Government Cannot Do Business, Not Even Poorly. A case of Uganda Airlines.

I was provoked into writing about Uganda Airlines because of my experience in the airline business, my knowledge in strategy and my travel experience. Having been in the airline business, I follow very closely trends in the airline business and I know that with a current competitive global environment, there is no room for small airlines that are not competitive. Even global brands like British airways, American Airways, Iberia have problems. I noted that my friend, Mastiko Kahunga who is part of the Editorial team of Nation Media in the Sunday Monitor of August 4, 2014 said that my arguments against the airline were wrong.

Well, Mr. Mastiko, I like a good intellectual fight, you have good argument but they are not what I meant. Let me understand what you were saying. You were saying that there is a feeling among people that blacks cannot do business and that business is done successfully by Asian and Whites. You have gone on to argue that this is a wrong mindset. You are a journalist and I am a researcher and we need to engage a little more on this. I cannot conclusively say blacks cannot do business successfully because I have seen the Mulwanas, Wavamunos, Bitatures and they have been successful. But there is something that bothers me in the Ugandan condition. Many Indians have come to Uganda, started a business and been very successful. We now have many changes showing up on our doorstep. Interestingly, there are now more Chinese flying into Uganda and many other African countries than Indians.

As a student of Entrepreneurship, I should say that Business is about perceiving ideas and exploiting them to create wealth. Ugandans are one of the most entrepreneurial group of people worldwide. This is evidenced by research (refer to Uganda GEM reports, you can Google this information). However Ugandans are some of the poorest people in the world. While we are entrepreneurial, we fail to transform that skill into wealth. There are numerous reasons why this is the case. One of them is our lifestyle but the other is that the global competitive environment does not allow us to extract value from international markets while the international companies are able to reap from our markets. A case in point, we cannot export to the European Union because of standards and yet Europe exports freely to Uganda and the rest of Africa.

The solution then is not formation of parastatals from your very arguments, the solution is in getting Africans to start business, make breakthroughs in international markets and compete globally. The parastatals were an acceptance of absence of entrepreneurship in a country. When you talk about parastatals, you talk about government being the entrepreneur, the one who starts and runs the business. This argument runs contrary to what you were professing. Ideologically, I do not believe in parastatals, I do not believe government can do business not even poorly. However, I know that an unfettered private sector can cause untold sufferings to the public creating a need for control. This is the role of government. Besides, in some countries where abject poverty prevails like in Uganda, it is not possible to raise world class companies that can compete globally hence the need for parastatals. Most of Europe has a huge number of parastatals. This is a post-world war ideological position in Europe with the concept of the welfare state. Indeed countries like France have a large number of parastatals. But that is an ideological position. To the contrary, United States, Japan, do not have public enterprises. But they have an efficient regulatory mechanism that supports regulatory and promotional mechanism that regulates business but also supports business to succeed. If you look at Uganda and you examine the non-performing registrar, you will be amazed at who is there. There are challenges with regulations and promotion of business in Uganda. I would support your model, where government starts a business and offloads it onto the stock exchange. I will make additional arguments on another day.

Turning to Uganda Airlines, what I said was a Uganda Airline managed by government is not viable for the time being. In fact not only government, but even if it was in the private sector, the global conditions do not favor an airline today based in Uganda. The competition in the environment is so big, an airline based in Uganda will not make it. If you read Msafiri of August, 2013, the Kenya Airways in-flight magazine, you will see that Kenya airways despite its strong position in the market, has made a loss this year. The British Airways, Iberia, Air France have been in similar problems. So the decision would be if we have to run an airline, we must know that we shall subsidize. I will leave you to go find out what the cost of this subsidy will be and whether this will be Uganda’s priority. 

I also made an argument that even if we were to own one by government, there are numerous challenges of managing public enterprises. Some are governance, others are market. Some have to do with our own lifestyles. If I refresh your memory, recently, (I am not sure which newspaper it was) an interview of Dr. Ben Latigo the former General Manager of Uganda airlines was made. You have heard of challenges at UNBS, National Drug Authority, National Medical Stores, Uganda Development Bank, Uganda Broadcasting Corporation, Uganda National Road Authority, Uganda Wildlife Authority and closer home in my own institution. As a journalist who is interested in this, you may wish to piece together a story of governance and competitiveness in the parastatal sector of Uganda.

Lastly, in management, there is nothing like wrong or right. It all depends on the situation you are in.

PS.
I was responding to Mr.Mastiko's Article in New Vision On August 4, 2013. The article can be accessed through a link below;
http://www.monitor.co.ug/Magazines/ThoughtIdeas/Balunywa+comments+on+Uganda/-/689844/1935836/-/vh3ebb/-/index.html