social Mobility and the Enclave Economy: Revisiting the Kenya Scenarios Project).
Having jumped into the fray, seemingly on the side of unpaid internships, I found myself on the receiving end, perhaps deservedly so. Still, I felt that the opportunity to inject some sobriety into the debate was not to be missed.
My last word on internships.
Your challenges will not be solved by the kindness of strangers. Kenya is a minority privilege economy. It can’t create the opportunities you expect for masses. You have 3 choices
join the fight to change the system
lower your expectations
— David Ndii (@DavidNdii) April 3, 2019
I will dispense first with a comment on why compulsory remuneration of internships is bad economics.
Hiring workers is costly, and firing is costlier still, both financially and emotionally. The human resource practice has developed various methods to minimise the risk and cost of unsuitable hires, such as screening, references, rigorous interviews, psychometric evaluations, probation, (which minimises the cost of separation), outsourcing (which shifts the transaction costs to employment agencies) and the poaching of proven performers from rivals at a considerable premium.
Internships can serve the same purpose. Consider a firm that employs university graduates and is willing to offer a salary of Sh30,000. If it employs one who turns out to be unsuitable, it incurs a month’s salary and a recruitment cost of a similar amount, a loss of Sh60,000.
Alternatively, the firm can offer three two-month internships and pay an allowance of Sh5,000 a month, at the end of which it offers the most suitable intern a job. It is not hard to see why firms would resort to this strategy in these days when the quality, and even the authenticity, of academic qualifications has become very uncertain. It is also readily apparent from this example that firms using interns as a search strategy ought to pay them. But it would be a mistake, and probably counterproductive, to generalise.
Other firms may be willing to take on interns as part of their corporate social responsibility but may not have the budget for it. And there are also graduates out there who are willing to do unpaid internships. There are also entrepreneurs who could offer valuable internships but may not be able to afford the cost. Think of an entrepreneur who is keeping her struggling technology start-up afloat by earning extra income, say by taking up a part-time teaching position that pays her Sh30,000. If, however, she could get interns willing to pay the amount, she would happily give up the part-time work and concentrate on the start-up. Compulsion to pay interns, whether through policy or through social pressure (such as the trending #payinterns), has the effect of reducing the supply of internships, which is maximised by allowing all three options – paid, unpaid and paying internships – and leaving the market to do the rest.
As I argued in Social Mobility and the Enclave Economy, today’s university graduate is a victim of a legacy of privilege from the halcyon days of matunda ya uhuru (fruits of independence) when it was an automatic ticket to high-status public sector jobs. All Bachelor of Arts graduates were automatically absorbed into the civil service as administrators. Those appointed as “Bwana DO” (District Officer) moved into a large bungalow previously occupied by a white man and were provided with a Land Rover and a bevy of “APs” (Administration Police) to do their bidding. Few university graduates joined the private sector, but those who did went straight to the top and enjoyed lifestyles that their peers in developed countries could only dream of. What Kenyans seem not to appreciate is that this status was not obtained on merit, and had no relationship whatsoever with the economic value of university graduates. It was a case of replacing white privilege with black privilege.
This transition was more or less complete by the late 70s. Since then, university graduates have simply been trickling down the system and displacing the less educated. In the 60s, a graduate was assured of a leadership role, in the 80s a professional and middle management position, in the 90s entry-level work, and, of course, today they are not guaranteed anything all. Up until the 80s, it was inconceivable that a university graduate could be a police constable, but here we are.
In short, university graduates have continued to have expectations of entering employment at a fairly high level and climbing the socio-economic ladder as rapidly as previous cohorts did.
And there is another dynamic at play; intergenerational social mobility has been quite high in Kenya. For example, my grandparents were primary school-educated (quite a high level of education in the 1920s and 30s!). Their children, born in the 1940s and 50s, are mostly high school-educated with a few being university-educated, while all my siblings and most of my cousins born in the 60s and early 70s are university-educated. This has meant that we have, by and large, become accustomed to intergenerational social mobility. But now we are getting to the point where we have a critical mass of graduates whose parents are themselves university-educated and who are finding themselves a notch or two below their parents socio-economic status. This is bound to be stressful.
I came across a new policy document the other day titled the Draft National Automotive Policy. Its goal is to revamp the local motor vehicle assembly industry by way of import protection – what we call import substitution industrialisation. In plain English, this means the strangulation of the used motor vehicle import trade. Twenty years ago, I was involved in a long-running debate in the papers with one Gavin Bennet, then an industry spokesperson, on precisely this subject. At its peak in the late 80s, the industry produced 10,000 vehicles a year. Ownership was limited to institutions and the wealthy, while others had to wait for used cars to trickle down into the market. Choice was limited to less than ten models, and they were not particularly well-made. I argued that liberalisation would broaden vehicle ownership and create more jobs, that the economic benefits would more than offset the jobs that would be lost in the assembly industry. My prognosis carried the day; the cost of motor vehicles came down, variety increased with cars available for every pocket, with the attendant increase in employment in trade and services that we see today in the industry.
According to the policy document, the industry has ramped up its installed capacity from 28,000 to 34,000 vehicles a year. Production increased from a post-liberalisation average of 5,000-6,000 vehicles to 9,000 in 2015 and 2016 but it has since fallen back to the historical 5,000-6,000 range. It is unclear why an industry operating at 20 per cent capacity would increase its capacity. More importantly, it is readily apparent that the implementation of this policy would not stimulate new investment but rather, the utilisation of the existing plants and equipment.
The document goes on to claim that full capacity would create 150,000 jobs. This is balderdash. The same document acknowledges that at its peak, the industry employed 12,000 people, 3,000 directly and 9,000 downstream. If it were proportionate, a fourfold increase in production would translate to 36,000 jobs — but in reality, it would be less than proportionate. Unsurprisingly, the document does not factor in the jobs that would be eliminated in the second-hand imports and trade sector. All said, even 25,000 jobs would be a stretch.
In the intervening period, as globalisation was proceeding, China and India were ramping up motorcycle production, and driving down the cost. Before liberalisation, the cheapest motorcycle would have cost a well-paid university graduate at least a year’s salary. Today you can check one out from the supermarket at about three times the monthly minimum wage. And, of course, the industry has exploded, with an estimated 1 million to 1.5 million boda bodas on the road, and the jobs created also being in the same range. We are informed by the document that there are already eight motorcycle assembly plants operating at 50 per cent capacity (more than double that of the car assemblers), as well as an unknown number of “makeshift/informal” assemblers. This industry has developed in a liberalised environment without the protectionism that is now being proposed for car assemblers.
It is worth noting that the makeshift/informal motorcycle assemblers are mentioned only in passing; we have jua kali operations out there assembling motorcycles, and a proposed industry policy that merely acknowledges their existence. The existence of backyard assemblers tells us that motorcycle assembly requires little capital to set up. In economic lingo, assembling cars is capital intensive, while assembling motorcycles is labour intensive. The low capital requirements that make jua kali motorcycle assembly possible also mean that it is more easily scalable. The regional market for motorcycles is in the order of a million units a year. We already know that car assemblers cannot compete while the potential of an exporting motorcycle assembly industry is readily apparent. Also readily apparent is that this automotive policy is not about jobs but about returns on capital – profits – at the expense of jobs, competitiveness, equity and growth; that is, every important economic policy objective.
First, that it takes five times more capital to create a manufacturing job in Kenya than in India, and 50 percent more than in China, in other words Kenya’s industry is the most capital intensive of the three
The contribution of the owners of capital to our economic underachievement through policy capture – such as seen here – is under-appreciated. A World Bank study, Kenya Growth and Competitiveness Study, estimated our manufacturing productivity in the early 2000s at $3,500 per worker, vis-à-vis China’s $4,400 and India’s $3,400. Our capital (i.e. investment) per worker was estimated at $11,500, China’s at $7,800 and India’s at $2,400, translating to a capital output ratio of 3.3 to India’s 0.7 and China’s 1.74. What exactly are these parameters telling us?
First, that it takes five times more capital to create a manufacturing job in Kenya than in India, and 50 per cent more than in China. In other words, Kenya’s industry is the most capital intensive of the three. Second, that it takes $3.3 dollars of investment to produce a dollar of industrial output in Kenya, less than two dollars in China and less than a dollar in India. Moreover, the same study found that our labour was also the most costly, at $100 per month for unskilled factory workers, against China’s at $85 and India’s at $50. Let us put this into perspective: the amount of investment that creates one job in Kenya would create four jobs in India, and two in China. Moreover, Kenya is the least attractive investment destination as, of the three, it has the highest labour cost, a feature of the protectionist high-profit economy that the proposed motor vehicle policy is designed to restore.
More fundamentally, with close to a million young people joining the workforce a year, should we be protecting industries that require a million shillings to create a job, while the same investment can create five or more jobs elsewhere
We are churning out 150,000 university graduates a year. Let us say that this motor vehicle policy was implemented and indeed did create 25,000 jobs. Let us assume, generously, that a fifth – 5,000 jobs that is – were new university graduate jobs. How many sectors and industries would we need to protect to absorb, say, half the annual supply of university graduates? More fundamentally, with close to a million young people joining the workforce each year, should we be protecting industries that require a million shillings to create a job while the same investment could create five or more jobs elsewhere?
Last week the President took the occasion of the State of the Nation address to announce a financial scheme fronted by his family’s bank. Fish rots from the head.
Why is this policy so fixated on waking up a corpse? Because the policy has been written by the assemblers themselves. In fact, all the industry players are listed in the document by name. This is highly unusual. Analysis of specific enterprises does inform policy, but this is usually contained in studies, memoranda and background papers, not in the final policy documents. Final policy documents of this nature should be neutral. But what does it matter? Last week the president took the occasion of the State of the Nation address to announce a financial scheme fronted by his family’s bank. Fish rots from the head.
Huduma Namba: Another Tool to Oppress Kenyans?
Since independence the Kenyan state has decided who is an “insider” and who is an “outsider” and which territorial spaces they should occupy. This has led to the politics of exclusion and marginalization based on geographical boundaries, religion or ethnic identity. These second-class citizens are then forced to use personalised patronage networks to gain access to their rights as citizens, such as the right to an ID or a passport. Will the Huduma number foster this reality?
When President Uhuru Kenyatta declared that the newly rolled out National Integrated Identity Management System, popularly known as Huduma Namba, would be the “single source of truth” about every Kenyan, I wondered if he understood the reality of what it means to be a citizen of a country where identity often determines destiny, and where the acquisition of documents like IDs and passports is quite often based on the whims of the state, or one’s ability to pay a bribe.
Besides, what “truth” is revealed about a person through this biometric registration system? I have a Huduma Namba, therefore I am? Do I cease to exist in the eyes of the state because I do not possess one? What truths are not – and can never be – revealed by a mere number? Can my hopes and dreams, pains and sufferings, joys and disappointments, be encapsulated in a plastic card in my possession?
The Huduma Namba form requires those registering to provide details of their national ID, National Hospital Insurance Fund (NHIF), National Social Security Fund (NSSF), birth certificate, driver’s licence and Kenya Revenue Authority (KRA) PIN numbers. I wonder how an 80-year-old Turkana woman will obtain a Huduma Namba when she doesn’t even have a birth certificate or an NSSF number.
And because the government has threatened to deny services to those who do not obtain a Huduma Namba (a cabinet secretary threatened to deny passports to people who do not have one), what happens to those Kenyans who have not been able to obtain any type of identity document because the state decides who is a bona fide citizen and who is not?
Take the case of the late Adam Hussein Adam, an activist whose ancestors were brought to Kenya from the Sudan by the British to serve in the King’s African Rifles. Adam, a Nubian, was born in and grew up in Kenya but was denied a Kenyan ID and passport for most of his life. (Which means he would also have been disqualified for a Huduma Namba.) For this reason, he failed to secure a place on the national rugby team and could not accept a scholarship to study in New Zealand. He got several offers from international organisations to work abroad, but could not take them up because he did not possess a passport.
When Adam applied for a Kenyan passport, he was told to bring his parents’, grandparents’ and great-grandparents’ birth certificates, which was impossible, as his parents’, grandparents’ and great-grandparents’ generations had no birth certificates.
Between 1992 and 2000 Adam unsuccessfully applied for a Kenyan passport five times. After producing 13 documents to prove his identity, he was finally invited for an interview. He was told by immigration officers that Nubians are not regarded as Kenyans. He was denied a passport, and so he remained stateless.
In 2003, he filed a case in the High Court seeking an interpretation as to whether Nubians are Kenyans. The High Court told him to collect 120,000 signatures from Nubians plus documentation proving their identities. Adam thought it was strange that a court would ask Nubians for identification documents since these were the very documents that were being denied to them, and the reason for which Adam had gone to court in the first place.
Adam eventually acquired a Kenyan passport, but the struggle was long and hard. The mind boggling hostile bureaucracy he faced was the kind of “death by a thousand small cuts” that Christine Mungai and Dan Aceda talked about in a recent article.
In 2006, he took his case to the African Commission on Human and Peoples’ Rights and also petitioned the African Committee of Experts on the Rights and Welfare of the Child. In 2011, these bodies found that Kenya had violated the rights of Nubian children to non-discrimination, nationality and protection against statelessness.
Adam eventually acquired a Kenyan passport, but the struggle was long and hard. The mind boggling hostile bureaucracy he faced was the kind of “death by a thousand small cuts” that Christine Mungai and Dan Aceda talked about in a recent article.
Kenyan Somalis have faced similar obstacles. In 1989, President Daniel arap Moi’s government began implementing a screening exercise on ethnic Somalis to determine whether they were Kenyans or Somalis. As Kenyan human rights lawyer Gitobu Imanyara commented at the time, the exercise effectively “de-citizenised” an entire community and placed the burden of proving that they were Kenyans on their own shoulders.
Since independence the Kenyan state has decided who is an “insider” and who is an “outsider” and which territorial spaces they should occupy. This has led to the politics of exclusion and marginalisation based on geographical boundaries, religion or ethnic identity. Somalis, Nubians, coastal Muslims, Asians and other “non-indigenous” groups considered lower down the “citizenship ladder” are, therefore, viewed as “second-class citizens”, and are more vulnerable to state persecution and neglect. These second-class citizens are then forced to use personalised patronage networks to gain access to their rights as citizens, such as the right to an ID or a passport.
Will the same apply to the Huduma Namba? Will some people simply become “de-citizenised” by virtue of the fact that the Kenyan state did not recognise their existence? Will not having an ID, and therefore, a Huduma Namba, mean that a section of Kenyan society will remain permanently un-serviced and further marginalised?
The Chinese and Indian models
To be fair, the use of technology to obtain mass biometric and demographic data is not new. In recent years, both the Indian and Chinese governments have introduced unique identity numbers that they, like the Kenyan government, claim will make it easier to provide government services to citizens. (Though it must be noted that in much of the rest of the world, government services are not denied to people who cannot prove their identity. When I lived in London, for example, I could use the National Health Service simply by virtue of being a resident in the UK; my Kenyan passport did not deny me access to free healthcare. In the United States, a driving licence, Green Card or passport are sufficient proof of identity.)
The Kenyan High Court that ruled that registering for a Huduma Namba should be voluntary and not mandatory
In 2009, India introduced Aadhaar – a 12-digit unique identity number (UID), tellingly managed by the Ministry of Electronics and Information Technology, not the Ministry of Planning – in order to streamline “targeted delivery of financial and other subsidies, benefits and services” to the residents of India and to prevent leakages in service delivery.
However, since its introduction, the Indian government has been encouraging citizens to link their Aadhaar numbers to a variety of commercial services, from mobile SIM cards to bank accounts (imagine the implications of that!), which raises concerns about whether the state has the right to deny people services provided by private companies and entities. Will those who do not have the Aadhaar card be denied a SIM card, for example?
It has become virtually impossible to carry out any business in India, including admission to a private hospital, without presenting the card, which has been hailed by a World Bank economist as “the most sophisticated ID programme in the world.
The legality of Aadhaar has been challenged in Indian courts, mainly with regard to issues to do with privacy, surveillance and citizens’ rights to welfare services, especially those citizens who are marginalised. Like the Kenyan High Court that ruled that registering for a Huduma Namba should be voluntary and not mandatory, the Supreme Court of India gave an interim order stating that “no person should suffer for not getting an Aaadhar”. However, it has become virtually impossible to carry out any business in India, including admission to a private hospital, without presenting the card, which has been hailed by a World Bank economist as “the most sophisticated ID programme in the world”.
There are also lingering privacy and surveillance concerns. There have been cases where biometric data has been shared with security and other state agencies, which raises questions about whether the data is safe and confidential. Moreover, if financial or other personal information is leaked or gets into the hands of criminals or hackers what recourse is there for the victims?
China’s “social credit system” is potentially even more problematic. This system, which was introduced in 2014, essentially rates citizens for their “good behaviour”. Authorities add or subtract points from citizens through the system, depending on how they behave. Jaywalking or neglecting to pay a bill could deny you certain rights, services or privileges, such as housing benefits or access to credit. More serious “crimes” could get you blacklisted by the government, which means you are basically denied all government services, a concept that negates the very essence of citizenship.
Some have accused the social credit system of giving the Chinese Communist Party complete power and control over the Chinese people. As one commentator put it, “China’s social credit system has been compared to Black Mirror, Big Brother and every other dystopian future sci-fi writers can think up. The reality is more complicated – and in some ways, worse.”
In an authoritarian state like China, where all citizens are heavily monitored and where freedom of expression and of the media are restricted, such a system could be used to conduct mass surveillance on citizens and to punish dissidents, thereby giving more power to a government that already enjoys unrestrained authority – and further curtailing people’s freedoms.
Kenya’s poor record in the use of technology
The very idea that you could be denied a service because you cannot identify yourself through a number also negates basic constitutional freedoms and rights that both Kenya and India guarantee, the right to privacy being among these freedoms and rights. Apart from concerns that the Huduma Namba could be used to promote the private commercial interests of President Uhuru Kenyatta, whereby banks associated with the Kenyatta family could benefit from a credit scheme linked to the Huduma Namba (as claimed recently by David Ndii in an article published in the eReview), Kenyans have legitimate reasons to be worried about the government having access to so much of citizens’ personal data.
In the absence of a law protecting personal data from abuse or misuse, what guarantee do Kenyans have that their data will not be sold off to a third party for political or commercial reasons
First, in the absence of a law protecting personal data from abuse or misuse, what guarantee do Kenyans have that their data will not be sold off to a third party for political or commercial reasons? As with Facebook, which is facing allegations of making users’ data available to nefarious “social engineering” and “mind control” companies like Cambridge Analytica to benefit certain politicians and political parties during elections in the United States and in Kenya, how do we know that the data obtained by the government will not be used to manipulate elections or prevent certain voters from voting? Will the Huduma Namba now replace the voter’s card?
Secondly, the Kenyan government has proved to be completely inept (or deliberately malicious) in using technology, as demonstrated during the 2013 and 2017 elections when the biometric digital systems for voting either failed or malfunctioned, and when servers seemed to have mysteriously disappeared. Apart from questions regarding the procurement of the technology, and whether kickbacks were involved, Kenyans watched in horror as the electoral body fumbled through the election results, even claiming that several voting stations could not electronically transmit the election results. Astonished voters like myself ended up voting in stations where our details were entered in a book as fingerprint recognition technology malfunctioned. If an entire election can be bungled in this way, what fate will befall the Huduma Namba database?
Moreover, all attempts by this so-called “digital” government to introduce computerised systems in government, ostensibly to reduce corruption and to streamline service delivery, have failed miserably; on the contrary, corruption has reached unprecedented levels. It is now an accepted fact that the introduction of the Integrated Financial Management Information System (IFMIS) in government procurement led to the disappearance and theft of billions of shillings from state coffers. If IFMIS can be so easily manipulated by government officials, then how easy will it be to hack or manipulate the Huduma Namba system?
The issue, I believe, is mainly about trust: How does one trust a government/state that has a reputation of criminalising citizens, where the onus of proof of citizenship falls on the citizen and not the government, and where lack of one document or another can land you in jail? If the government can use the information citizens provide against those very citizens, then what incentive do those citizens have to give the government that information?
Until Kenya reaches a stage where citizens feel protected – rather than persecuted – by the state, where being born is not a crime, there will continue to be lingering doubts about the real intentions of the Huduma Namba biometric registration scheme.
Kenya is not Norway or Sweden, where citizens are convinced that the government is working in their interest, where there are sufficient checks and balances to prevent fraud or malpractices, and where people believe that their taxes will benefit the public, not corrupt politicians. Until Kenya reaches a stage where citizens feel protected – rather than persecuted – by the state, where being born is not a crime (to paraphrase Trevor Noah), there will continue to be lingering doubts about the real intentions of the Huduma Namba biometric registration scheme.
The Great Flying Crane Heist
As the Museveni government rolled out plans to revive Uganda Airlines, was the president’s brother-in-law caught with his hands in the cookie jar? MARY SERUMAGA celebrates a rare victory for a vigilant public.
28 March 2019 was a good day for the Ugandan people. In fact, the entire week will go down in history as the one in which Government was forced to back down from an attempted fraud. There has been a whiff of scandal in the air since the President announced plans to revive Uganda Airlines last year. Created by statute in 1976 and privatised in 2001, the plan was to revive the airline through a Public Private Partnership scheme. With the public still reeling from revelations that an intended PPP for the construction of a private hospital has been transformed into a $300 million build-and-operate contract awarded to a shady Italian firm called Finasi, and wholly financed by a promissory note from Government, last week was the wrong time to attempt the flying crane heist.
The country is notorious for disastrous PPPs. In 2017 the Auditor General reviewed the functions of the PPP Unit and reported: “The position of Director (head of the PPP Unit) had not been substantively filled despite its critical importance to the functioning of the Unit and the PPP Committee. The current Head of the Unit has been in acting capacity since 2015. In addition, the key positions of the PPP unit such as communication expert, project finance expert, legal expert, technical expert, and technical specialist were also vacant. This means that the PPP unit cannot provide the technical, financial and legal expertise to the PPP Committee and project teams established by contracting authorities as required under the Act.” [Emphasis mine]
Who owns the new Uganda Airlines? It does not appear on the books of Uganda Development Corporation, the investment arm of government. The Auditor-General does not include it in his tables of State enterprises, either active or dormant.
This writer commented at the time that keeping all the key technical positions vacant enabled the junta to override the functions of the PPP Unit and implement projects over which there has been no technical, financial or legal oversight.
An old rumour has resurfaced that Sam Kutesa, the President’s brother-in-law and Minister for Foreign Affairs, acquired the brand ‘Uganda Airlines’ and required billions of shillings in compensation to surrender it to the State.
As with the contract to build Lubowa Hospital awarded to Finasi, so with the formation and financing of Uganda Airlines. No procurement procedures were apparent when aeroplanes were ordered, two of which are to be delivered this April at a cost of UGX 280 billion ($75,380,200.00). Nobody could or would answer the question: who owns the new Uganda Airlines? It did not appear on the books of Uganda Development Corporation, the investment arm of government. The Auditor-General did not include it in his tables of State enterprises, either active or dormant, loss-making or profitable.
Privatisation has generally been a massive looting exercise by the junta that rules Uganda. Various family members own or owned various assets divested by the State. Caleb Akandwanaho (aka Gen. Salim Saleh), the President’s immediate younger brother, was forced to resign his seat in parliament after fraudulently acquiring Uganda Commercial Bank.
An old rumour has resurfaced that Sam Kutesa, the President’s brother-in-law and Minister for Foreign Affairs, acquired the brand ‘Uganda Airlines’ and required billions of shillings in compensation to surrender it to the State. Kutesa’s censure by parliament in 1999 for the irregular acquisition of the once State-owned cargo and ground handling service company, the only profitable part of the privatised Uganda Airlines was still fresh in people’s minds. That same year, a parliamentary committee was set up to investigate the sale of the ground handling service to Kutesa’s Entebbe Handling Services (ENHAS) and the sovereign routes.
Privatisation has generally been a massive looting exercise by the junta that rules Uganda. Various family members own or owned various assets divested by the State. Caleb Akandwanaho (aka Gen. Salim Saleh), the President’s immediate younger brother, was forced to resign his seat in parliament after fraudulently acquiring Uganda Commercial Bank, the country’s largest commercial bank.
In a report, policy researcher, Wairagala Wakabi noted:
“At the time, the World Bank noted these and other serious flaws in the privatisation programme. It said a number of privatisation transactions had been unsuccessful and “the program has been widely criticised for non-transparency, insider dealing, conflict of interest and corruption.” Besides this, the Privatisation Unit, the agency responsible for carrying out privatisation, was unable to collect many outstanding payments for firms which were sold on a deferred payment basis, and questions had been raised about the use of the funds in the divestiture account.” Bringing affordable telecommunications services to Uganda: A policy narrative and analysis W. Wakabi, 2009.
The current re-nationalisation is proving to be just as opaque. The facts relating to the ownership of the resuscitated Uganda Airlines only began to emerge when the Ministry of Works had to submit a request for a budget supplement to complete payment for the planes. Although the order had been made months earlier, there was no provision for it after Export Development Canada pulled out of negotiations in September 2018. At the time, Canada’s action was thought to be related to the state brutality that erupted in Arua in August. Whatever the reason, the aircraft were ready for delivery this April after payment. The public maintained pressure on government via social media and two opposition MPs Joy Atim Ongom and Winnie Kiiza led the charge in the House. The Ministry tabled its request before a belligerent Parliament. The first objection was that the State had been allocated only two out of two million shares (0.0001%) in Uganda National Airlines Company Limited, (UNAC) the new entity that was going to run the airline. The 1,999,998 unallocated shares became the focus. To whom did they or would they belong? Is UNAC in fact a State Enterprise?
The first objection in Parliament was that the State had been allocated only two out of two million shares (0.0001%) in Uganda National Airlines Company Limited, (UNAC) the new entity that was going to run the airline.
The risk was that having passed UNAC off as a State enterprise thereby securing State funding, the drivers of the project – who remain unknown – could then allocate shares to ‘investors’ via the usual middlemen. The experience of Uganda Telecoms is indicative of this modus operandi.
In the beginning, the State held a 49 percent stake in UTL, selling 51 percent to investors. UTL also retained residual rights to license value added services. Currently the State holds only a 31 percent stake. Furthermore, no value-added service provider can operate without getting past MTN, a potential competitor allowed to begin operating before UTL , formerly the telecoms segment of the old state-owned Uganda Posts and Telecommunications Company, had been relaunched. With its history, infrastructure and brandname, MTN therefore holds a massive advantage in the telco market.
Minister Azuba Ntege gave an uncharacteristically embarrassed response for the NRM government and withdrew the submission to ‘correct the errors.’ The Speaker allowed her a day. The following morning the Minister arrived with fresh forms, updated to allocate 100 percent of UNAC shares to government.
“The sale of the 18 percent public holding was queried by the Public Accounts Committee not least because it flouted the requirement that the shares be valued by at least three qualified valuers (and not a mere broker) and advertised for sale to attract the best offer,” explains Wakabi in his report.
The Uganda Airline operators, whom the Ministry of Works is fronting, have been less fortunate. Minister Azuba Ntege gave an uncharacteristically embarrassed response for the NRM government and withdrew the submission to ‘correct the errors.’ The Speaker allowed her a day. The following morning the Minister attended the Budget Committee with fresh forms, updated to allocate 100 percent of UNAC shares to government. At that point the registrar of companies, Uganda Registration Service Bureau (URSB), announced that the updated articles and memo of the company were null and void. One reason for this was that the share allocation did not reflect the history of the initial allocation of two shares.
During the UNAC debate, Movement MPs pleaded that the State was days away from penalties for non-payment; an earlier deadline had been missed in December and the $27 million deposit stood to be lost.
It seems the effect was that a new entity was being formed with an initial allocation of 100 percent of the shares to the State. If so, that would have raised the question: who ordered the Bombardiers in 2018? It could not have been a company formed in March 2019. The question remains unanswered. Another mystery centres on the entity called Uganda Airlines Limited registered in 1999 and which has had no operations since. URSB even wrote to government in 2017 advising them that Uganda Airlines Ltd could be operationalised. Government preferred to register the new entity, UNAC Limited, in January 2018.
During the UNAC debate, Movement MPs pleaded that the State was days away from penalties for non-payment; an earlier deadline had been missed in December and the $27 million deposit stood to be lost. None addressed the issue that the State was in fact not liable in the event of UNAC defaulting.
A third set of papers was presented with effusive apologies from both ministers: “The registration process had gaps and I regret on behalf of myself, ministry and government. I beg to withdraw those documents,” apologised Minister Ntege. They now held all the shares in their capacities as public servants and not individuals. The government had no option but to accept radical amendments to the report of the Budget Committee that had spearheaded the defence against this latest attempt to raid the Treasury.
We are not out of the woods yet. There remains the issue of the two Airbus A330 aircraft ordered from Rolls Royce. It must be pointed out that the vendor, Rolls Royce has a long record of engaging in the kind of business practices for which Patrick Ho was convicted.
The ownership issue was sorted out with a resolution to transfer UNAC to Uganda Development Corporation. Ground handling services are to be re-nationalised regardless of the fact that Kutesa has allegedly sold ENHAS to NAS, allegedly a Kuwaiti entity. It is worth noting that there were rumours of this transaction around the same time that one Patrick Ho was being indicted in a New York court in 2017 for bribing both Kutesa and the President for oil and other business rights. (When Enhas was mentioned in parliament, Beatrice Anywar MP, who recently deserted the Opposition front bench for the NRM, was seen to leave her seat and in highly unorthodox fashion, whisper in to the ear of the Deputy Speaker. He waved her away).
We are not out of the woods yet. There remains the issue of the two Airbus A330 aircraft ordered from Aerospace and powered by a Rolls Royce engine.
In this case there should be more time to scrutinize the business case for the investment, something not done with the earlier ones because of the payment deadline. It must be pointed out that Rolls Royce, which issued a press release welcoming Uganda’s decision and looking forward to developing its relationship with Uganda Airlines, has a long record of business practices for which Patrick Ho was convicted.
Due diligence demands that Ugandans ask: Who negotiated with Rolls Royce for the Airbus aircraft? Did they receive a bribe? Having interrupted a burglary in progress, they need to be on the lookout for other attempts to milk the Treasury.
Following an investigation by the UK’s Serious Fraud Office, it was found that Rolls Royce exchanged bribes for business with officials across the globe. The operation continued for 24 years before Rolls Royce reached a Deferred Prosecution Agreement (DPA) in 2017 under which individual officials would not be prosecuted but Rolls Royce would pay penalties of US$800 million for bribery in Angola, Nigeria and South Africa as well as Azerbaijan, Brazil, India, China, Indonesia, Iran, Iraq, Kazakhstan and Saudi Arabia.
The judge found:
“v. […] substantial funds being made available to fund bribe payments.
vi) The conduct displayed elements of careful planning.”
Due diligence demands that Ugandans ask: Who negotiated with Rolls Royce for the Airbus aircraft? Did they receive a bribe? Having interrupted a burglary in progress, they need to be on the lookout for other attempts to milk the Treasury through this enterprise. The greatest weakness is that private operating capital will have to be found because Isimba and Karuma Dams are ahead of the airline in the financing queue and have not yet found the public funds needed to transmit the power they will generate. There is also the proposed oil pipeline and refinery for which investors are either not forthcoming or remain cautious. How the shares are sold and to whom is key.
Regarding any compensation for ground handling, if this service was illegally carved out of Uganda Airlines and in fact led to its collapse and sale, there should be no obligation to compensate NAS. It would be interesting to find out if in fact NAS is not Sam Kutesa in disguise.
With respect to the Airline, parliament adopted a business plan that they have not seen and whose profitability is questionable. It may have made sense for private individuals to own 99 percent of it, and operate a business for which all funding and liabilities are borne by the government, but it may not make sense for government to own 100 percent, and operate an airline when other regional airlines are struggling. Previous efforts by private entities in Uganda have not been successful, all but one failing for lack of cash, a shortage of which, incidentally, is also haunting Government.
In 2020, the grace period on 19 loans (including for the Entebbe Airport expansion and the Expressway) will expire requiring government to allocate 65 percent of her revenues to debt servicing. With 44 percent of revenues currently being devoted to debt service, the economic situation is already untenable for the majority who use neither the airport nor the expressway. The fiscal crunch is characterised by drug-stock-outs in health centres and lack of teaching materials in State schools. Feeder roads by which smallholders (80 percent of the population) transport their produce are in a dire state. Their maintenance requires UGX 800 billion ($215 million) a year but the government was only able to manage a fixed amount of UGX 417 billion for the three years up to June 2018.
In A brief chronological history of Uganda Airlines, Kikonyogo Douglas Albert gives an insight into the vicissitudes of the air transport sector. In 2001 Africa One opened and closed within the year owing to limited capitalization; East African Airlines with a single ageing Boeing 737-200 running flights within East Africa, to Dubai and South Africa lasted five years before an investment shortfall forced it to close in 2007. Royal Daisy Airlines founded in 2005 lasted five years.
Government ventured back into the industry in 2006, investing in a 20 percent share of Victoria International Airlines regular flights to South Africa, Sudan and Nairobi. This venture too suffered from inadequate capitalization and closed after only 2 months. Finally, the Aga Khan Group’s Air Uganda started regional operations in 2007 and stopped in 2014 after the International Civil Aviation Authority Organization November raised technical queries.
Signs of incompetent management have manifested sooner than expected. Although the Ministry states 12 pilots have been recruited at UGX 42m ($11,307) a month and 12 co-pilots at UGX 38 m ($10,230.17), and promised Parliament to table their professional records, on 31 March it transpired the airline may actually not have pilots. Documents were leaked to NTV Uganda investigative journalist, Raymond Mujuni, showing that owing to a dispute over pay, they have not reported to work objecting to salaries apparently lower than those of Kenya Airways and Rwandair pilots. The pilots also want permanent terms (which would make them eligible for massive pensions – Uganda has no public service pensions fund and billions are owed to Uganda Communications Employees Contributory Pensions Scheme (UCECPS) pensioners in arrears).
The airline immediately tweeted a disclaimer urging the public to ignore the report. Given the choice of R. Mujuni, a competent investigative journalist, and the shady airline company, a vigilant public might be more inclined to believe the pilots are on strike. Now that it is a public enterprise, the Auditor General and Inspector General of Government will need to pay particular attention to the Flying Crane. An important line of enquiry is whether the jobs were advertised and whether or not the recruits are beneficiaries of the controversial State House scholarship scheme, the educational arm of the junta.
As it is, the airline is to be launched in April. So far there has been no marketing of the maiden flight. The challenges ahead notwithstanding, after 33 years of fiscal abuse by Yoweri Museveni’s regime, Uganda was able to stop another heist of public funds. What made it even more beautiful was the fact that the methods used were parliament and the media.