Africa's Unending Poverty challenges: A Case of Malawi

The reports about Malawi being a success story in agricultural production were very interesting and a challenge for many African countries. To date there is a feeling in many African countries that not enough money in the national budget is being allocated to agriculture. Malawi did this starting in 2004 by giving a subsidy to farmers and is reported that Malawi started harvesting maize in surpluses which enabled it to export to other countries. It is reported further that this was opposed by donors who say subsidies were against the principals of free markets. Donors withdrew their usual support for the government budget deficit and the Malawian economy crumbled. What is the problem? The problem is begging. If you rely on donations, when the rag is pulled away from you, you will definitely collapse.

I have argued and will again do so that African emergence from poverty lies on increasing production in and productivity of agriculture. The problem of not being able to produce more has dire consequences not only poverty but hunger. And to overcome hunger, donors must again be gracious enough to donate food to these poor Africans.

See article

Why MUBS will not become a University

In 2006, cabinet directed that MUBS be transformed into a university. 8 years down the line, nothing has happened. Since then, about 20 other universities have been established. In 2010, after a visitation ordered by the National Council for Higher Education, the NCHE recommended that MUBS should be made a degree awarding institute.  A degree awarding institute does everything a university does except call itself a university. UMI is one such in the public sector and the TEAM is the other in the private sector. When you go through the list of NCHE that classifies tertiary institutions, MUBS is listed with those institutions that do not have a single person with a PhD. In fact you take pains to look for where MUBS is.

When you write and complain (like I am complaining now) those concerned will say these people complain too much. In this world, you never get what you deserve, you get what you negotiate or fight for. Unfortunately, we have failed to identify the one single person that has made decisions about MUBS not to be implemented. When you go to seek assistance, since this country is an assistance seeking one, they will tell you that you are part of Makerere and yet Makerere cannot give you a single coin.

This story appearing in the vision of February 22, 2014, is that Belgium gives universities shs.5billion for research. It is a pity that we are still a public tertiary institution that is not expected to do any research and yet the research output from MUBS is phenomena. What bothers me is that MUBS is a public institution and a leading business institution in the region. MUBS has made tremendous contribution to the country’s business and management training. MUBS has tremendous opportunity to contribute to the economy in various ways. However somebody out there has locked out these opportunities for some selfish reasons.

MUBS annually looks for about USD 100,000 to participate in a Global Entrepreneurship Monitor Research. This research has been fundamental in understanding entrepreneurship in Uganda. Thanks to the few people who have funded the research over the past two years and thumbs down for those who continue to keep MUBS out of its rightful position. By the time MUBS is given its rightful position, it may be too late because universities in our neighboring universities have picked out the loose ends in the MUBS game and are doing what MUBS has been doing very well without limitation. MUBS has had its hand tied behind its back, it legs chained and told to run.

The struggle continues.

Poverty Series III

Poverty as you know is rampant in Uganda and indeed many other African countries. Numerous solutions are being proposed. In this article that follows, the UN Agricultural fund is focusing on promoting small holder farmers as a way of reducing poverty. 

Over the years, in dealing with these matters, i have read beautiful articles and listened to beautiful voices talking about how poverty can be addressed. Unfortunately, the years of this talk and proposals continue to produce nothing. Yes it is true, we must support the small holder farmer but a realistic view about what is happening is that there has been no significant change in the lives of these farmers. if anything they become poorer. Take a case of coffee farmers in the Busoga area and i look at my village where i hail from. Coffee has traditionally been grown by small holders throughout Uganda. There are a few plantations in Uganda. What has happened to the small holder farmers? The decline in prices made the coffee farmer abandon the production of coffee. Coffee grows over years and will continue to yield fruit even if it is not well tended.

The decline in prices offered by the farmer is a reason why it was abandoned and yet the demand for coffee worldwide continues to grow. Who rips from the coffee sales? It is the big multinational companies. I saw reports that German exports coffee worth USD 9billion a year and yet it does not grow coffee. it is re-exporting processed coffee. What is the solution to improving the lives of the coffee farmers? It is all about fair trade, giving value to the people who grow coffee. It is not about giving them aid, it is not about extending credit to them, as long as they do not get value from what they produce, they will never take coffee farming a very serious business.

If somebody else is making the profit, it means therefore that the actual farmer will continue to be poor. I have argued that increasing production is one step but you have ti increase production when there is a proper market. Increasing productivity is the other however efficiently you produce, as long as you do not earn the value from it, you will continue to be poor.

Those who are interested in improving small holder farmers lives, let us review this a year from now to see what improvements there are if any.

Small holder farmers are the solution to poverty — UN

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Supporting smallholder agriculture breaks the vicious cycle of poverty while preserving scarce natural resources

newvision

By Vision Reporter

The UN agricultural development fund has been asked to focus more on promoting small holder farmers to reduce poverty. The call was made during the 37th session of the Governing Counsel of IFAD in Rome. 

Fabrizio Saccomanni, the Italian minister for economy and finance, asserted that ensuring small holder family farmers have adequate access to credit and investment is of paramount importance for poverty reduction.

Speaking to international policy makers, farmer leaders and private sector representatives, Saccomanni said that while some progress had been made, much remains to be done to eliminate hunger and poverty.

“The challenges ahead require a radical increase in agricultural productivity, but this has to be pursued in a sustainable way,” he said.

“Supporting smallholder agriculture is the way-out, as evidence and research show; it breaks the vicious cycle of poverty while preserving scarce natural resources.”

IFAD is a specialised UN agency and international financial institution that provides investment funding aimed at creating a route out of poverty for rural people in developing countries, most of which are involved in Agriculture.

Uganda is one of the developing countries where 67% of the population is said to be vulnerable to poverty with about a third of that number living under poverty line. The 2012 expenditure review said that 92% of the poor live in rural areas and overall 89% of the country’s estimated 36m people are classified as rural.

The country’s mainstay is agriculture, but most of the farmers are subsistence farmers, whose livelihoods are threatened by the changing climate and lack of assistance to mitigate increasing loss of soil fertility and droughts.

In his statement, Abdullah Jummah Al-Shibli, Assistant Secretary-General for Economic Affairs of the Cooperation Council for the Arab States of the Gulf Cooperation Council (GCC) underscored that farming families are important for socio-economic development and stability.

Women have a particular role to play in food security and through their empowerment, poverty can be eradicated, he emphasized

IFAD President, Kanayo Nwanze, welcomed farmers’ representatives and delegates from IFAD’s 173 Member States, including its newest member, the Russian Federation, which announced its commitment to support the replenishment of IFAD’s resources.

In his speech, Nwanze stated that today agriculture has an unprecedented potential to drive economic development and inclusive growth.
 

How do people make more money than others?

I was returning from Dar es Salaam last week and I found notice at the arrival hall in Entebbe airport that said “The family of Sudhir and Jyotsna Ruparelia welcomes you to Uganda”. It must have been something like that but cannot say exactly what it was. I wondered why this signs post was here but my mind said to me this man has more money than half of all Ugandans put together, so he could sneeze and these people catch a cold. May be he had just wanted to have this here because he had that financial muscle to do it. Little did I know that he was welcoming visitors to his daughter’s wedding. Well I read that the wedding was being done the third time. This kind of pissed me off but I said to myself who am I to decide how Sudhir spends his money. I don't think anybody should tell me how I spend mine.

The questions that come to my mind as a Ugandan who has attempted to contribute to removing poverty in the country through education I ask myself what has Sudhir done that his contemporaries haven't done to make so much money. How can we have Ugandans try to make as much money as Sudhir has done? What do we learn from Sudhir. As Entrepreneurship scholars we are interested in what we can learn from Sudhir. I am asking him through this media to engage our graduate students on his motivations. , what it has taken him to make the tones of money which enables him spend $2million on a wedding. 

See Article below which appeared 

Pomp, Glamour as Ravi Marries Meera Again

Love is a beautiful thing that deserves to be celebrated. Ravi Kotecha met Meera Ruparelia eight years ago. She was 20 and he was 23.

The two lovebirds took the bold step and walked down the aisle last November at the Mandarin Oriental Hotel in Hyde Park, one of London’s most exclusive hotels.

The wedding was attended by only 200 guests, which called for another reception, two days later, that had 900 guests at the Grosvenor, another exclusive London Hotel. Sudhir flew hundreds of guests from different parts of the world into London. But that wasn’t enough as it called for a Kampala ceremony that coincided with Valentine’s Day.

Kotecha is a Kenyan businessman, also born to one of Mombasa’s real estate and haulage honchos. He met Meera when he frequented Kampala where his uncle, Bhasker Kotecha, owns Midcom, a giant mobile phone dealer in Uganda.

Meera is the daughter of tycoon Sudhir Ruparelia, a man with a big heart and naturally with many friends. He decided that his family, friends, business colleagues, associates and contemporaries who didn’t make it to London deserved a piece of the pomp and glamour.
You could say it was a big heart or simply Sudhir’s excesses. He threw not just a conventional wedding ceremony but a week-long celebration with bashes on each day.
The big day was Friday, which happened to be Valentine’s Day, when lovers exchanged vows, yet again and Sudhir officially handed over his daughter.

It was a day particularly themed to Indian customs; colourful, with the walkways carpeted with flowery decorations. Speke Resort Munyonyo, the venue for the wedding, was beautifully decorated with flowery ropes hanging from the trees. Guests ate and drank enough during the seven days when Munyonyo was closed off to the public for the “mother of weddings”. This wedding went down in the books of history as one of the most expensive, with reputable financial magazine Forbes valuing it at $2m (about Sh5b), more expensive than most of your foreign celebrities’ wedding ceremonies, including that of showbiz couple David and Victoria Beckham, which cost $800,000 (about Shs2b).

It was an emotional moment for the father of the bride, Sudhir, happy and sad for letting his eldest daughter go, so he made sure it was memorable. The seven-day festivities also included a Ugandan themed party on Thursday, with the entertainment and the décor mirroring an African setting. Sudhir himself donned Nigerian attire for that particular party.
Sunday was the day to wind down with boat cruises.

But the biggest ball with over 2,500 guests was on Saturday. During his speech at the ball, Sudhir was happy with the massive gathering of family and friends and expressed his happiness, quoting wise counsel that was passed down to him by his own father.

““A man’s wealth is not judged by the size of his bank account but by the number of his friends,” he said. This was confirmation that he is a wealthy man in all measures, as his bank account is not in question, being the 24th richest African, according to Forbes.
Sudhir, who has spent 37 years in marriage with his wife Jyotsna, gave Kotecha a piece of advice on how to make the marriage work.

“Women are never wrong, they are always right, so there is no point in arguing.” He advised the newlyweds to govern their marriage with the principles of respect, love, care and honesty and prayed that God blesses them with many children.

After the wining and dining, guests got onto the dance floor till the wee hours of the morning.
There was no better way to sum up the wedding, than Kotecha’s own brother who when called up to give a speech on behalf of his family said, “I’m never lost for words, but all I can say is, wow.”

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Planning of towns II: Fire will cause Havoc

Poverty and possibly greed is one of the enemies of town planning. But the consequences of not planning or poor planning are dire. Our towns continue to grow as slums mainly because of lack of the big picture by our planners and local politicians who provide leadership to their local communities. Most towns in Uganda look alike, no proper roads and where exist they are murram, small and impassable. The towns are full of trash everywhere with plastic bottles and buvera a menace. Road side markets and small shops are everywhere including roads. The residential areas are huge slums without any order. It’s common for one to build a house today and on completion the neighbor will build a pit latrine in front of the existing house!

The consequences of these developments are chaos. It is not easy to provide any service to these types of construction. Roads themselves are a problem because the house owners are the first to take away part of the road reserve if any! They do so with the understanding of the local leaders. Many people who build houses, drain they storm water into roads!! This makes roads not only impassable but also eroded and have big channels that give vehicular traffic a problem. Of course this lowers the value of the neighborhood. It is not easy to collect garbage from these communities so it’s also dumped somewhere common or in the roads! Towns should have a central sewer system which lowers cost to those building houses and also facilitates disposal. In most of our towns there is no central sewer system. Each individual constructing a house has to construct a separate septic tank. That is if they have water bone toilets because there is no water supply in the town. Most homes have pit latrines. One of the challenges of pit latrines is that if the water table is high that is water is found near the surface the pit latrine will affect such water especially if pumped through bore holes!

Getting electricity supply to these residences is also a problem and risky. Getting electric poles through slums is not easy and can be dangerous to the local community. One of the nightmares that is yet to hit us if fire. In the developed countries they know fire is very dangerous it not only claims people's properties but also lives. This lack of planning creates alleys rather than roads. You cannot easily access people’s homes. In case of fire, we shall have tragedies on our hands. We not only do not have the fire equipment but even where we have, the equipment cannot reach the affected places. Look at a place like Kikuubo, Can a fire vehicle reach the different parts Are we waiting for a tragedy to happen?. Can our planners and of course local leaders wake up before this happens

Why MTN May Become the Biggest Bank in Uganda

On January 30, I was talking to the CEOs of Insurance companies in Uganda about the managing change in their industry. What I had read to prepare for my presentation, I looked at the PriceWaterhousecoppers report for the Insurance industry globally for 2013. A report had predicted risk, talent, motor industry and general economic conditions as the drivers of change in the coming years including 2014. While these were global drivers of change in the sector, they were to some point appropriate for the Ugandan Insurance Industry. As a developing country with about 90% of the population outside mainstream economics, 80% of the population involved in agricultural production, the sector has challenges of bringing that part of the population into the mainstream economics to that extent, the drivers of change in the Ugandan insurance sector include the changes in those factors. Nonetheless, the sector has been growing with a large number of players joining the industry. This is a normal occurance in any industry. As the industry grows, it attracts startups. As one researcher said, fools rush in as they see the sector grow. The rush is to capitalize on the high margins that are typical in a new or high growth industry. But this profitability attracts more and more players and the longer they stay in the industry, the harder it is for those who can’t manage their operation efficiency. These are the high cost producers or those that have to give a high dividend to their shareholders.

Competition reduces margins and the weak players are shaken out. Those with cost advantage or niches stay in the market and make a profit. This is typical in any industry. There is always a shakeout as margins drop. This shakeout especially in an industry where exit barriers are high does not lie in business closure but in mergers and acquisitions. Those with stay in power take on those who are struggling. Small companies by global standards lie BMW who have a niche could afford to buy British Motor Vehichle companies. The British Mini was brought by the German BMW.

The huge companies like Microsoft swallowed small companies like Hotmail to enable them consolidate their position in the industry.  This is likely to happen in the banking and insurance sectors in Uganda. As margins dry up, there will be mergers and consolidation.

The following article however reveals an interesting trend. Technology is the primary driver and enabler of change. Mobile technology has been changing things globally and in the developing countriies, it is redefining banking. The telecommunication companies like MTN are collecting more money than banks and yet they are not in the banking business. It is not surprising therefor if MTN will become the biggest bank in the country. Can MTN abandon its cash cow, mobile telephony and grow into the darkness of areas where it has no expertise. In this world, anything can happen. Enjoy the article below;

MTN could be the shark that eats up small banks

It was one of those rare cocktails that a company had thrown at the Kampala Serena hotel poolside - dull and hardly anything to write home about.

The conversation with Gary Watson, the former boss at African Alliance Uganda, was interesting though. This was around 2006.

Over glasses of wine, we talked about the stock market and all. Gary then asked me what I thought was a trick question: “What do you think will be the biggest bank in 10 years?”

I thought the answer was simple. From the Serena poolside, you can see at least two big banks – Stanbic and Barclays. So, I shot off quickly. Stanbic. Gary said no! Barclays?

He insisted it was not the answer either. I must have whispered Standard Chartered before Gary interrupted. “Think,” he implored me.

Worried that I would give a silly answer, I gave in and told him I did not know the answer. Gary then pointed at what he believed would be the biggest bank in a decade. The building was the MTN towers, which is sandwiched between Stanbic and Barclays along Hannington road.

I had interviewed Gary a few months earlier, after African Alliance had set up shop here, and was promoting then a rare product called Unit Trusts. I had no doubt he was a brilliant man. But for a brief moment after he pointed me to the MTN towers, I thought he had had enough to drink for the night.

Gary had got wind of Safaricom’s M-Pesa, a money transfer service in Kenya, which was set to kick off some sort of revolution in their economy. MTN would follow up on that in 2008. The rest, as they say, is history.

Today, you can practically pay for anything over the mobile phone – from settling your electricity dues, borrowing money, to paying a police fine!

That builds into a bigger question: will MTN make it to become the biggest bank in Gary’s target year of 2016? And what does that mean for the banking industry?

I thought about Gary in light of Nigeria’s GTBank’s takeover of Fina bank and the fact that we have 26 banks in Uganda, too many if you ask me. How do banks like GT intend to make money in this country? How do they intend to survive the mobile money onslaught? How about the competition among the banks?

There are at least two factors that should partly explain the entry of new banks and the perseverance of those that have been around but are not making money. Oil and the East African integration!

It is a long way before Uganda produces its first barrel of oil, probably sometime in 2020 or 2021. Few banks can wait that long. Perhaps, it is only those banks that can arrange fairly large loan sizes, $2m - $5m and above, that are likely to benefit from the oil, which will spur economic growth. The East African integration is moving so fast with retail giants such as Uchumi and Nakumatt expanding aggressively. But that’s just about it.

So, what makes banks think they can make money in Uganda? It is high time we thought deeper about laundered money. Corruption remains rampant in Uganda, and banks offer some bit of glue in the flow of stolen funds from public coffers.

Uganda also has a number of companies with jurisdictions in tax havens. These companies are the masters of moving money around as they skirt taxmen, with, again, banks playing a key role in making it possible.

So many dubious NGOs have been formed, simply to steal from unsuspecting donors. The money comes through banks. For how long will this go on?

As global pressure builds up, with donors and the public demanding for more accountability, banks are likely to find it difficult to tap into these funds. Banks will still make some money through offering credit to a growing middle-class, but there is little evidence to suggest that the risks in the market have declined, with bad loans still a little high.

Pension firms will also probably be looking to channelling funds to the private sector, while investment clubs will grow too, and possibly lend out money too. The regulator could raise the minimum capital requirements, putting more pressure on smaller banks.

And then, of course, technology will play a role. Going to banking halls will be left to those who need to make large purchases. Ultimately, the market will turn to mergers and acquisitions. Big banks could swallow up small banks. It will be survival for the fittest.

MTN, might not be your conventional bank, but it accounts for the biggest amount of money transactions, and is making it hard for some banks to make money. Gary could have been right.

 From Media