Neo-imperialism and Mutebile agency in killing local banks, cheap credit

Two memories stand out in story of the liberalisation and privatisation process that gripped Uganda in the 1990s: the utter sense of conviction with which it was carried out, and the avalanche of verbiage that came forth from the mouths of a whole herd of over-eager chatterboxes spouting MBA-isms, in its defence.

 Anyone who may have followed the recent remarks made by President Museveni regarding the 2001 sale of Uganda Commercial Bank (UCB) to a private foreign bank, would be forgiven for not really getting a sense of the fevered passions of the time.

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President Museveni was speaking at a January 27 memorial lecture held in honour of Emmanuel Tumusiime-Mutebile, former governor of Bank of Uganda (BoU), who passed away in 2022. In his speech, the President expressed “regret” at having overseen the sell-off. At its peak, this bank operated well over half of all bank branches in the country and held 50 percent of all commercial bank deposits.

Mutebile, who served in various government roles before taking over the reins at the central bank and running it for twenty-one years, will go down in our history as perhaps the most consequential custodian of Uganda’s fiscal matters in recent decades, if not since Independence.
One thing that the consumers of late Mutebile’s financial policies will agree on is that he was very effective in what he did, especially during his reign as the BoU Governor.  The policies he implemented have had, and continue to have, a real impact on our lives.

The problem of course is that the policies created winner and losers: all this sterling work (and it was prodigious) was done to the benefit of the Western economies that installed the regime that appointed him, to the great detriment of the ordinary working people, the peasantry and the struggling middle classes.
You see, in his speech, President Museveni further explained, rather in the manner of the Biblical Adam pointing the finger at Eve, that the sale came about as a result of him being “persuaded” by Mutebile.
So, between the reality of those with all the clever arguments having now fallen silent, and wandered off to jobs in the the universe of international finance, and those with the absolute conviction now expressing regrets, it is important to understand what happened: have we been dealing with the ideas of one or two men, or are we faced by a whole system, of which they are just prominent local representatives?

Because the same president was also recently on record expressing amazement at the high levels of poverty in Busoga, yet that sale was supposed to solve problems such as this. How did we end up here?
UCB was the end-product of a long history of African struggle to regain their self-determination, and this background is important to understand why some two decades after the deed was done, some still feel obliged to explain it away. “The past is not dead,” said the writer William Faulkner, “it is not even past.”
So, we need to look that whole past to understand why this issue will not die.
The imposition of the  colonial economy came with the imposition of a colonially-brought currency. 

This meant that anyone who did not have a currency stake in the new economy (which was the vast majority of the population) automatically became poor. 
It was a situation similar to what happened with the imposition of the colonial education system; wherein those without qualifications in it (despite whatever native expertise they may have already held as healers, blacksmiths, farmers, among others; basically everybody at the time) were automatically labelled “uneducated”. In other words, colonialism came as a ready-made economic crisis for the colonised.
The struggle against colonial rule in Uganda was built around very concrete economic demands, which fed the usual political ones. Among these was the right of access to affordable credit.

Because once fully enclosed in the economy created by the colonial occupation, Africans in Uganda struggled to live in the new and very exploitative conditions. 
By law, Africans were expected to pay administrative and economic taxes, to remain producers of raw products and remain racially excluded from the value-addition parts, by having to sell those raw products to state-designated middlemen, and not to have a right to unionise or otherwise have a say in the management of these policies, as there was of course no representative government.
In the political reforms of the late colonial period following a series of African uprisings, this was one of the issues addressed. 
The Uganda Credit and Savings Bank was set up in 1951 to allow at least some Africans to begin trading on the market. It was this organisation that became the Uganda Commercial Bank after independence.

UCB’s existence was, therefore, one of the few lasting tangible accomplishments of the independence struggle and one that had not turned completely into yet another of the usual post-colonial disappointments.  
This bank continued to exist amidst the changes that had Ugandans see something like nine presidents generally violently come and go in her first two decades of self-rule. 
Together with the Co-operative Bank, Post Bank, and also a number of banks that had been set up by local and other Africans during the heady decade or so after the National Resistance Movement 1986 seizure of power, when it successfully sold itself as a pro-African organisation.

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Mutebile oversaw the destruction of the Uganda/African-owned banking system in Uganda, and making the credit system safe for foreign banks. 
Between 1993 and 2014, nearly all the black-owned, or government-owned banks, were summarily put out of business. UCB is simply the most emblematic case.
To achieve this, three key measures were put in place by the pro-West cabal in power, some as law, others as policy.
First, there was the creation of “independence” for the central bank via the 1993 overhaul of the 1969 Bank of Uganda Act. 
What this really meant was making the bank independent of Ugandan government, but not their actual bosses at the International Monetary Fund and World Bank. The original “traditional” policy was to have the bank directly answerable to the Ministry of Finance. 

Related to that was the  1993 Financial Institutions Act (FIA), further beefed up in 1994, which gave the central bank specific operational ways in which it could apply this new independence in relation to private banks.
The second measure was the government decision to remove all restrictions to exporting money. 
Previously (like with many post-colonial countries, and the then Eastern Bloc), a foreign investor was required to keep a certain percentage (40 percent, I believe) of their revenues in a local bank. The purpose was to make capital more available for the local capital market.

This had been a long-standing “problem” between Western financial institutions, their governments and so-called investors on the one hand, and the post-colonial/socialist government, in much of Africa and the wider post-colonial world, on the other. 
In fact, is was one of the reasons given by Idi Amin for the 1972 expulsion of the Asian community, many of whom had been using rights they had under the British citizenship that they had retained after independence, to send their business profits out of the country and simply run their business on a rolling bank overdraft.
A third measure was the government again giving in to the Western donors long-standing desire to permanently remove the risk of the nationalisation of any private foreign-owned company (as again, Amin had done), and to commit the state to immediate return or compensation for any such company nationalised as soon as new political conditions allowed.

Uganda was among the first black African countries to sign agreements to, and then implement these neo-liberal measures. And President Museveni is on record as praising this as some kind of achievement.
The effect of the first measure was to enable the bank to make monetary policy without having to listen to the concerns of the population speaking via an actually representative national government. This is also why elections have to be stolen, and why the West helps to cover it up. 
It is a double-insurance to insulate their fiscal policy from a potentially hostile democratic will of the people. 

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The triple-insurance (“Third Party”?) is the buying off any willing section of sections of the opposition, just as the NRA was bought by the imperialists when still a rebel movement against the Gen Tito Okello Lutwa government.
The effect of the second measure was the complete liberalisation of the foreign exchange market. Some of those foreign investors now began converting what they had earned in Ugandan shillings by bulk-buying dollars and immediately sending them abroad on even a 24-hour cycle. 
Previously, for example, the prices of foreign currency was set by the bank according to the diktats of the government (one dollar, if you could find it, was rated at nine shillings, during the Amin era).

With the shilling thrown into an open (and rigged) market, its value has since plummeted. Yet, many key urban and developmental services such as electricity supply, piped water supply, health equipment and even mass transportation, are actually dollar-dependent somewhere along their supply chain. So, it has become ever more costly to pay for these things with Ugandan shillings.
The effect of the third was arrival of all manner of “foreign investors” who now felt very safe buying up national assets and family land, and basically turning all aspects of our lives into a market.

Mutebile fronted arguments about “incompetence” as a justification; he is on record as having expressed the view that no Ugandan should even be allowed to own a bank. In that spirit, he was to use the FIA as the principal weapon to decimate the indigenous and otherwise African and state-owned banks, as the 2018 Abdu Katuntu-chaired Committee on Statutory Authorities and State Enterprises (COSASE) hearings uncovered. 
It reached a point where the central bank was not even following its own legal provisions, and simply imposing its will, as testimony on the extraordinary antics of Justine Bagyenda, the former BoU executive director for banking supervision, revealed.
Through the FIA, the Central Bank was able to keep the base interest rate high, and also significantly jack up the base deposit amount any private bank had to have in order to legally participate in the banking market.  Any private bank (and this meant the local, public, or otherwise African-owned ones) not able to immediately comply with this then became a candidate for closure. And indeed, most of them were shut.

Effects
All of this has contributed to the “esente zibuze” (“money is scarce”) expression among urban and rural folk; money is indeed expensive in the obtaining, and cheap in the spending. It is literally scarce.
Those there above are the concrete reasons why we are forced to turn each other into a function that normally a bank would perform for us, with people constantly seeking personal loans from one another: everybody is constantly beeping everyone else because their Yaka metre is also beeping.

I am a good example; all my friends and personal contacts know that to get in touch with me is to run the risk of being asked for cash to support my projects, and I would not blame any of them for avoiding me as a result (but they should not use this statement as a reason to stop with their generosity).
But this is actually a very serious point: Ugandans should be able to obtain personal bank overdrafts between salaries (if they have one), and bank loans to capitalise their businesses so they would one day not need to borrow money anyway.  
These policies were not theories: they were decisions that have had real consequences on the ground; a direct consequence of the deliberate destruction of local control over a local credit system.

The racist psychology part is to then “play with peoples’ minds” by exhorting them to be “job-makers and not job-seekers” and other such official claptrap so as to make people feel that the problems they are caught in are a result of personal failings, and not intentional government-imperialist policy.

Museveni’s changing position on UCB sale 

[The] parliamentary objections to the proposed sale “do not change my long held view that UCB should be sold as soon as possible, as per our Privatisation Plan for the whole parastatal sector. We should not allow our petty internal disagreements to scare away bona fide multinational investors ... Time has come for all of us to appreciate the necessity to harmonise our positions so as to maintain the hard-earned credibility with our international partners … In order not to damage our image with the investor community and our development partners, I deem it the duty of the entire government system to be fully involved and supportive of the privatisation of the bank,” Museveni’s September 30, 2001 letter to Mutebile.

UCB was doing very well because it was making profits but the Mutebile group put out forward an argument that the interest rate was high because UCB is a government company and the managers are carelessly giving loans and many of the loans are not paid back and we who are stupid to pay back end up to pay for ourselves and those who didn’t pay….But Dr Suruma put up a big fight but I got persuaded by Mutebile. I said let’s try [the private sector people] and see. We called the South Africans, these people called Stanbic, they came but they have done nothing. Then there were other government banks... they wanted to privatise but I said, please forget no more privatisation of these banks because I made a mistake of UCB, I will never repeat it again,” Museveni at Mutebile Memorial Lecture on January 27, 2023.

Continue reading (PART II):Sale of UCB betrayed reason for independence struggle