As we try to create jobs, the youth take to Gambling.

The Sunday vision of July 7, 2013 talked about how sports betting is crippling our youth. Sometime back, I posted an article on the same thing. One of the key challenges our nation has is creating employment for the youth. Over 70% of Uganda’s population is reported to be below 30 years old. This means that a very small part of the population possibly those between 31 and 65 are creating the wealth and the resources the nation is using. Of course when you look at it from the perspective of wealth, there is nothing to talk about. 30% of the population lives below the poverty line. 80% are in the rural areas. 90% do not have access to electricity. 95% of the employed are in the informal sector. All this spells poverty for the country. The only way to overcome this is through creating jobs. And not just jobs of boda boda cycling and peddling Chinese 3rd class low quality goods in the streets, it is not about car wash or selling vegetables, coca cola and water on the streets, the jobs we are talking about are high quality jobs that result into value addition. We are talking about jobs either in the manufacturing sector or in the IT sector. In comes gambling. It is an exciting thing to gamble but the law of gambling is that 93% lose and less than 5% win. It is addictive and leads to hysteria plus heart attacks. For some reason, government has licensed numerous businesses doing sports betting. It is becoming the second type of expenditure after airtime. Taxi drivers, boda boda drivers, students, hawkers wake up in the morning and take money to the betting houses. They place as little as 500shs. Of course majority of them lose the money. Once in a while, one hits a jack pot. We are not going to turn the world through gambling. The casinos in the up market places were not accessible to the poor people. Now the game has changed, as the bible prophecy tends to be more positive when it says ‘...everyone who has, more will be given,…” we rarely look at the negative which says “…but from the one who has not, even what he has will be taken away”. As we plan to improve the welfare of the youth in this country, there are certain things we would rather not do. I hope that taxes coming out of sorts betting are going out to creating job opportunities for the young people.

A setback for Uganda’s high quality jobs.

We have just concluded a conference on youth and those involved in research about unemployment and poverty are arguing that Uganda’s middle income status will come from value adding jobs rather than boda boda, chapatti making, taxi driving and sale of unprocessed agricultural produce.  The daily Monitor of June 21, 2013 reported that BAT was closing its factory in Uganda. When you look at this story in isolation, you may not know what the problem is. BAT has been scaling down its operations and transferring high quality jobs elsewhere as part of its global competitive strategy. It doesn’t make sense for them to process tobacco in Uganda. The unsaid reasons are Uganda is a high cost country, the cost of electricity, the cost of transport of course the cost of small things like a bottle of soda and any other locally produced product.  When compared to international markets, Uganda is very uncompetitive and to locate here, you must be attracted by either a tax incentive or the cost of importing what you produce being higher than what you produce. Uganda is very uncompetitive. Competitiveness is driven by productivity and productivity is determined by the ability to produce a product or service at a lowest cost possible. Today china is the lowest cost producer in the world for the manufactured products. China produces goods at an amazing low costs that is not easy to compete with. Japan was framed for importing iron and oil and producing low cost vehicles. This advantage has now gone to China. It is the world’s factory. China churns out different qualities of products for different markets. The lowest quality comes to poor countries like those in Africa. No wonder government is struggling with traders to see how best they can control the poor quality products that are coming in from China. Going back to competitiveness, one of the key determinants of competitiveness is labor and attitude of labor. Check out our attitude to work, we want big salaries, look for promotions in high places and yet nowhere to work. We are late for meetings, we are slow at doing things, we literally write ourselves out of the market through these lassiez faire attitudes which unfortunately make us lose out in international markets. The quality of our labor is another issue. It is not surprising that most international companies bring foreigners in key positions. In fact not only international companies but even local ones. They will bring in an expatriate to head various operations simply because Ugandans are not competitive.

For BAT, if they look back at the exchange rate, they see that Uganda has been slowly losing its competitiveness through the depreciation of the shilling. If BAT was importing goods to Uganda, they would hang in here because for what they would lose through exports they would gain through the import system but this has not been the case. Many local companies who have cat flower export businesses, sale abroad and use that money to bring in other goods and in that process make money. BAT did not have opportunity and therefore had one choice, to get out of Uganda, cut their costs before they completely burn their fingers. Their departure is a tragedy for Uganda. Uganda’s economic growth is going to come from improving productivity in agriculture, creating higher quality jobs through value addition in agriculture which will then spur production of manufactured products for an increasingly wealthy nation. BAT jobs have been such type of jobs, we should therefore cry as we see our middle income status go away from us. This is a setback because those are some of the few jobs that the country has relied on, what lessons do we pick from this? How do we increase our productivity, competitiveness? How do we return such jobs where we have had a competitive advantage to the country? My proposal is very controversial and next to impossible but there it is. I don’t believe in government owing and running businesses but Uganda produces tobacco, the factory producing tobacco can only be located in Uganda to retain the high value adding jobs. At this moment in time, the multinational company like BAT cannot have a factory in Uganda because in the BAT headquarters wherever it is located the decision to continue operation depends on the bottom line contribution by BAT Uganda to the BAT global operations. Our planners should get back to the drawing board.

SOUTH AFRICA’S SEVEN KILLER APPS

I came across this article in this magazine (Acumen, Issue 2, Fourth Quarter, 2012) that is published from South Africa and it was about how South Africa has readied itself to take the African market. They are the eyeing of a billion people in Africa and they have what it takes to dominate. I wonder what our National economic strategists are thinking about. 

SOUTH AFRICA’S SEVEN KILLER APPS

Words of Professor Nick Binedell 

In a flat and competitive world, every country has to dig deep to make sure that its sense of self and its approach to the future is based on realism about its location, economy, politics and social structure, says professor NICK BINEDELL, dean of GIBS.

South Africa has seven “killer Apps” at play. Following the reasons of well-known historian Nial Fitzgerald, these killer Apps are critical strategic factors that define the business landscape for South Africa. They will play a critical role in determining our long-term economic growth, prosperity and overall success. I list them in no order of strategic importance.

KILLER APP NO. 1: PRIVATE SECTOR STRENGTH

No country of similar –sized economy has produced more world-class companies. In a variety of industries, South Africa has a company in the world top ten. It begins with our history in Agriculture, then to mining and now a complex diversified economy with a strong financial sector. We have always attracted capital to these shores, starting with a discovery of diamond and gold and we stand out among emerging economies of our size in this regard. Our stock market, the JSE, is ranked 20th by the world federation of exchanges in terms of market capitalization, but first by the world Economic Forum in terms of regulations of securities exchanges. Although there is always room for improvement, we have a strong capital raising capability. A significant number of entrepreneur have built businesses from scratch into sizeable enterprises-among them companies like Discovery, RMB, Holdings and Aspen pharm care.

KILLER APP NO. 2: INSTITUTIONAL STRENGTH 

Despite complaints and difficulties, we have a strong institutional framework. We are a constitutional democracy driven by the rule of law. We have a functioning parliament and a state bent on ensuring transformation and development. Institutions in civil society are also effective, having played a strategic role in our transformation in the 80’s and 90’s. They continue to be a lively source of ideas, contestation and support to many. Even though these institutional dynamics are contested, they are, relative to other emerging economies of our size, a tremendously competitive advantage.

KILLER APPS NO. 3: INFRASTRUCTURE

We have a highly sophisticated for an economy of our size. This is a great legacy and a critical one in terms of our future, in capturing value in both the continent and the global economy. 

KILLER NO. 4: AFRICA’S ONE BILLION PEOPLE

Many citizens of Africa are largely untouched by effective government or by the private sector. This is true of many places and spaces in Africa and these billion people are the centre pin for many company strategies for the next decade. Africa has not reached its economic potential for two reasons: It has not used its human resources effectively and undoubtedly, its natural resources are going to be key to the world’s economic development. Africa will thus receive the appropriate strategic attention. 

“….THIS FRONTIER MENTALITY HAS SERVED US WELL……”

KILLER APP NO. 5: OUR FRONTIER MENTALITY 

In South Africa we have an attitude of resilience, competitiveness and contestation, which flows from our history, whether it’s about politics, how we run the country or the economy. Johannesburg became the country’s largest business city in the space of just six years after gold was discovered in 1886. By 1892, it had overtaken Cape Town. South Africa as a whole remains the largest economy in Africa, even though Nigeria is making great efforts to catch up. Although this frontier mentality has served us well, in the years ahead it is going to be strongly challenged by East and West Africa. We need to be ready for the fight.

KILLER APP NO. 6: ENGLISH LANGUAGE

Our main business language, if not dominant spoken language, is a soft asset, giving us access to world markets. Compare, for example, the struggle of the Japanese in the 1970s and 80s, and the Chinese now, where understanding each other in English is a major challenge. It is a great advantage to South Africa, as well as to many other countries on African continent. 

KILLER APP NO. 7: GEOGRAPHICAL LOCATION 

South Africa benefits from its location in a central time zone and the multidimensional nature of our strategic relationships. We have a long history on linkages with the west. We are also building a linkage to Asia. To the north, lies an entire continent inviting us to grab the opportunities presented. 

To View video: www.gibs.co.za /acumen/binedell/killerapps