BoU disposal of banks was not in the national interest

The Parliament’s Committee on Statutory Authorities and State Enterprises (Cosase) continues to dig up dirt on the way top officials at Bank of Uganda (BoU) casually closed and disposed of assets of several banks.

This dirt has peeled off every layer of respectability that the top people at BoU had; now those people look as creepy. Seeing the CCTV footage showing people carting off bags of God-knows-what from the central bank seems to have bothered many Ugandans and left no doubt in their minds that our society is rotten to the core.

Nevertheless, a deeper understanding of the whole idea of underdevelopment and the material inequality between the developed world and poor countries should show that the revelations of impropriety at BoU should not be surprising.

For a considerably long time before the 1960s, ideas of development became topical because of the encounter between Europe and other parts of the world, including Africa, Asia and Latin America. That encounter became particularly important through colonialism and imperialism.

Colonialism looked at what was done in Africa, Asia and Latin America as primitive. That is how the colonialists began to think that it was their duty to bring about modernisation to such primitive areas. Thus, Western institutions (such as banks) and ways of doing things (culture, norms, values) as well as industrialisation and urbanisation became some of the tools for shaping the way people in poor countries viewed the world.

Inevitably, a one-size-fits-all mentality emerged to drive home the point that anything developed in Europe was superior.
Sadly, vestiges of that mentality endure. The Cosase probe on BoU shows how indigenous banks such as Cooperative Bank and Greenland Bank were questionably closed and their assets practically given away to foreign interests. And the legal basis for the so-called sale was British Common Law!

A number of scholars have used the dependency theory to discuss such exploitative relationships. Prof Mahmood Mamdani of Makerere University has done a lot of work on the dependency theory and popularised it in East Africa. Similarly, Samir Amin popularised the theory in West Africa, Andre Gunder Frank popularised it in Latin America and Amartya Sen did it in Asia.

It is from such scholars that we get to understand how the “core-periphery” relationships really work. We see how resources from the” periphery” of poor and underdeveloped countries such as Uganda are extracted and exploited by the “core” of mostly developed states in Western Europe and North America. This is done through comprador collaborators, a section of an indigenous middle class allied with foreign investors, multinational corporations, bankers, etc.

Thus, while the manifest role of BoU is to ensure macroeconomic stability and foster a sound financial system in the country, its hidden role is that of a comprador agent for foreign interests.

Older Ugandans will tell you how the Cooperative Bank played a pivotal role in the economy of this country through the promotion of production, processing, diversification, marketing and value addition activities of members of Uganda Cooperative Alliance spread throughout the country.

So, how could such a key artery of socio-economic development be summarily closed and sold? Was BoU really acting in the national interest when it did exactly that some 20 years ago? How can we talk about financial inclusion in this country when the banking sector is controlled by mainly foreign interests?

These and many other questions should be at the back of our minds as we continue to watch the soap opera that the Cosase probe on BoU has become. These are the questions that also make us understand why there are virtually no significant foreign direct investment inflows to our poor villages, especially in terms of value addition. It is precisely because of this that we continue to be exporters of mostly raw commodities and net importers of higher value finished products.

No wonder the dependency theory tells us that economic growth in the advanced industrialised countries does not necessarily lead to growth in poor countries.

Dr Akwap is the acting deputy vice chancellor for academic affairs at Kumi University.