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The Economic Logic of Regime Change: Venezuela Today. Uganda Tomorrow?

The US is supervising a coup in Venezuela. The pretext: Nicholas Maduro’s brutality, the state’s record of widespread human rights abuses, does not wash. In August 2018, appeals for similar US intervention when Museveni brutally suppressed the youth uprising led by Bobi Wine and his colleagues, were rebuffed. In Zimbabwe, the Mnangagwa government turns on anti-austerity protestors with impunity. Why the double-standards triply-distilled? It’s all about debt, the old Washington Consensus, and the incumbent Big Man’s ability to suppress his people’s right to economic self-determination. By MARY SERUMAGA.

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The Economic Logic of Regime Change: Venezuela Today. Uganda Tomorrow?
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The American engineered regime-change taking place in Venezuela should be of interest to Africa and especially those countries which like Venezuela have experienced sporadic episodes of social unrest over a protracted period. President Maduro, like Presidents Mnangagwa of Zimbabwe and Museveni of Uganda has responded with wanton brutality. The actions of all three countries featured in in-depth reports by Human Rights Watch in 2017 alone. Maduro is the only one of the three so far who has attracted the ultimate sanction of regime change.

The Ugandan regime, hopelessly in debt and facing growing disaffection, is vulnerable to a take-over similar to Maduro’s. So strong is the disaffection and so likely are the youth to succeed in displacing the National Resistance Movement in a fair election, the United States cannot afford to be complacent if it wants to maintain the status quo. The only potential barrier to a second phase of structural adjustment (SAP II) is the fact that support for the new and most popular opposition leader, Robert Kyagulanyi aka Bobi Wine, is rooted in the most excluded and disaffected and not the elite who would benefit from the continuation of the status quo.

Going back to 20th-century history, Africa and Latin America formed part of the Tripartite set up in the sixties to represent the global interests of Africa, Asia and Latin America. The high point was the 1966 Solidarity Conference of the Peoples of Africa, Asia and Latin America. The bloc expanded the then existing alliance known in the United Nations as the Afro-Asian Bloc and solidified at the Bandung Conference of 1955. The bloc was considered a threat by the United States and Europe as it voted against American interests on matters such as allowing Communist China to sit in the General Assembly. The Afro-Asian bloc enjoyed at least the nominal support of the Soviet Union (the depth of that support was tested by the Congo crisis during which the Soviet Union did not in the end support Patrice Lumumba who was assassinated before the colonialisation of Congo resumed unabated).

In the following years, much of Latin Africa signed on for their first phase of IMF development assistance. The results of the austerity that followed have been much written about, and culminated in the ‘IMF riots’ of the 1980s and 90s. Recent austerity protests in Zimbabwe continue this trend. Enter Hugo Chavez and his socialist intervention. President Maduro’s mentor gained popular support from the poorest and most marginalised for his anti-imperialist platform, enough even to recover from being deposed in an earlier American coup d’état in 2002. As Craig Murray put it, “Hugo Chavez’ revolutionary politics were founded on two very simple tenets:

  • People ought not to be starving in dreadful slums in the world’s most oil-rich state
  • The CIA ought not to control Venezuela”

Murray was referring to the twelve Latin American coups organized by the CIA between 1954 and 2019. Neither Chavez nor Maduro were able to rise above corruption and autocracy. Neither has President Trump, but unlike Donald Trump’s America, Venezuela needs outside financial support.

The end of the Cold War and the collapse of the Soviet Union left African countries in the lurch, still in need of access to capital for development, under pressure to continue to supply primary commodities and yet no longer able to play one superpower off against the other. In addition, the 1980s debt crisis forced most of them to sign onto the IMF’s structural adjustment programme. Austerity-induced social unrest is the enduring result. Uprisings in all three, that is Zimbabwe, Venezuela and Uganda, are a response to extreme and worsening economic conditions of high unemployment, hunger and rising taxes. Endemic corruption and economic sanctions only worsened the situation (and were designed to do so) in Zimbabwe. There are no examples anywhere of the success of structural adjustment in achieving its stated goals of deeper democracy, greater rule of law, higher respect for human rights, good governance, civil service reform, improved service delivery, an enabling environment for FDI and a rising, prosperous middle class. On the contrary there are only examples of countries having to receive further assistance to achieve the unattained goals of the first phase of IMF and World Bank intervention, Uganda, Zimbabwe, Kenya being a few.

There are no examples anywhere of the success of structural adjustment in achieving its stated goals…

Structural Adjustment did achieve the objective of liberalising economies. This ensured Western access to cheap primary commodities not otherwise available to major IMF shareholders. The removal of restrictions on exporting capital has meant foreign investors whose role was meant to inject capital into assisted economies, can now freely transfer profits illicitly earned. It is an indisputable fact that there is a net outflow of capital from Africa of $41 billion every year – that is, the difference between loans, grants and FDI received and the cost of tax evasion, repatriation of aid, environmental damage, land-grabs and other features of the SAPs.

The IMF as an organization ensured its own profitability by locking borrowing countries into unsustainable debt.

When in Uganda political dissent was met by a massive and sustained wave of brutality by the state, in August 2018 Ugandans called on the United States to intervene by withdrawing their material, diplomatic and moral support from President Museveni. Uganda’s constitution like Venezuela’s provides for the removal of the president on various grounds of incapacity. The United States did not invoke the article against Museveni as they have done against Maduro.

The IMF as an organization ensured its own profitability by locking borrowing countries into unsustainable debt.

Washington did the opposite, effectively endorsing the NRM regime by placing the responsibility for the crisis on the opposition, and pressuring on its leadership to reach an agreement with what is ranked as East Africa’s second most corrupt government. They have been assisted in creating a façade of legitimacy for Museveni by organisations such as Transparency International whose global leader handed him an award for his ‘fight against corruption’ in 2018 – in the same week that he was being cited in a New York court for having taken a $500,000 bribe.

This unstinting support is useful in maintaining the economic status quo. Ironically, it is Museveni’s rash behaviour that is tipping the balance in favour of regime change. The United States has turned to Kenya for some of its security needs, transferring a lucrative military base from Entebbe to Kenya.

Washington has been assisted in creating a façade of legitimacy for Museveni by organisations such as Transparency International whose global leader handed him an award for his ‘fight against corruption’ in 2018 – in the same week that he was being cited in a New York court for having taken a $500,000 bribe.

In the first phase of the state’s brutality against its citizens, the regime allows the drama to be broadcast. This has the important function of instilling fear in the population. It is a signal to the world of the regime’s impunity. Later on, rumours circulate of house-to-house invasions by the armed forces in which young people are dragged out of their homes and beaten, ostensibly for supporting the uprisings.

Leaders of both countries have resorted to unconstitutional means to acquire and maintain power. There was the bloodless coup in Zimbabwe during which the uncooperative and China-embracing Robert Mugabe was ousted. President Museveni simply altered the constitution to allow him first to exceed the two-term limit to the presidency and later, the age-limit. Members of parliament were paid to support both constitutional amendments.

In the first phase of the state’s brutality against its citizens, the regime allows the drama to be broadcast. This has the important function of instilling fear… It is a signal to the world of the regime’s impunity.

This brings us to the reasons the United States, backed by the EU, is intervening in Venezuela – why it can justify its intervention of breaches of democratic principles in Venezuela but continue to support Museveni whose method of governance is similar. Officially it is to end President Maduro’s undeniably repressive rule and to prevent him from (further) embezzling and squandering Venezuela’s resources. There is little point in arguing a defense of President Maduro. However, the fact remains that his removal can only be sanctioned by a ruling of the Supreme Tribunal of Justice that the required constitutional ground/s have been met. There was no such ruling before Guaidò declared himself president. So much for the rule of law.

The answer is that Museveni’s continued domination of Uganda until recently met the economic objectives (often cast as security prerogatives) of the United States and Europe, the IMF and the World Bank. However, he is now struggling to remain relevant in global financial circles. The groundswell of opposition to NRM rule renders the enabling environment for extraction and extortion so risky as to be a bad investment. Should the opposition succeed in ousting Museveni and his cabal, there would be no guarantee the IMF’s regime would survive the transition.

In Venezuela’s case, Guaidò is already committed to the IMF and Western goals. His economic advisor, Ricardo Hausmann has been a political exile in the United States for years and has been in talks with the IMF. In January 2019 he made some of his proposals known. Although he has warned that an immediate resumption of debt servicing would not be possible, Hausmann does not call for a debt audit to determine whether lenders were duly diligent in lending to past regimes that he opposed on the basis of their alleged corruption, or whether the proceeds of the loans were injected in to the economy.

In Venezuela’s case, Guaidò is already committed to the IMF and Western goals. His economic advisor, Ricardo Hausmann…has been in talks with the IMF.

“For Hausmann, the key to any turnaround is a swift and massive injection of cash from the International Monetary Fund – to the tune of $60 billion or more.”

“Venezuela is the most over-indebted [sic] countr[ies] in the galaxy,” Hausmann said. “First, second and third priorities have to be the recovery of the country. There’s a humanitarian disaster. There are millions of Venezuelans flooding into other countries. If you want to fix the problem, you can’t take money out of the system to pay yourself back. It will take years to start servicing debt.” (Ben Bartenstein, Bloomberg January 30, 2019)

He does not say that illegal, unsustainable, illegitimate or odious debt should not be paid but merely proposes rolling payments over to a later date. If Venezuela agrees, she will become the new darling of the West.

In return Guaidò has received support unprecedented for a foreign opposition leader. On 24th January, US Secretary of State, Mike Pompeo and the Treasury Department announced sanctions against any persons that continue to do business in Venezuela’s oil industry; on January 25th John Bolton, President Trump’s National Security Advisor announced US intention to shift oil production in Venezuela to American companies. Ambassador John Bolton tweeted, “The United States will not let Maduro and his cronies continue to loot the assets of the Venezuelan people.” And finally, the rule of law in Venezuela was further flouted on 29 January when the United States sequestered Venezuelan bank accounts held there or insured by them, and put them at Guaidò’s disposal.

On his part, President Mnangagwa signed up weeks after ousting Mugabe. He will enjoy continued support as long as he too remains committed to repaying Zimbabwe’s unsustainable debt. His problem is he is simply unable to implement structural adjustment austerity and obtain a new package of concessional loans. The reason being that although Zimbabwe’s outstanding dues to the IMF were paid in 2016, there are unpaid arrears to the World Bank, the African Development Bank and other international financial institutions and development partners. The rules require that these be paid before any further lending can be considered. As their spokesperson pointed out, the IMF “stands ready to help the authorities design a reform package that can help facilitate the clearance of external payment arrears to international development banks and bilateral official creditors and that then would open the way for fresh financing from the internal community including potentially the IMF. But, again, just to stress as we said before, potential financial support from the Fund is conditional on the clearance of those arrears to the World Bank, the AFDB and financing assurances from bilateral official creditors (emphasis mine).”

On his part, President Mnangagwa signed up weeks after ousting Mugabe. He will enjoy continued support as long as he too remains committed to repaying Zimbabwe’s unsustainable debt.

Clearance of those arrears which amount to just over US$5 billion would mean austerity even beyond the conditions Zimbabweans’ experiences today. This outcome is not acceptable either to opposition politicians or the general population. In 2017 when the government tried to arrange financing to clear the arrears, opposition politician Tendai Biti stated: “That will not help much or anything at all in reality. The biggest challenges facing Zimbabwe cannot and will not be addressed by paying off arrears on which we defaulted almost 20 years ago; what really needs to be addressed are structural economic issues, de-industrialisation and unemployment. That money could be better used to fund industry revival to create jobs and boost production, as well as increase exports and improve liquidity.”

Although Uganda has a track record of cooperation with Western financial institutions, it has reached a tipping point. The auditor-general points out that…in 2020, total debt repayment will require 65 percent of all revenues collected.

Similarly, although Uganda has a track record of cooperation with Western financial institutions, it has reached a tipping point. The auditor-general points out that when the principle for some loans becomes repayable in 2020, total debt repayment will require 65 percent of all revenues collected. Mass demonstrations against austerity are likely to escalate. By December 2018 the IMF had made it clear that no new concessional loans were forthcoming until certain steps are taken to rein in overspending, restore fiscal discipline and control corruption. SAP II requires the suspension of infrastructure projects financed by non- or partially concessional loans (mainly from China). Although Kenya agreed to this condition to its own SAP II package in 2018, Uganda still hopes to find alternative funding for the projects. It is unlikely to be found because the IMF works in tandem with bi-lateral lenders – acting as a debt collector for them, even in cases such as Mozambique where funds were borrowed illegally (without parliamentary approval) and subsequently stolen.

If support is withdrawn from either Museveni or Mnangagwa it will not be as punishment for their human rights abuses. It will be because their development partners calculate that their own objectives would be better achieved through alternative proxies.

If support is withdrawn from either Museveni or Mnangagwa it will not be as punishment for their abuses of human rights and democratic principles and public demand that they depart. It will be because their development partners calculate that their own objectives would be better achieved through alternative proxies. The United States and her acolytes will back any candidate that will agree to their terms. Self-proclaimed president of Venezuela, Juan Guaidò is a clear example of that.

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Mary Serumaga is a Ugandan essayist, graduated in Law from King's College, London, and attained an Msc in Intelligent Management Systems from the Southbank. Her work in civil service reform in East Africa lead to an interest in the nature of public service in Africa and the political influences under which it is delivered.

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#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.

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#Payinterns: Further Reflections on Millennial Angst, Crony Capitalism and the Privilege Economy
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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.

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.

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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?

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Huduma Namba: Another Tool to Oppress Kenyans?
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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.

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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.

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The Great Flying Crane Heist
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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.

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