M7 Vows to Fire PSs Over Failing Economy
As Textiles Giant Fine Spinners Becomes Latest firm to collapse
By John V Sserwaniko
Barely 6 months after posting them in different Ministries, the President is already frustrated with his new Permanent Secretaries (PSs) showing readiness to fire them in case they don’t put their act together.
Reliable sources say Museveni expressed his frustration with some of the PSs’ ineptness during a weekend (Saturday) meeting he had with all the accounting officers at State House Entebbe.
Reliable sources say that in 2014, Museveni met a delegation from UMA who predicted to him the economy was going to collapse in 3 years time (exactly 2017) if no deliberate steps were taken to boost locally-owned businesses through emphasizing local content.
Local content basically connotes allowing locally-owned firms and businesses to participate in implementing multi-billion projects undertaken by government which remains the biggest source of opportunities for the private sector. As we showed in our story yesterday, much of these opportunities have gone to foreign firms totally excluding local firms and service providers.
In a recent engagement, UMA honchos reminded Museveni how they predicted the economic chaos we are currently experiencing as government helplessly looks on. We are told Museveni had started well immediately after elections as he emphasized the “Buy Uganda Build Uganda” policy (aka BUBU) in his post-election State of nation address in May 2016.
He is, however, frustrated that much of the local content-related proclamations he made in May 2016 have remained unimplemented and this has made UMA honchos to begin not trusting his word. “He was very clear as he made reference to the textile subsector correctly pointing out that annually the whole Ugandan population consumes textile products (basic clothing etc) worth $888m.
He directed all armed forces [UPDF, Police and Prisons etc] and public sector workers to buy their uniforms from local manufacturers-like NYTIL and others. This was a good way to stimulate demand for textiles which is good for stabilizing our foreign exchange earnings.
This worked well because all their uniforms and related supplies like shoes, belts etc have been purchased locally and the concerned firms have profited from that but apart from the armed forces where he could directly supervise to ensure compliance, the other MDAs accounting officers didn’t comply yet much more would have been achieved by now.
The idea doing this [BUBU] is that you increase job creation, reduce wasting scarce Forex on importation and you also bring in more dollars through increased exportation once these local firms are supported to operate more profitably. This is why some in the textile industry have benefited to the extent of exporting huge volumes to Rwanda, Sudan and DRC,” said an economically knowledgeable source.
We are told that whereas he is happy with accounting officers like those of the armed forces and health ministry (through NMS) who have been buying uniforms directly from local manufacturers, Museveni is unhappy accounting officers in other MDAs have been lukewarm towards his BUBU directive.
Sources say he believes if everybody had complied like the armed forces and MOH/NMS have done to his BUBU directives, the economic situation would have been mitigated and the financial crisis would have been milder than currently is.
He is specifically concerned about leather industry where strict compliance to BUBU would have gone a long way bringing in the dollars and boosting the local firms. So during the Saturday 18th February meeting with accounting officers, the man from Rwakitura didn’t hide his frustrations.
READS THE RIOT ACT
In what panicky sources likened to reading a riot act, Museveni used the February 18th meeting to sound a clear warning to his PSs and other accounting officers. We are told in total over 146 accounting officers attended the meeting. At that meeting people were unanimous the President was rightly angry at the accounting officers’ failure to expeditiously implement his BUBU-related directives which he publicly first issued in May 2016 during his state of nation address.
“He was disappointed and we all agreed he was right to be displeasured,” anonymously said one of the PSs we spoke to for this article. Museveni is generally concerned that we currently spend over $4bn importing stuff into the country using the scarce dollars yet we only earn $2.6bn annually from the little we export.
This is why he wants to use BUBU and other local content-related approaches to create more opportunities for locally owned firms so that they benefit from economies of scale while growing their capacity to produce for the export market.
This reduces dependence on expensive imports while simultaneously bringing in dollars for the country. It was against this background that Museveni, who sources at the February 18th meeting say appeared increasingly inspired by Tanzania’s Pombe Magufuli’s pragmatic approach to service delivery, was unusually tough on accounting officers.
He clearly told them they had up to Wednesday March 15th to verifiably indicate to him how they intended to increase their respective MDAs’ absorption of local content. Each will be required to demonstrate to him in a meeting expected before March 15th the steps they have taken or intend to take to actualize his new efforts aimed at empowering the local firms by primarily buying what they produce.
“This is Kisanja Hakuna Mchezo. Each one of you will be required to clearly demonstrate how you are helping the economy or prepare to quit. Whoever fails us on this should be prepared to resign and we get other people to hold that docket,” the unusually very stern Museveni was quoted as saying during the February 18th meeting.
To show how serious he was, Museveni has since directed Premier Rugunda (also head of gov’t business) to intensify supervision guiding accounting officers on what is expected of them between now and March 15th.
Rugunda has accordingly organized a big meeting on Thursday March 2nd at his OPM Board room where a strong UMA delegation and other private sector players will meet some of the accounting officers face to face advising them on the interventions necessary to realize the BUBU policy objectives as espoused by Museveni.
According to Trade Ministry PS Julius Onen, the Thursday meeting will be used to stress to the accounting officers that BUBU simply seeks to increase purchase and consumption of local goods and services without compromising quality standards.
Onen says the Thursday event will be a platform for the private sector specifically those in the manufacturing sector to showcase what they have to offer before hundreds of accounting officers who Museveni wants to support economic recovery by primarily buying from them as opposed to importing stuff.
Onen has designated a one Hussein Musiho, an officer in his ministry, to be the contact person helping Rugunda use the Thursday event to realize the President’s BUBU objective. Musiho is also to ensure accounting officers and private sector manufacturers massively attend the Thursday event.
Yet there are more indicators that the accounting officers are this time round taking Museveni’s threats to knife floppy actors very seriously. Besides Rugunda’s efforts, Finance Ministry Permanent Secretary/Secretary to Treasury Keith Muhakanizi last night also sent out a circular inviting all the accounting officers controlling the over 146 votes to a crisis meeting at his Finance Ministry Board room on Tuesday March 7th.
This will be a day before the Wednesday March 8th cabinet meeting during which Museveni is expected to ask on the progress being made on his local content and BUBU-related directives as handed down on February 18th. Sources say during Muhakanizi’s meeting, the Finance Ministry (which deploys and coordinates the work of accounting officers) will take them through what the President will specifically be expecting each one of them to have accomplished ahead of the much awaited day of March 15th.
“That meeting will be used to grill the accounting officers trying to get each one of them share and demonstrate what they intend to present to the President when the much awaited follow up meeting comes up before 15th March,” said a knowledgeable Finance Ministry source.
On a lighter note, sources said, some of the accounting officers had resorted to cheerfully referring to Museveni as “Kagu,” just to create some proximity to “Magu” which is how some in the Tanzanian media these days fondly refer to reformist Magufuli, the new President of Tanzania.
“These days when we are discussing Hakuna Mchezo things, we refer to Mzee as Kagu so that it’s nearer to his Tanzanian friend Magu,” said one of the accounting officers.
This latest effort by Museveni, putting his technocrats on tenterhooks, comes on the heels of efforts by MPs to help the situation. Only last week MPs, led by Kasanda North MP Patrick Nsamba, Mohammed Mbabali and Herbert Ariko, unanimously resolved to expeditiously enact the Local Content Bill making it mandatory for accounting officers to give a good share of the big contracts to local firms.
Nsamba says this is meant to enable them partake of the trillions currently government is spending on major construction works in roads, energy and education sectors. Nsamba says unless the trend is reversed and locals are permitted to participate, foreign firms are going to blow up our economy through unregulated repatriation of millions of dollars.
Nsamba showed us very shocking figures insisting government must act. His figures show that Chinese firms are taking a lion’s share of the multi-billion GoU projects. He reflects on the transport sector alone whereby in the last five years (2012-2017), the roads sector spent over Shs15, 970bn! Of this, Shs12,324bn was from loans and Shs3,646bn was internally raised by the GoU.
On the loan money (Shs12,324bn), Chinese firms took contracts worth Shs11,175bn (or 91%); followed by Israel firms (Shs444bn or 4%), Asian/Japanese/South Korean firms (Shs447bn or 4%) and Portuguese firms (Shs258bn or 2%). Ugandan firms shared zero! On the Shs3,646bn GoU locally generated (not loans, not grants), the Chinese firms still dominated chewing Shs2,193bn (or 60%).
Next were Indian firms which took Shs491bn (13%), Israel firms’ Shs477bn (13%), Turkish firms’ Shs360bn (10%) and Serbian firms’ Shs123bn (3%). This is why we need a law making local content integration in these projects mandatory and imposing penalties for non-compliance.
Nsamba and other MPs are furious that even on projects which are 100% funded by the GoU, our firms are getting zero (0%) and can’t be permitted to participate at all. The Kasanda north MP notes that the Chinese firms, taking a lion’s share, have in the last 5 years relied 100% on Chinese managers for top management positions.
They have also relied 76% on Chinese engineers for all engineering posts and Ugandans only serve as casual laborers and machine operators attracting poorest remuneration. “Tell me why won’t Ugandan firms and their proprietors be collapsing everyday like Red Pepper has been reporting?” Nsamba rhetorically wonders.
“If this trend is not regulated, I fear for the worst where the linkages will continue to accrue to Chinese firms.” This is the disastrous situation Museveni wants to avert. Nsamba’s bill seeks to provide for “affirmative action of sorts” to enable local firms participate in these multi-trillion projects.
“This is good for our Balance of Payment [BOP] position whereby we reduce the importation hemorrhage and volatility in our foreign exchange regime which the President has been complaining about each time he comes to us as MPs to deliver his State of the Nation address,” argues Nsamba.
The MPs say legislating for local content is being done in Kenya and Ethiopia and the results speak for themselves. But some pundits fear that insisting on local content and BUBU-related approaches will make Uganda less attractive to foreign investors who are always patronized by what sources contemptuously called “mafia agents.”
TEXTILES FIRM COLLAPSES
In a related development, another big multi-billion firm is on the verge of collapsing due to harsh economic conditions despite efforts by powerful government officials treating with kids gloves. It’s called Fine Spinners and purports to specialize on textile manufacturing though critics have always dismissed its officials as dishonest and always out to dupe the President.
Located in the former Coffee Marketing Board Bugolobi premises, this Indian-owned manufacturing firm (free of charge) inherited all equipment Kananathan operated under AGOA. Five years ago, the firm was given free land (40 acres in Bugolobi/ex-CMB), free factory equipment, a manufacturing plant previously for Phoenix logistics, free electricity and cotton buffer facilities worth Shs10bn annually.
Cotton Development Authority boss Jolly Sabuni and other powerful actors with unfettered access to State House greatly supported this incentives package on grounds the company would export and bring Forex and create jobs. Specifically, the company bosses led by CEO Jas Bedi (a big name in Kenyan manufacturing) duped Museveni they would create 5,000 jobs and build capacity to annually export textiles worth over $10m.
Shocked Uganda Export Promotion Board bosses revealed last night the fast-collapsing firm hasn’t delivered on its promises. Today it barely employs 200 people where it promised 5,000 and there was generally low level of economic activity when we visited their Bugolobi facility yesterday.
“This is why besides pushing for local content, BUBU and other things, Mzee needs to reexamine advice he gets from some of the people who claim to be investment gurus. He is vulnerable. He likes investors and is always misled to blindly support some unscrupulous investors. How can a firm get so much support like Fine Spinners got and end up not being able to support this economy? There is something wrong and it’s high time that State House investment desk is dismantled and we revitalize Uganda Investment Authority as the main monitor and regulator of investments. Otherwise we aren’t going to progress with some of these sham investors the president is always misled to incentivize: just look at Shimon, UTV land and others,” ranted one of the UEPB officials we spoke to for this article.
The same source added that Bamugemereire’s land probe should also look into the dubious allocation of land and other incentives to what turned out to be kiwaani investors.