Is ours an imperiled economy or boom-town?
Posted Thursday, February 28 2013 at 09:11
After absorbing the shock of cuts in donor funding, the government is starting to catch up on its bills for the 2012-2013 fiscal year. At the height of the freeze, government struggled to meet even its most basic obligations: payroll. Civil servants reported failing to see changes in their bank accounts at the end of December.
There are some other signs of a modest uptick in economic activity.
Economic intelligence briefers look at the growth of mobile money transactions, the rise in consumption of petroleum products, a firming of the Uganda shilling, steady food prices and so on. In the words of Alan Greenspan, the long-term chairman of the US Federal Reserve, the economy has gone through another “soft-landing.” If the government prevails in the ongoing arbitration proceedings against Tullow Oil Plc in London, some more certainty is likely to return to the oil sector.
This news has peppered over a number of problem areas in the economy. It is clear that the banking sector is struggling. Many banks which scaled up in anticipation of an economic boom in the last decade are struggling with modest or no profits at all. The majors- Stanbic, Barclays, Stanchart are all retrenching either branches or ATMs or both. The threshold of operating a viable ATM is just 8,000 transactions a month or slightly over 250 transactions a day. The middle tier banks that regularly cannibalise each other for customers and deposits, have reported flat or whimsical profits. A number of financial institutions required to report their annual results to the public reported profits on the scale of as low as $ 100,000 for countrywide operations.
“Anonymous” banks are in the throes of sustained debt collection activities all over the country. For people in large business, if the banks are not collecting from you, they are collecting from your neighbour. Hotels, industry and agricultural enterprises have joined the perennial problem of unsustainable household debt whose debt stock is mostly held by ruthless money lenders.
This situation is unlikely to change until the Central Bank realises that purely market forces can regulate interest rates. It will also continue to grow, if regulators fail to realise the need to create special mechanisms to manage catastrophic debts. Many loans began to fail with the arbitrary rise in interest rates in the 2011-2012 period. Other loans on a non-uniform basis fail due to localised factors. For example, the continued mechanical problems on the steamer MV Kalangala, is a strain on the budding domestic tourism activities on the islands; or negative hedging seems to have driven some of the last indigenous domestic players in the coffee industry into unsustainable debt.
Economic policy-makers have also ignored the growing problem of mismanagement of the agricultural sector. The agricultural sector, the backbone of the economy, continues to dive further into a mishmash of foreign control either directly through ventures like commercial agriculture or indirect ventures like the rise of cash-flow agriculture dominated by high consumption of imported seed, pesticides, herbicides, growth supplements, whose long-term effects on soils and crop quality is not well documented. In 2012, it was reported for the first time that Uganda had begun stealthily importing poultry after faulty materials landed in the domestic poultry train.
Naads, as a national productive mechanism is not short of disappointments. At the implementation level, it is dominated by kickbacks, cronyism and waste. Many rural villages, for example, have a road-sign announcing village markets; and empty sheds where successful farmers are supposed to “interact” with the marketplace.
The force of the weatherman in light of climate change is also quite muted. It should be a mandate of public media to publish and broadcast weather forecasts regularly. One wonders why the unending political shows on radio that always come to the same obvious conclusions on the same topics cannot include relevant information like the day’s weather. It would be interesting to know why the lake region no longer has 170 days of rain per year.
The economy seems to lack a head prefect or spokesperson to communicate the ups and downside in the economy. In many countries some of these are designated by law. The Central Bank is mostly in a supporting role and the role of the Finance Minister is mostly to mollify politicians and the press. Other countries rely on publicists to regularly highlight positive economic statistics. Most donor dependent economies rely on the World Bank and the IMF to highlight their health by stressing their adherence to their prescriptions.
This can be disastrous when sudden changes in the economy warrant an immediate public response. Secretive central bankers should know the long-term harm caused by failing loans all over the country. We hope never to repeat the situation of publicising non-interrupted flow of imports and exports in 2007 after the railway line through Nairobi’s Kibera slum had been vandalised and major highways cut off after that year’s general elections.
Mr Ssemogerere, an attorney and social entrepreneur, practices law in New York. firstname.lastname@example.org