During the Capital Gang on 91.3 Capital FM Radio of July 30, 2016, the hot topic of debate was is bailout! Many opinions on this is divided-some say it’s wrong to bailout irresponsible tycoons when no one else has been assisted in the past apart from Basajjabalaba.
However, bailouts have happened before like in the USA where it worked and the economy recovered- the argument was that banks were too big to fall! In Europe however, Greece in particular sank economically and despite International Financial Institutions like the World Bank (WB) and International Monetary Fund (IMF) coming to try and rescue the country, the bailout hasn’t worked!
Dr. Richard Mukungu, the guest to the show and an economist, recommends a bailout but doesn’t agree with reducing interest rates.
The credit process has also not been followed by the banks, says Mukungu who is a Banker himself.
He also says there was a misrepresentation on the word bailout on the scheme.
Mukungu said there nine interventions recommended by economists that were founded to the Prime Minister, Ruhakana Rugunda, who was to brief President Yoweri Museveni for clearance. He said among these, were;
1. That was need for government to pay out all domestic arrears. In this case, the only category that would be considered to be on bailout were the traders who supplied South Sudan and were never paid, he said.
2. The second category were companies in the oil sector.
What increases domestic high interest rates is domestic borrowing.
Mukungu says there is urgent need to address local content. Local companies have not been supported to receive such treatment so that they can recover and help in the economic growth.
“When it comes to international companies, there are treated differently, this is not sustainable as most of this money is usually repatriated. If local companies are supported, the money remains within the economy and hence jobs can be created and maintained,” he argues.
Mukungu says 2 things are causing the current domestic debt. These he said is the current delay in the production of Uganda’s oil.
However, oil prices have fallen by more than 50 percent and China itself has slowed somewhat, these oil and gas exporters are facing a current account deficit.
Other economic analysts have also argued that the rapid economic growth that much of sub-Saharan Africa in the past 20 years with a growth registered between 1991 and 2011 appears to be coming to an end. And that is what is behind the present crisis leading to major Kampala companies requesting government intervention.
Ibrahim Nganda Ssemujju, the Member of Parliament for Kyadodo East, claimed on the show that the list to bailout the companies in crisis are a “Saleh project”, meaning a list drawn up by Gen. Salim Saleh, brother to President Yoweri Museveni.
He mentioned that there were rumors in in Uganda that some of the companies in question are owned by the First Family, Ssemujju claimed on the show.
“Even if this is true, the fact of the matter remains that businesses are struggling because of fundamental weaknesses in the economy and the end of rapid growth of 1991-2011.One of the features of this 1991-2011 growth is something we often overlook: it was growth driven by heavy investment in infrastructure, most of which infrastructure was dependent on imported materials,” he explains.
He said government needs to quickly come out and recognize that there is indeed a problem to be fixed with the economy before this get out of hand.
To build the arcades, airports, roads, supermarkets, high-rise apartments, government offices and other infrastructure, we imported most of the materials.
Thus we were growing – but growing ourselves into national deficits and debt.
It was not our fault to wish to upgrade our infrastructure; but lacking the capacity to produce industrial materials of our own we had to import them and that is how we grew our way into the deficits we now see.
It was the same thing for the growth in the purchases of mobile phones, cars, televisions, computers, music home theatres, fridges, cosmetics, clothes and other imported consumer goods.
Growth that is mainly from imports had to one day come back to haunt these African countries and finally it has.
“You will be surprised that many of the traders in South Sudan are actually not Ugandans. Some People are just making claims for their benefit,” Ssemuju says.
Abdu Katuntu, the Bugweri County Member of Parliament however says there is also a problem on how these companies are managed.
He argues that many of the companies need restructuring to enable them work more efficiently.
“Some of the managers in these companies luck the necessary skills that can foster growth. What do expect if you have an incompetent team of managers running your businesses?”
He also wondered where government would find the 1.3 trillion shillings since it has a huge foreign debt already to think of.
The Gangsters as the like to be referred to also had a discussion on the on-going NRM retreat in Kyankwanzi and wondered if this time, government would improve on the delivery of services to Ugandans.
The weekly programme is moderated by Journalist Oscar Semweya Musoke.
