Hawks ‘Nsenene’ in Juba,While Kenya Does Banks – Wait!

Charles Onyango-Obbo

20 July 2011

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Last week in The Observer, MP Ssemujju Ibrahim Nganda, in an article titled “Juba: Uganda vends bananas while Kenya opens bank branches” touched on one of the most shameful truths about “Uganda capitalism”.

Writing from Juba, the capital of the new nation of South Sudan where he was for the independence ceremonies, Ssemujju said: “Juba is closer to Uganda, but it appears that Kenya has been quicker in spotting the market potential and is already outpacing Uganda…Uganda mostly exports fresh food, including fruits, vegetables and eggs, the Kenyan banking sector is already making inroads there. Kenya Commercial Bank and Equity Bank have already opened for business in Juba.”

To mark South Sudan’s independence, many newspapers in the region ran supplements. However, the supplements in the Kenyan papers revealed the extent to which banking, hotel, construction companies, and even universities from the country have entered South Sudan ahead of regional rivals.

The reason for this isn’t because Ugandans are lazy, they are not. It isn’t that Ugandan companies are unimaginative. It isn’t even that we are a nation of small-minded fellows who can only sell grasshoppers (popularly known as nsenene), bananas, and jackfruit (fene) in regional markets. Rather, it is about what it takes to succeed in business in Uganda, and what kind of companies have arisen from the peculiarities of economic liberalisation in Uganda over the last 20 years.

During privatisation, quite a few companies were sold to fellows with political connections. That in itself is not a problem, because one’s political allegiances has nothing to do with one’s business acumen. However, privatisation happened concurrently with economic liberalisation, so while for example hotels that had been nationalised were sold off, licences were given for investors to build new hotels.

Rather than compete, the politically connected fellows who had bought off the State companies sought protection to allow them “stabilise” and recoup the money they had used to buy the assets. However, because the government was committed to a free market it refused (sensibly) to give them the protection they sought.

However, there were other ways the government could help. The easiest one was income tax exemptions. These exemptions enabled the State to pick and choose winners using political authority, while not interfering with the market.

As the economy opened up more and more, even people who had started businesses on their own without government help, felt the heat of competition. To survive, they too found a godfather who secured them exemptions.

Soon, even the income tax exemptions could not protect these businesses from nimble smaller operators who were doing business more efficiently. The next thing? They asked government to inject new money in their struggling businesses either through direct cash handouts from the Bank of Uganda (ordered by State House), or writing off their debts (as happened with nearly all the hotels that were privatised).

A local variety of crony capitalism had been born in Uganda; you succeeded in business if you were protected by a powerful figure in government or the military. Because in 1996 Uganda started having elections, even though they were still under a one-party system, there was still some level of competition. Often the winner was the one who spent the most money.

The politicians therefore started demanding that the companies they were protecting pay back by contributing to their campaigns, employing their campaign managers, and so forth. In turn, to cover these costs, the companies demanded more exemptions and inflated tenders from the government.

When these abuses were pointed out, the retort from the government was that the critics were “jealous”, or that even if the system was corrupt, it was still good because it was creating wealth and jobs for Ugandans.

Now we are paying the price, because most Ugandan companies cannot compete outside the country because they cannot succeed in markets where they have to pay taxes, and where they cannot get subsidies and protection from government officials.

Uganda helped the Sudan People’s Liberation Army and the Rwanda Patriotic Army in their liberation wars. But in both these countries, Kenyan firms have the big hotels, banks, construction companies, supermarket chains, while Ugandans sell bananas (matooke), are barbers and mechanics.

This is not to sneer at matooke and fruit sellers. On the contrary, it is to admire and say the bigger Ugandan companies should learn from them. The government does not help our matooke sellers. On the way to Rwanda and South Sudan, they have to bribe many traffic police officers. Then border officials shake them down. They pay commercial prices to transport their bananas, because their fuel is not subsidised.

Unlike Hassan Basajjabalaba, they don’t get billions of taxpayer shillings to bail them out. They go through all these hurdles, and in South Sudan the police and army harass them, but they still do a sale, make a small profit, return, and go through the horrors all over.

The Uganda matooke sellers in Juba, like their counterparts in Kikuubo, represent the genius of Uganda enterprise. If Uganda is to ever become an export power in this region, it is their knowledge, not that of the Kampala Road companies, that will win the day for us.

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