Wednesday August 6 2014

‘Accra-Kampala Disease’: Why Uganda needs to learn from events in Ghana

By Charles Onyango-Obbo

Something is happening in Ghana, which should interest Ugandans because a version of it has been playing in the Pearl of Africa in the last three years.
The Ghana currency, the cedi, has tanked against others like the US dollar. Government finances are a shambles. Though Ghana now produces oil, it is plagued by fuel shortages.
Then we heard something that used to be the daily staple of news in Africa, but we haven’t heard much of in the last 10 years – Ghana suggested that it was running to the International Monetary Fund (IMF) for a bail out!
Apart from long fuel lines, Ghana got into a farce. All manner of pastors and “bishops” jumped into the economic fray, praying for the cedi to stabilise against the dollar.
Proving that there is wisdom in separating God’s matters (church) and Caesar’s (state), the cedi refused to budge to godly cajoling and continued its slide.
There is no agreement on what is wrong in Ghana. Unlike Uganda, it has low corruption levels. Its politics is also different; as its ruling parties do lose elections, so governments there are more sensitive to public sentiment unlike, again, in Uganda where the election outcome is known well before voting day.
Recently, I met a chap who researches Ghana, and he said the country’s current problem is down to oil. It was an African version of the “Dutch Disease” (the proverbial tendency for countries to neglect most other sectors of the economy and mooch off easy oil and natural resources money).
I think though that in Africa we are seeing a mutation of this disease. In Uganda, there was a time when President Yoweri Museveni used to start nearly every speech, especially when he is telling off donors whom he thought were patronising his government, with “when we begin selling our oil”.
Critics allege that the Kampala government’s binge of spending of recent years, was based on the calculation that oil in the years to come will allow it to cover up the financial holes it is digging today.
My researcher friend told me that the Ghanaians did the same. They borrowed heavily and went on a spending spree in the hope that oil money would close their deficits.
Like Uganda, the Ghanaians counted their eggs before they hatched, but they actually borrowed eggs from the neighbour, fried and ate them, with the promise that when their hens hatch in future, they would replace them ---with interest (ie where they borrowed 1,000 eggs, they would return 1,250). Call this the “Accra-Kampala Disease”.
Now there is a reason why the world has few respectable futurists (the likes of George Friedman), and good economic forecasters. The future is fickle, too changeable, and prone to too much disruption by technology, innovation, and social change. Too many people lose their reputations in that business and fall by the wayside.
Take our example of the eggs. Surely, if you are a poultry farmer and your business is doing well, there is no reason to expect that you cannot pay the neighbour from whom you borrowed 1,000 eggs with 1,250 in the future, right?
Wrong. First, a guy in the next town could set up a more efficient poultry farm with chicken that drop more eggs, allowing him to sell at half your price. With everyone flocking to buy his eggs, your business will bleed, leaving you unable to pay back even 10 eggs.
Secondly, some unforeseen disease could kill off your chicken, again leaving you hiding over eggs. Or everything will be just fine, but dietary tastes change, leading to lower demand for your eggs.
We have a live example of this. Late last year, something strange happened in East Africa. In Kenya East African Breweries (EABL), the good people who also own Uganda Breweries, surprised many when they cut back on a seven-day beer production week, work shifts, and laid off workers because business was bad.
People were drinking more, yes, only that they were drinking less beer. However, figures showed there had been a sharp rise in the drinking of whisky, although admittedly from a low base. Now this gets interesting. The multinational drinks company Diageo holds the majority shares in EABL, and it produces easily the world’s most popular whiskey - Johnnie Walker.
I haven’t spoken to anyone at EABL or Diageo, but someone in the know told me that the shift to whiskey (it is “whisky” without the “e” if it’s not Scottish, a seasoned drinker tells me) but in health attitudes. Increasingly more women and men, he alleged, believe that whiskey is less likely than beer to leave you with a potbelly.
The lesson here is that you really can’t game the market and the future. Uganda should observe Ghana and learn.

Mr Onyango-Obbo is editor of Mail & Guardian Africa ( Twitter: cobbo3.