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Musevenomics: The case for a rethink of our Banking sector

Uganda Commercial Bank Ltd (UCB/UCBL) was a Ugandan government-owned bank, and the largest financial institution in the country.

Uganda Commercial Bank Ltd (UCB/UCBL) was a Ugandan government-owned bank, and the largest financial institution in the country.

“Some circumstantial evidence is very strong as in when you find a trout in the milk.” – Henry Thoreau

This past week, we gathered at Kawuumu to discuss Musevenomics and what it holds for the future of our great Pearl.
By all accounts, there is no doubt that the economy in what is now Uganda is today bigger and stronger than at any time in our 500-year history.

For many ardent Movement supporters, the adoption of Capitalist ideals into Socialist political ideology on which the war to liberate our Pearl from the tyranny of “ideologically bankrupt” political leaders was and remains a bitter pill.

Fortunately, economic evidence suggests that the best way to achieve Socialist goals – of which we still have many – is to adopt Capitalist tendencies. It would have indeed been foolhardy of our young National Resistance Movement government to totally reject the role of the private sector in our economic processes.

Today, let me restrict myself to our banking sector and the refusal by some economists to speak truths against this colossus of ineffectiveness.

Dr. Muhumuza from the Makerere University Business School (MUBS) Economic Forum contends the privatisation of what was Uganda Commercial Bank (UCB) – holding Ugx 400bn at the time – to Standard Bank Group of South Africa – trading as Stanbic Bank (Uganda) Limited in 2001 was not a forced mistake on our government.

I disagree!

A 2001 report by parliament noted: “The original mission of UCB was to save the African population that was largely excluded from banking services. Although the bank started in the colonial era its mission was in agreement with article 32 of the 1995 constitution…”

It was also argued that the sale of UCB and other public banks would “enhance competition in the banking sector which would then result in a decline in the lending interest rates.”

However, a 2018 Bank of Uganda Report by Dr. Adam Mugume and Ms. Katangaza Rutsimbira concluded “…interest rates remain prohibitively high and restrict many private sector borrowers from accessing the credit markets. The high lending rates are mainly on account of high overhead costs. Thus, reducing the high lending interest rates will require a reduction in operating costs of the banks.”

At right about the time we were selling off UCB, Kenya’s president Moi, was also being pestered by the IMF & the World Bank to sell off Kenya Commercial Bank (KCB).

Kenya Commercial Bank, according to the IMF, faced the same challenges as our UCB.
The Economist Intelligence Unit in a February 2001 publication observed: “The second of three IMF-World Bank payments due to be made in December has been delayed, and the whole programme is in danger of falling apart unless the government takes serious action over governance issues and demonstrates a commitment to economic reform.”

President Moi rejected this conditionality and although he opened up the banking sector, KCB, and 3 others including the National Bank of Kenya and Consolidated Bank, remained public banks. They are all profitable and are out-competing non-Kenyan private banks.

In point of fact, the four biggest banks in terms of assets in the world are government owned. The idea that a willing government such as ours cannot operate a profitable institution is a lie.

Since 2001, our banking laws have been written to favor our bankers. Because of this, Uganda has for the past nearly 15 years been saddled with the highest interest rates within the East African Community.

Today it is not uncommon to read in our press dubious deals by banking officials conniving with dubious individuals to defraud clients of mortgaged properties. Sometimes, as our High Court in February 2019 found, bank officials sell to themselves mortgaged properties. In both cases, these properties are always sold at below market price. Imagine!! By her own admission, Stanbic’s MD says Ugx 5 trillion is tied up in Courts because of disputes between banks and clients.

The bulk of these are cases brought against banks.

The framers of the phrase “Musevenomics” are admirers of president Museveni’s understanding of economics. This understanding is based on a careful study of Africa’s economy in general and Uganda’s economy in particular – from the 1441 arrival of the Portuguese on our West African coast and at our attainment of Independence starting with Ghana in 1957 as well as our post-independence economy.

The idea of Musevenomics is to stall the advances of neocolonialism in Uganda and Africa. Stalling neocolonialism does not infer we strangle the private sector nor is it a license to abrogate Public financing institutions.

Historical evidence repudiates the notion that Public banks are not feasible. Indeed, as pointed out by Prof. Ezra Suruma, “one of the most blatant aims of new colonialism(neocolonialism) is to ensure that Africans are denied access and control of Capital.”

Those arguing otherwise fail to realize that their jars of milk have trouts in them.

We need strong public banks with pro client laws if only because our constitution mandates “the government to take affirmative action to address the interests of populations that have historically been marginalised.”

The writer is an avid student of Musevenomics.

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