economic worries for Uganda

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Banking sector solid but shallow in Uganda

Banking sector Solid but shallow

In 2007/08, USA faced a financial crisis following the bursting of the U.S. housing bubble that caused the values of securities tied to U.S. real estate pricing to plummet, damaging financial institutions globally.  It resulted in the threat of total collapse of large financial institutions, the bailout of banks by national governments, and downturns in stock markets around the world. In many areas, the housing market also suffered, resulting in evictions, foreclosures and prolonged unemployment. The crisis played a significant role in the failure of key businesses, declines in consumer wealth estimated in trillions of US dollars, and a downturn in economic activity leading to the 2008–2012 global recession and contributing to the European sovereign-debt crisis.   The signifies importance of a strong banking sector to a country’s economic growth and development which is also well established in the literature

In Uganda, the banking sector which accounts for 80% of the financial sector faced a crisis in the 1990s when several indigenous commercial banks were declared insolvent, taken over by the central bank and eventually sold or liquidated. These included Uganda Cooperative Bank, Greenland Bank, International Credit Bank, Teefe Bank and Gold Trust Bank, which were closed or sold.  

 

The banking sector is now in a healthy financial condition, recording strong profits in 2012, in part because of high interest margins. Banks’ profits after tax stood at Ushs.370 billion in the nine months to March 2013 relative to Ushs.430 billion in the same period to March 2012. Overall total assets of commercial banks grew by 9.7 percent from Ushs14.4 trillion in June 2012 to Ushs.15.8 trillion in March 2013.The banks’ capital position remained very strong, with core capital for the banking system as a whole standing at 18.8 percent of risk weighted assets in December 2012. At the beginning of March 2013, the statutory increase in the minimum paid up capital of banks from Ushs 10 billion to Ushs 25 billion took effect, with all 24 banks in operation now in compliance. Core capital which is the primary form of capital grew by 16.0 percent from Ushs.1.87 trillion in June 2012 to Ushs.2.17 trillion at the end of March 2013. There was also an increase in the liquid assets to deposit ratios of the banking sector from 37.6 percent in the March 2012 to 42.7 percent in March 2013.Credit to the private sector grew by 6.0 percent from Shs.7.19 trillion in June 2012 to Ushs.7.62 trillion by end March 2013, reversing the stagnation experienced during the period September 2011 to June 2012.  However, a slight decline in the stock of loans and advances was registered between December 2012 and March 2013 mainly due to the closure of the lands registry which impeded the banks’ ability to verify land titles which are used as collateral for commercial bank lending.

 

The banking sector remains an effective transmission conduit of monetary Policy. In particular in 2011, the economy faced high inflation levels hitting 30.5% in November. To curb inflation, the BOU aggressively tightened monetary policy by raising the CBR. The CBR was increased from 13 percent in July 2011, when it was first introduced, to 23 percent in October, and remained at 23 percent until February 2012. The increase in the CBR was quickly passed on to interbank rates and other market interest rates. The average interbank rate increased from 10 percent in June 2011 to 27 percent in December 2011. Commercial banks’ lending interest rates increased from 21 percent to 27 percent; and yields on treasury bills and bonds also increased. Consequently annual headline inflation has since subsided to single digit figures at 3.6% in May 2013and the CBR rate is at 11%

However, according to World bank and IMF estimates, Uganda’s average private sector credit as a percentage of GDP for years 2009 to 2012 at 13.9% is among the lowest by East African countries; Kenya ( 34.4%),Tanzania(19%), Rwanda (13.1%) and Burundi at 15.3%. Noteworthy, Commercial banks private sector credit growth subsidized in 2011/12 to 14.6% of GDP from 16.6% in the previous financial year.  Nearly all new credit over the last 2 years has been extended in foreign currency, and is posed to increase in the next few months since commercial banks are slow at lending in Local currency.

 

Linkages with the agriculture sector which employs over 66% of population is still weak. Private sector Credit is largely skewed to construction, trade and salaried loans. The building and construction sector constituted the largest share of total credit, dominating at 23.3 percent. The share of the trade and commerce sector to total lending, which in the previous year constituted the largest share at 21.5 percent, increased slightly to 21.7 percent.  Personal and household loans constitute 21.1%, manufacturing at 8.9% and

 agriculture at 6.4%.

 

There are about 5 million accounts. This is equivalent to a 14% commercial bank penetration rate given the current population of 35 million. Access per 1000 adults for commercial banks remains low for Uganda by east African countries, the Ugandan average accounts per 1000 adults for period of 2008- 2012 is 168 compared to Kenya(523) and Rwanda (215)

Drastic growth of Mobile money to over 11million accounts with a total transaction value exceeding 20% percent of GDP (bigger than the size of proposed budget for FY 2013/14 ) pose a negative risk to  the banks potential profit growth but is a welcome move to compliment the banking sector increase financial access.

 

Financial 2011/12 was a difficult year for Uganda- facing the worst inflation in 2 decades and consequently slower growth at 3.4%. This in turn inflicted down turn risks on the households and corporate. The commercial loss expense provisions in the wake of high interest rates have since increased and the data from Bank of Uganda data shows that commercial Banks’s expense provisions grew by 260% from UGX 77.9 bn(US$ 31.6 M) in December 2011 to UGX 205.9Bn(US$ 82M) in 2012. Also the non-performing loans share of the total lending stood at 4.5% in December 2012 which is twice the amount the previous years.

 

Despite the central bank reducing the CBR to 11%, the decrease was not met with a proportionate cut in credit rates as banks only adjusted lending rates marginally downwards to an average of 24%. Hovering uncertainty, high alternative sources coupled with slow adjustment of credit risk continue to forestall deeper cuts of credit rates by lenders

The banking industry remains solid with high capital and profit levels but penetration rate remains low. The banking sector will grapple with downturn risks of slow growth in the last two years. There is need for commercial banks with high non-performing loans to ensure that lending standards remain high and that loan quality does not deteriorate further. The growth in foreign denominated credit poses an indirect credit risk; the growth in banking volumes due to cross border transactions will require vigilance by both banks and central banks.   Private sector credit to GDP at 14.6% remains lowers than the EAC macro-economic convergence criteria of the 30%.  Banking sector linkages with agriculture sector is still weak.  The passing of the anti-money laundering legislation will come in handy in mitigating misuse of the banking sector to lauder proceeds.  Interesting times ahead though for Uganda as further deepening of the financial sector. Agency banking, Islamic banking, liberalisation of the pension sector should boost the banking sector. The transition requires BoU vigilance

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economic worries for Uganda

Economic worries for Uganda medium term

Uganda’s annual GDP growth averaged 7 percent in the 1990s, accelerated to over 8 percent from 2001 to 2008 and due to global and domestic challenges since 2008- the average growth has slowed; experiencing the worst growth rate in 20 years of 3.2% in FY 2011/12 and rebounding to 5.1% in FY 2012/13. Despite the average growth of about 6- 7% over the last two decades, Uganda’s economy outlook is sound but not all that rosy. 

 

According to the World Bank (http://data.worldbank.org/indicator/NY.GDP.PCAP.CD  ) Uganda’s GDP per capita has grown by 112% from USD 258 in 1986 to USD 547 in 2012.  The GDP per capita growth has been slow primarily due to high population growth; real GDP growth per capita averaged only 3.4 percent over the 1990s, and just over 4 percent over the 2000s. Given our small base of GDP, the economy should aim at growing are more than the growth potential of 7%. Notably the last 2 few years have grown at less than potential and the current 5% is not good enough given the current annual population growth of 3.4%.  Uganda aims to achieve middle income level by 2017 i.e. USD 1000 that is 82.8% growth from the current USD 547.  Uganda’s population currently at 35 million is projected at 40 million in 2017, which implies that for Uganda to achieve USD 1000 per capita- Uganda would need to have grown its GDP stock to USD 40billion ( i.e per capita USD 1000 times 40 million) from its current GDP of 18Billion. Is tenable in next four years, I stand to be quoted in 2017 or least 2020, it is not tenable. In the same abated breath, I allude to some economic worries.

 

The annual population growth of 3.4% is one of the highest in world and if unregulated could lead the country into population curse. In addition to high population constraining Uganda’s high economy growth over the last two decades, it is important to note that the rate at which poverty has been reduced from 56% in 1990 to 25% in 2010 has been almost at same rate the population is growing, that is why the absolute numbers living in poverty have remained almost the same. In 1990, we had 56% of 16 million people (9.1million) living in poverty while today we have 25% of 35 million (8.75 million) in poverty. 

 

The population argument withstanding – Uganda’s tax remains low by regional standards – its revenue to GDP per capita at only 13% is lower than that of Tanzania and Kenya. This is of course way lower than the target set in the east African convergence Criteria of 25%.  The empirical analysis highlight mainly the untaxed sectors, especially informal businesses and some agricultural activities,tax evasion and the tax incentives. In Our VAT is 18% but analysis shows that 15% of the VAT-able base is recoverable is paid. It is commendable that Government will carry out a VAT gap analysis in this current financial year. In many countries especially those similar structure like ours, it is the biggest 5- 10% that pay significantly the tax, so the question would be exploring on whether our SMEs to big tax payers are paying taxes commensurately.  

Slow tax growth means high dependence on the foreign aid or least increased borrowing. The latter has been the case. Our latest budget document shows that the  cost of debt is rising- our interest bill is now at almost 1 trillion (higher that health budget). Notably this is about 14% of cumulative debt of about 7 trillion. The cost of debt should be point of concern despite the debt sustainability analysis showing that debt is sustainable and that there is room for future borrowing given that debt is less than 30% of GDP.

 

In addition to the challenges of the supply side (revenue) of the fiscal policy, the fiscal side of expenditure has also been faced with challenges of budget credibility. The latest Auditor general’s report alludes to several cases of budget indiscipline related to nugatory expenditure, procurement flaws, unverified vouchers, and excess expenditure among others. GoU has also relied on supplementary budgeting for the past consecutive four years .The FY 2009/10 saw a supplementary budget of Shs.500 billion (7.2% of the approved budget); Shs.753.6 billion (9.7%) for the year 2010/11; shs.700.1 billion (7% of the approved budget) for FY 2011/12 while FY 2012/13, the MoFPED the 1^st supplementary schedule was about5% of the approved budget. The supplementary budgets are in most cases dominated by recurrent foreseeable expenditures or least agencies like state house, Public administration. As much as the Public Finance bill currently before parliament, presents an avenue to address supplementary budgets through introduction of contingency fund of 3.5% of approved budget, the good laws in Uganda always remain on paper.

Needless to mention the cost of corruption is high and the Auditor general is his latest report identified about 700bn to have been lost in FY 2011/12. This is 5-7% of the approved budget which is in line with the World Bank estimations of about 5-10% lost in corruption lost annual. At 10% of approved budget lost annually, it implies Uganda losing a full budget year in 10 years.

 

Corruption is not the only constraint to doing to business in the Uganda. In the ease of doing business 2013, Uganda 120 out of 180 countries with the areas under scoring being access to good infrastructure especially energy, ease of starting a business, protecting investors, registering properties, enforcement of contracts and trading across borders. Uganda’s infrastructure is among the worst in the world (Republic of Uganda 2010; World Bank 2007). The National Development Plan identifies weak infrastructure as one of the key binding constraints in Uganda. Roads, power and railways are all below those of Uganda’s neighbors, with grave implications for the economy. It is a welcome move however that the current budget priorities key infrastructure projects in energy, works and transport sectors. 

 On top of the agricultural sector getting only 4% of the current budget proposal, we continue to see limited linkages with the banking sector Private sector Credit is largely skewed to construction, trade and salaried loans. The building and construction sector constituted the largest share of total credit, dominating at 23.3 percent. The share of the trade and commerce sector to total lending, which in the previous year constituted the largest share at 21.5 percent, increased slightly to 21.7 percent.  Personal and household loans constitute 21.1%, manufacturing at 8.9% and agriculture at 6.4%

 Low agricultural productivity arguably is linked to current account deficit which remains at over 10% of GDP. This implies we demand more forex to import than forex we get from exports thus leaving exchange rate vulnerable to volatility. The current account not likely to ease in coming few years due to oil investment imports. Despite the diversification of its export base, Uganda remains heavily dependent on primary commodities. Diversification of the export base is of paramount importance. The factors that continue to constrain export diversification include the primary and low-value-added nature of Uganda’s exports, poor product quality, and poor regulation standards, which inhibit competition in marketing and export of primary commodities. The current account deficit could also dent the further accumulation of reserves the reserves are the main source of revenue for the central bank revenue but due to low rates on international markets, the central bank incurred operational losses in the last financial year.

Uganda will also face a number of other both internal and external risks like  reduced reliance on foreign aid,   the nascent oil sector challenges, supply or structural shocks to inflation e.g. drought,   the global fluctuations on oil prices, the economic conditions in Europe, china and America.  To mitigate the ultimate effects, the monetary policy and fiscal policy have got to be in sync.

 

 

Are the Uganda Real estate Prices sustainable?

Are the Uganda Real estate Prices sustainable?

I recently went looking for purchase a plot of land with my peanut savings, so the broker on knowing the amount I had in mind- he called his network of brokers to look for me a cheap plot intimating “Ono sente tayina za CHOGM”  literally meaning he does not have CHOGM funds. This arguably among other factors could explain the exponential rise in real estate’s prices in Uganda. It is against this backdrop that I try to explore the sustainability of Uganda’s real estate bubble that characterized by rapid increases in valuations of real property

Unlike the stock market, where most people understand and accept the risk that stock prices might fall, most people who buy a house don't ever think that the value of their home might decrease. The laws of physics state that when any object (which has a density greater than air) is propelled upward, it will return to earth because of the forces of gravity act upon it. The laws of finance say that markets that go through periods of rapid price appreciation or depreciation will, in time, revert to a price point that puts them in line with where their long-term average rates of appreciation indicate they should be. This is known as mean reversion. Prices in the housing market follow this law of mean reversion too - after periods of rapid price appreciation (or depreciation), they revert to where their long-term average rates of appreciation indicate they should be. Home price mean reversion can be rapid or gradual. So yes, at some point property prices will come down. The when question is one that has not empirically be answered, therefore the scope is this piece is limited to the key factors that cause the bubble as well pointers to why it might burst.

Economically prices are driven by demand and supply. When demand Outstrips supply, the prices go high and reverse is true. To best understand the dynamics of real estate market, one ought to know the factors that affect both demand and supply of real estate. Assuming the supply is constant (same geographical stock of land), my analysis is limited to the key drivers of the demand side.

Land, real estate prices don’t follow the normal demand law, where the higher demand is driven by lower prices and vice versa. To the contrary, people buy more real estate when prices are high expecting them to rise further. This is primarily driven by speculation as well lack of alternative investments in other sectors like agriculture. The speculation will further stimulated by the huge expectations from the oil sector where the estimates place the value of Uganda's oil assets at a minimum of $75 billion. A substantial amount of this money is to be spent on public expenditure, with a good amount trickling into the property industry. Also worth noting is that a commercial exploitation of the reserves requires about US $10bn of investment which will also inevitably trickle down to  However; Oil trend significant oil revenues (worth 5% GDP) won’t happen until 2030. During the peak period – which is estimated at 15 to 40 years at maximum – revenues will be around US$ 1.1 billion. Often resource extraction often entails little job creation, unemployment rises.

The risk of rising debt levels is that they will likely strain the future oil proceeds. Debt levels increasing simply mean more taxes in future. Currently, Uganda’s post HIPC and MDRI debt is growing at an average rate of 17% per annum in nominal terms, whilst projected to rise to 20% per annum in the medium term and long term frameworks. If we can take a leaf from the Greece or any debt ridden country, austerity coupled with increased taxation only strains the demand levels with a trickledown effect on housing prices

It is reasonable to expect that the number of houses built will increase as approximately the same rate as population grows. However as  much as there is growing demand for real estate and an apparent Huge housing deficits, the structure of the population demonstrates high levels of dependency with over 60% of population below 18years. This coupled with the growing levels of youth unemployment will prospectively lead dwindling demand for non-consumables including land

Real estate bubbles are seen as an example of credit bubbles (pejoratively, speculative bubbles), because property owners generally use borrowed money to purchase property, in the form of mortgages. This is probably the case in Uganda, as in FY 2011/ 12 when the central bank initiated an inflation targeting tool- by increasing interest rates to curb the runaway inflation (30% in November 2011), construction sector grew in real terms at 1.7% in FY 2011/12 compared to 7.8% in FY 2010/11. Real sector activities continue to grow at 5.6% over the last 4 years.  Also notably banks have consequently revised their mortgage valuations way below the market valuations. This move was prompted by dip in housing prices in the center of town. This only points to fact that land and other real estates are wrongly priced primarily due to speculation. E.g. when will land of 1bn shillings in kololo ever pay back?

Speaking of inflation, arguably it could be here to stay primarily. There is an increasing shortage or scarcity of food inputs like land, energy, water etc. yet the demand globally is increasing due to increased population growth rate. Thus the structural changes around oil and food production may be here to stay. With persistent inflation, the consumption share of income of the already small formal sector(less than 10% of the economy) as well as others will increase reducing the available disposable income to clear mortgages or least buy off the overly priced properties.

 

Lastly corruption has a significant premium or call tax on the real estate pricing. Corruption which is estimated annually 10% of the national budget/ about 2.2% of GDP has played a significant impact on the boom in real estate activities. Since the introduction of declaring the source of income for all properties above 50Million, the land and real estate activities have dwindled. Corruption if not curbed in the long run impedes investment especially since it worsens the doing to business indicators as well global competitiveness index thus reducing investor appetite. The expansive Corruption trends will trigger increased citizen demand for accountability which consequently will reduce corruption as well lower demand for real estate products.

 

The Oil potential impact with standing, economic theory seems to suggest that the key drivers of real estate bubble that is corruption, private sector credit, remittances, among others like growth of an economy and expectations tend to be volatile in the long run. So given that real estate the real estate prices are growing faster than any macroeconomic variable, worryingly higher than real GDP growth which is a proxy for effective demand/ affordability, the bubble will inevitably burst unless government takes strong stands to regulate the real estate prices as well as put measures in place to control corruption. Construction and housing bubble will burst faster in medium term (5-10 years) than other real estate activities which will in the long run(10years plus) unless regulation happens. This recommendation is in sync with Joseph E. Stiglitz recommendation on the market failures_ REGULATE REGULATE ofcourse in moderation (checks and balances)

 

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Uganda’s District-lisation Model of service delivery is only Futile!!!!
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Uganda had only 16 districts in Uganda in 1959. The number of districts increased in 1974 and 2000 to 37 and 56 respectively. In 2006 there were 80 districts. In 2011 we had 112 districts till Kampala was recentralised or made an independent accounting authority. At 111 districts, Uganda has the highest number of sub-national political units of any country in Africa. Indeed Uganda at 100+ districts surpasses Russia (83 federal states) to become the first country with the largest number of the highest level sub-national administrative units in the world. The Government now has now proposed to increase the number of districts by 25 putting the number at 136 districts.

Government’s vindication for creation is primary for enhancing service delivery and effective administration in tandem with the 179 article of the Uganda constitution of 1995. This however has stirred debate on whether ditrictlisation enhances service delivery. Against the backdrop of the discussion, I highlight a number of reasons as to why this model is only futile.

To start with each district LG structure in Uganda has five political levels: The district (LC 5);the county (LC4);the sub-county (LC 3);the parish (LC 2);the village (LC 1) coupled with a number of administrative positions as well as other political officers Each district has have following standardised 11 cost centres; Chief Administrator’s Office, Finance, Statutory bodies (including Council and its Committees),Production,Health,Education,Works,Natural Resources, Community Based Services, Planning and Internal Audit. This means the creation of a leads to a significant number of new posts at the district level. First, a whole new set of technical and administrative staff must be hired, including a Chief Administrative Officer (CAO), Resident District Commissioner (RDC), deputy CAO, deputy RDC, and a District Auditor, Clerk (and Assistant Clerk), Community Based Services Manager, Education Officer, Engineer, Extension Coordinator, Finance Officer, Director of Health Services, Information Officer, Inspector of Schools, Land Officer, National Agricultural Advisory Services Officer, Personnel Officer and Planner, among others. A new set of district councillors  representing special interest groups (such as women, the youth and the disabled), averaging out to around 12 per new district, must also go on the payroll. Finally, a new district must also accommodate a district Chairman. This in essence points to fact that starting up a district requires substantial investments most of which in the short run are rather administrative. The Local Government Finance commission has demonstrated that each district requires about 1.2 bn for start-up but Government can only avail 100mn which alone cannot set up a descent administration block.

The uncontrolled expansion is imposing a toll on the national budget especially since the local governments hardly raise any revenues. Eg Palissa has annual revenue of about Ushs. 130 million and is represented by 5 MPs who cost the nation about UShs. 900Million. so do we need all these MPs or least the 900mn can be used to improve services in districts. A district is allocated about 2million for school inspection annually.

On the contrary, despite the number of districts having increased by 39% from 80 districts in 2006 to 111 in 2011, the Local government share of the budget continues to dwindle. (For instance, over the MTEF 2006/07- 2013/14 over 69% of the budget is spent on centre programmes and only 31% on Local Government programmes.) As per FY 2012/13 only 21% of the national budget will be spent at the local government level. Also still most of the local governments depend on 90% central Government transfers. Also notably, despite the increase in the number of districts, services are increasing being centralised e.g. the procurement of drugs by NMS, the 10,000kms taken over by the UNRA, centralisation of Kampala city council by central government into KCCA among others.

An empirical paper by GREEN ELIOTT, “Decentralization and Conflict in Uganda”, London School of Economics in: Conflict, Security and Development 8, 4 (December, 2008) concludes that district creation is a platform for entrenching political patronage by the current regime to win elections. This is a synomyous to process to the old American practice of gerrymandering, whereby sub-national political units are altered in size or shape in order to alter the majority/minority status of certain political, racial or ethnic groups. A case in point arguably is when an opposition district is broken into several units and the ruling party spends our natonal treasury to win over the seats for the created units or least break an NRm district into several units. This districtlisation is the reason we have such a bloated parliament of 365 members, the majority over 70% being NRM members, rendering the pertitent discussions always ending up in favour of the ruling party.

The benefits of creation new districts(most of which are shortterm) with standing, there is limited evidence todate that creation of  districts ehances service delivery. So there is an evident need to evidence based policy rather than the politically driven policies. The latter always may not yield traction.

The Booming Ugandan Corruption bubble Requires the ASIan NO Nonsense corruption model  to Burst!!!!
With reference to the latest acquittal and discharge of 2 of the 3 former health ministers accused of mismanaging Shs. 1.6 bn meant for Global alliance for Vaccine and Immunisation(Gavi), a friend intimated that if the 2 are innocent, then Uganda’s corruption is so deep rooted that even the innocent looked guilty. The deep rootedness perception is in sync with the President’s outcry that Uganda is full of thieves” In that regard, we should treat all corruption alleged culprits as guilty till proven innocent rather than the other way round.

Corruption basically means the misuse of entrusted power for private gain. There are mainly 2 forms of corruption; Political corruption and administrative corruption. Uganda arguably is marred with both forms of corruption. Political corruption is when laws and regulations are more or less systematically abused; side stepped, ignored or even tailored by rulers to fit their interests. Public Financial management assessment 2008 notes that “Basic systems are in place, but non-compliance, violations and non-enforcement is common” which signals Uganda’s corruption is largely political. This is well demonstrated by the fact that the Ugandan government has a zero tolerance policy on corruption BUT yet again the president continuously alludes to entrenchment of corruption in his country. Similarly the African peer review mechanism noted that Uganda has the largest implementation gap that is the difference between the country's legal framework for good governance and anti-corruption and, the actual implementation/enforcement of that same legal framework. This perpetuation signals the lack of political will to tackle the problem, and has cemented the Impunity around the corrupt. 

In fact, when one reads “My time to eat by James Kemoli Amata” book, it immediately points to our corrupt banana republic- Uganda! Both domestic and international data sources of corruption allude to deteriorating or worsening trends of corruption in Uganda. The World Bank (2005) estimates that Uganda loses about 500 billion per year through corruption which represented 10% of the Budget. This implies Uganda loses a full budget year every 10 years to corruption!

The first Data Tracking Mechanism report on corruption by IGG highlighted implementation flaws at each stage of the budget cycle (planning, budgeting, accounting and reporting, auditing, and audit oversight) that lead to corruption. Virtually all spending agencies (local government or central Government) have been marred with corruption scandal at some point. The most prominent cases being the now 5 years old CHOGM, the HABA case, the UAC, NAADS, GAVI case, NMS, UNRA, NSSF the list is endless- of which these cases have common denominators or players. The IGG who publishes bi- annual reports to parliament has continuously lamented over parliament’s failure to discuss the reports he presents to them, consequently leading to non-closure of the corruption cases or least the reports will be “DEAD on ARRIVAL” by the time they are discussed.

The IGG notes syndicate corruption that is the interlinked corruption at every stage. The multicity of oversight bodies like audit offices, PAC, IGG, among others only espouses corruption rather than eradicate it. The very reason we see no service delivery at the end- because compromise likely happens at all oversight bodies. E.g. if the former accountant at OPM Kazinda is actually as rich as speculated yet he earned a salary of 1.1m UGX, it points to the fact that oversight bodies above him could have been compromised. A friend who formerly worked at LG centre (district) once told me auditor is always welcome by a brown envelope. Hypothetically Auditors, accountants, accounting officers (Permanent secretaries and CAOs), head of Government projects are rich way beyond their formal income streams. That said, the special institutions of control (ombudsmen, IGG, AG etc.) are also particularly weak, and prone to being overrun by informal politics in Uganda. Also a report from Uganda’s Inspectorate of Government (the Data Tracking Mechanism on Corruption) indicated that corruption has become worse in the police, judiciary as well as in health and education sectors.  If the enforcers or oversight bodies like judiciary or least legislature esp. PAC are corrupt, then how will corruption ever be solved? Against that backdrop- simple indicator would be “Do the PAC reports always reflect the Noise they make? Or rather the noise if for arm twisting?”

Contrary to decentralisation or creation of districts opening up voices for accountability, it exacerbates the corruption through increased networks of corruption. Anecdote evidence seems to suggest  that the presence of Inspector General of Government regional offices is confirmed to be strongly associated with reported corruption cases.

The 2011 Transparency International Index indicates a negative trend of corruption for Uganda, now ranked 143 out of 182 countries assessed from 127 out of 178 countries in 2010. Meanwhile in 2011 Rwanda continued to rank highly as the fourth least corrupt country in Africa and 49th in the world.

Although some researchers have argued that a minimal amount of corruption might be efficient because it removes government imposed or allocates scarce resources to those with the highest willingness to pay, the leading view is that on the overall; corruption has adverse effects on economic growth. Economically it affects negatively the investment climate, infrastructure (the pothole culture in Uganda), social equality as well as a tax/ significant effect on inflation which the poor as well end up paying for.

In a nutshell corruption is so politically entrenched in this country; in that there is fear that de- entrenching it will inevitably cost the current regime power.

1.      Given the lack of political will, Uganda needs a Kagame mould or Asian model of zero tolerance to register success against corruption.

2.      At the back drop of cases stalling in courts, and political interference, it is critical that While the investigation and prosecution of corruption (criminal in nature) is solely the responsibility of (1) CID in collaboration with the DPP or (2) the IG (with in-house police investigators), the Magistrate’s Courts Act (MCA), Chapter 16 makes provision under section 41 for any person to initiate criminal prosecutions, otherwise called private prosecution. There are accountability CSOs such as ACODE, ACCU, UDN and even the Uganda Law Society which have filed cases in public interest before.  However the Currently there is no law which enables private citizens in Uganda to pursue these matters by way of civil proceedings, there is need to review the laws in light of the current political interference in the judicial process

3.      As empowered by the leadership code, the IGG should validate civil servants mainly accounting officers’ income, assets and liabilities as well as those of his/her spouse, child or dependant.

4.      Use of targeted sanctions; in neighbouring Kenya and both the United States and European Union threatened targeted sanctions against stubborn political leaders in the administration who were suspected of blocking constitutional reforms and engaging in grand corruption. The sanctions included travel bans and revocation of visas for the leaders and their families.

5.      There is need for closure of the accountability cycle, the PAC reports should be followed through on time, as well the accountant general producing respective treasury memorandum.

6.      There is also need to rotate accounting officers to avoid continued collusion with suppliers or contractors. This has worked effectively in other countries as well as in some statutory agencies like URA

7.      Lastly the voice and accountability starts with you. You are the voice of change especially in light of the envisaged oil influx in a few years.  Otherwise given the prevailing corruption trends, Oil arguably will be a curse