June 2020 – Prime Time Communications

News

#OutToLunch Let people buy their radio sets and face masks

By Denis Jjuuko When COVID-19 struck, the government promised some people food and indeed some households got. It somewhat showed a government that cared for its people even though the distribution was bogged. Even the biggest economy in the world, the United States, gave its citizens something with adults getting checks of US$1200 and children US$600. In Uganda, there were arguments that instead of food, people should have received money on their phones to boost spending to restart the economy. From free food, we were told of free face masks for everyone above six years old. Like it was with food, many people have never received their free face masks. Then last week, the government promised free radio and TV sets to enable kids to learn during the lockdown or enable politicians campaign now that the electoral commission is talking of campaigns carried over the airwaves. Ugandans are supposed to go to the polls next February. The newspapers said 10 million radio sets will be distributed each costing Shs38,000 or approximately US$10. Ugandan governments since independence have run a mixed economy. Providing free medical care in government hospitals and free education. With Universal Primary Education (UPE), a child can study for free up to university. Many farmers today receive agricultural inputs in seeds and other stuff to boost their income. I think some progressive farmers have made significant progress taking advantage of these freebies though the majority have remained dependent on the seeds. A face mask on average in Kampala costs Shs2,000, which is less than a US dollar. Even when the economy has been shut down during the COVID-19 pandemic, we should assume that the majority of people should be able to buy themselves a mask that costs that much. If they can’t and therefore need to be given free ones, then there is a major problem we need to address. There is a famous saying sometimes attributed to the Chinese that posits that it is more important to teach people how to fish than giving them fish. With face masks and free radios and everything free, we are giving people fish when they can fold their sleeves, get on a canoe and catch the fish themselves. If they learn how to fish, they can always get themselves what to eat. If we give them fish, they will be looking at us every few days even when the lake full of fish is just in their courtyard. We have had many poverty alleviation campaigns for many decades now, it is time to assess their impact. If these campaigns have had any impact, we shouldn’t be now thinking about giving out free masks and now free radio sets. Many years ago, people may have lacked TV sets (like they still do today) but most households had radio sets. How come today they must be given free ones? We should campaign less on giving people free stuff rather enable them to afford the basics of life. We should ensure that any household that needs a radio set worth approximately US$10 can have it by buying it themselves. The same applies to the face masks. This can be done easily by creating markets for mainly agricultural produce because the majority of Ugandans depend on agriculture. Many years ago, if you moved into an area where people, for example, grew coffee, you would find either a coffee factory or a store. It meant that people in that area had somewhere to sell their produce. Many people when they needed anything, they could simply present their delivery notes for credit just in case the factories hadn’t paid yet. People took their kids to expensive schools because of coffee and other cash crops. This is something that could be done again. The money that has been spent on free face masks and what will be spent on radio sets is approximately Shs500 billion. There are 134 districts in Uganda today. This means that Shs3.7 billion or approximately US$1 million per district. This is enough money to set up a project at least in one of the district sub-counties that can significantly, if well managed, change the lives of the ‘vulnerable poor’ in that area. If we continue tuning the mindset of the poor that everything will be given to them, nothing will change. The dreams we have of a middle-income country will remain just that — dreams. Of course, there could be people who benefit when people are so poor but we should not forget that the poor are the same people who will be used to challenge those who are currently benefiting from them. The writer is a communication and visibility consultant. djjuuko@gmail.com

June 25, 2020

News

#OutToLunch New KCCA team should prioritize easing Kampala traffic

By Denis Jjuuko Last weekend, a new team of executives was proposed by the President to lead the Kampala Capital City Authority (KCCA) after the resignation of Jennifer Musisi Ssemakula two years ago. The letter nominating the new team, which widely circulated on social media indicated that they should go through formal interviews I think as some form of legal measure. Their jobs are assured. I offer my warmest congratulations. I must admit that I am not sure what is entailed in their terms of reference but one area that is making Kampala ungovernable is the issue of transport. The outgoing acting team recently came up with taxi routes and numbers but I am not sure how they solve the city’s endemic traffic nightmare. It is unacceptable for people to spend 2-3 hours driving a distance of less than 20km — the same amount of time an average pedestrian needs to cover the same distance. So on average, people who work in Kampala lose four hours every day in traffic which translates to about 1,040 hours a year for those who work five-day weeks. Uganda’s economy is mainly based in Kampala and therefore makes losses of approximately US$800m or Shs3 trillion a year in gross domestic product according to the World Bank. KCCA itself carries this unwanted statistic on its website. There is a need to significantly consider public transport by implementing a multimodal mass transit system that can decongest Kampala. One of the ways Dorothy Kisaka, the nominated Executive Director for KCCA needs to look at is buses. The time for 14-seat passenger vans (taxis) is over. A bus with the capacity to carry 90 passengers can get 6.4 taxis and about 40-45 vehicles off the road. Private vehicles carry on average only two people. I know that Ugandans love cars but they do so mainly because of systematic problems in the public transport sector. Many cars for office workers are parked all day and they are expensive to buy, fuel and maintain. A reliable public transport system would see many people dump cars and free up their resources to invest elsewhere. On average, a reliable old car costs approximately Shs20m — enough money to start a sustainable business that can employ a few people. Buses offer the first step in this multimodal approach. Kiira Motors, a government entity, has developed capacity over the years to make vehicles. Their Kayoola EVS, fully electric, city buses could save Kampala from congestion as well as from the fumes of 15-year-old vehicles that dominate the streets. KCCA can easily organize taxi entrepreneurs to consider buses. They can give them incentives such as special lanes. A part of Kampala city roads is reserved for street parking. If we worked on our public transport, there would be no need for street parking since many people will be coming to the city by public means. The buses won’t need any parking as they would be consistently on the move whether with passengers or not. The spaces designated for street parking will then be made special lanes for buses. The same lanes for buses could be used by trams. The people who are currently employed in the taxi sector will still be employed on the buses and trams. In fact, more people will even get jobs. With buses in place, KCCA can go ahead and charge prohibitive fees to private motorists to enter the city. The parking fees can also be raised to deter street parking in the areas where bus lanes are not needed. Many people who drive private vehicles in Kampala as a form of transport easily jump on public transport vehicles while outside the country. If they can jump on trains and buses in London or Dubai, why can’t they do so in Kampala? If we make Kampala expensive for people to drive in, they will use public transport or force others to work from home. As COVID-19 has taught us, most office work can be done from home. During the lockdown, many people managed to accomplish their work from wherever they were. Once the lockdown was lifted, they went back to their routines. Many times people drive to Kampala for meetings, banking, and such other stuff that can be done online. Of course, it is always nice to meet people physically and establish proper relationships but such meetings should only be held when necessary. The writer is a communication and visibility consultant. djjuuko@gmail.com

June 18, 2020

News

#OutToLunch George Floyd, bank mergers and lessons for Ugandan SACCOs

By Denis Jjuuko As the United States of America was engulfed in flames following the killing of an African American, George Floyd, in police custody, an interesting story surfaced online. In the story, African Americans were urging each other to support fellow African American or black businesses. The story says black banks, for example, had experienced substantial increases in the number of blacks opening accounts. At the same time as this story was spreading, Bank of Uganda gave no objection to the merger of NC Bank and CBA Bank. Both banks are Kenyan owned and have been in Uganda for a couple of years but as small players. Their merger, we were told, has created a bank with assets worth more than Shs500 billion. The merger followed an earlier one in Kenya where both banks are headquartered. The merger in Nairobi created a behemoth worth US$4.4 billion or a whooping Shs16.2 trillion in Uganda currency according to Reuters news agency. This moved the two merged companies from mid-tier banks to the third-largest bank with more than 38 million customers. Before that, in 1991, in South Africa, some small banks merged to create the Amalgamated Banks of South Africa commonly known as Absa, which recently entered the Ugandan market by acquiring the assets of Barclays in Africa. The merger of small banks created a unicorn that is now a big financial power on the continent with a recognizable brand plate. These stories made me think about our SACCOs and investment clubs. There are thousands of them in Uganda with many assets releasing billions every week to millions of members but in such small amounts that they go almost unnoticed. What can they learn from the business lessons emerging from the death of George Floyd many miles away? What stories do they get from the merger of NC Bank and CBA Bank? These SACCOs and investment clubs have money in billions but they haven’t earned their place on the table. They are not controlling the economy. Many invest members’ savings in commercial banks earning a small fee on their fixed deposits. If they merged, they would become a force to reckon within the financial sector. They can start directing the economy. They can become banks though they don’t necessarily need to do so to create impact. There are many business models. Many SACCOs and investment clubs give members loans to buy imported boda bodas. How about funding a factory to assemble the boda-bodas? They would fully control the boda industry. A boda-boda costs less than US$300 in India but sold here at about US$1500. The SACCOs working together can change that narrative with their boda boda production plant. They already have the money; they just need the vision for big business. In many villages, there is what is called VSLAs or Village Saving and Loans Associations, which collect money every week. They enable each member to borrow and do their little business usually in the agricultural sector. How about if they simply agreed at a parish or even a sub-county level to change a little bit and decided to invest in one or two crops say the growing of onions. Such a village will be known for onions. It will attract onion buyers there and significantly reduce the cost of transport for onions. They would also collectively bargain for better prices as they would be a big force in the onions market. Government agencies such as NAADS will pay attention to this sub-county and probably set up a processing plant for them to add value to their produce. But if each member in the same village, parish or sub-county continues to grow their own crop on their own little pieces of land, they will remain poor substance farmers for life and the cycle of poverty will continue for generations. Many big companies also have SACCOs from which staff borrow to pay school fees, build rentals that bring almost zero returns and cry when jobs are shifted elsewhere. Yet some of the SACCOs can easily turn themselves into businesses that supply that very company where the members work. They can supply the company with raw materials if they are a factory or even consumables for offices. They can supply others as well. Of course, these ideas can only work if the SACCOs institute proper governance structures and have qualified managers in place. I believe that the money in SACCOs and investment clubs lying idle in fixed deposits and dormant land investments can easily create a revolution in this industry. We simply need to think like NCBA Bank or Absa before it. They can pull money to do big business like we are seeing African Americans learning from George Floyd. The writer is a communication and visibility consultant. djjuuko@gmail.com

June 12, 2020

News

#OutToLunch Ongoing URA changes should address SME challenges

By Denis Jjuuko Over the weekend, several senior managers at the Uganda Revenue Authority (URA) tendered in their resignations ostensibly to pursue other careers. Social media as is usually the case went overboard with some people claiming it was a purge that the officers didn’t choose to resign rather forced to do so. URA issued a statement saying the board made recommendations concerning the “reorganization and management” but “some senior officials chose to resign and the board accepted their resignation.” There is nothing new in mass resignations in organisations following an appointment of a new boss. However, what concerned me was the statement, which talked about “reorganization and management of URA” though my concern isn’t merely in the personnel, those can always be replaced. The way URA works is what needs to change and I hope the “reorganization and management” will consider small and medium enterprises (SMEs). There is a need to change or push to change the many taxes that end up strangling small businesses. The income tax rate is at 30%, excise duty at 15%, withholding tax at 6% and VAT at 18%. All these taxes may be fine for large organisations, but for small companies, they are a death sentence. So imagine a company that gets a Shs100m contract, runs to the bank to get a loan to execute the assignment and the loan is granted at 24%. If they pay all those taxes and the interest fee, what do they remain with? But before the company even gets a contract, it must submit a tax clearance certificate (TCC). Some years ago, URA people sat in a boardroom and came up with an ingenious idea —TCC must be issued per a bid. So if you are bidding for work in Company A today, you apply for a TCC that goes to Company A and if tomorrow you need to make another bid to Company B, you apply for another TCC. Never mind that you just got a TCC a day before. The funny thing is that today URA can issue you a TCC and tomorrow they can reject to give you one. I don’t know what makes URA issue a TCC today and refuse to issue another tomorrow. This process of applying a TCC per bid is another cost for SMEs because many rely on external consultants to process these certificates for them. Why doesn’t URA issue a TCC for say six months or one year? If they fear that SMEs will forge them, they can a create verification system. If people can quickly verify in whose name is a vehicle registered at URA, why can’t they verify whether a TCC is genuine or not? Taxes like VAT should also be reformed where SMEs don’t have to pay URA once an invoice is issued rather when they have been paid. I know there is an option for this but its administration is even more complicated than paying URA before a company is paid because you must have paid all your VAT before you allowed this option. Where does an SME get the money to pay taxes for money it is not sure will be paid on top of servicing loans at crazy rates? URA sometime back introduced a very good system where some types of businesses are charged a set rate as income tax. They call it a presumptive tax. Businesses like salons pay this rate instead of self-assessments. The figure payable is set regardless of the profit made. I think this is a very good way of taxing SMEs. However, they left out many businesses that could pay more taxes if they were asked to pay a fixed rate. Self-assessments are cumbersome to both the small taxpayers and URA. The URA needs many staff to look at documents before they accept that the self-assessment is correct. Many times, URA refuses self-assessments and institutes charges that are way above what an SME made in a year. That involves a lot of back and forth before the tax is paid if ever paid. There is a need to widen businesses that pay a presumptive tax rate but also consider the size of business. The other alternative is to have an income limit where, for example, if the business earns less than a certain amount a year is allowed to pay a presumptive tax than going through the cumbersome processes of self-assessment. This will reduce the number of companies filing zero profits and therefore paying nothing in income tax. Also, URA needs to handle SMEs differently. For example, the assessment forms for Withholding Tax exemptions shouldn’t be the same for all taxpayers. A simple form for a small business is sufficient whereas, for the largest taxpayers, they can have a form that fits their size. As URA was issuing statements about its staff resignations, MTN was issuing another regarding a tax case involving Shs326 billion which the telecom giant questioned in court. The assessment came to Shs24 billion but MTN further appealed to the Tax Appeals Tribunal. To cut the long story short, MTN got an interim order against the enforcement of URA notices. MTN as a large company can afford silver-tongued lawyers and appeal even for 20 years but SMEs can’t. A mere lack of a TCC is a disqualification from a potential contract. Excessive assessments from URA simply lead to heart attacks for the owners and closure of the business. URA enforcement officers also love small companies — they quickly attach bank accounts, put padlocks on the premises and such other things. For the big boys, they simply sit on the table or go to court. Changes at URA, therefore, shouldn’t stop at just personnel but the way tax administration is carried out especially for SMEs because they are the majority and employ more people collectively. Customer care is critical if URA is to achieve its tax targets and SMEs can play a critical role if URA invested time and resources to understand them and address

June 4, 2020