Sale of UTL: A manifestation of a management crisis in State-owned enterprises.

During the Economic Recovery programs that were spearheaded by the NRA government between 1986-1990, the Structural Adjustment Programs (SAPs) were adapted to facilitate the process of reviving the economy which had slowed down during the periods of Amin & Obote2. These policies which included liberalization, privatization among others had been spearheaded by the IMF and the World Bank. Consequently it led to the sale of my state-owned enterprises like Uganda Commercial Bank, Uganda Coffee Marketing Board among others.
The intension was to steer competition within the private sector by reducing state intervention which was overcrowding the private sector. And indeed it steered competition and this is explained by the increase in the number of commercial banks after the sale of Uganda Commercial Bank (case study). However there has been strong contest on whether competition has improved the welfare of the citizens or has increased exploitation by the private sector.
Whereas it is clear that privatization steers competition, it is very critical to consider the timing to privatize. Most economists agree with the fact that privatization in Uganda was done at a wrong time with wrong intensions. It was done at a time when majority of Ugandans were poor and thus were exposed to unfair competition from the private monopolies that emerged thereafter. Whereas state enterprises put much consideration on the welfare of its citizens, the private monopolies that emerged considered profits thus over exploited people.
To cut the story short, it explains why Uganda has a lot of commercial banks today but when there is an increase in poverty. This explains why there has been a panic attempt to recapitalize the Uganda Development Bank. It also explains why some leaders carry money in sacks with intensions of helping small scale enterprises. It also explains why noble businessmen are running to the Head of State seeking “Bail outs”. And the reason is simple because locals have been over exploited by the private sector without state regulation. All these wouldn’t have risen up had the Uganda Commercial Bank still been in existence because of the fair competition it fostered.
Therefore, should Ugandans welcome the sale of Uganda Telecom Limited? Absolutely,No.
The intension of privatization in the late 1980’s was because government had failed to manage the enterprises thus were operating in losses. Instead of addressing the issue of management, they instead made a blunder to transfer ownership. This is the same mistake the government is doing with the sale of Uganda Telecom. The government is openly admitting that it cannot manage the telecom thus it is entrusting someone else who is profit-minded to do it.
Whereas the government may successful transfer the burden from itself, the citizens must be prepared to suffer at the expense of the sale. UTL was grossly mismanaged at the watch of the state but nothing was done in time to detect and deter the possible negative outcomes.
The consequence of selling UTL will lead to an increase in profit repatriation. Ugandans are usually excited with % economic growth rates but unfortunately this has not led to increase in employment or a reduction in poverty levels. Most of the big projects especially in infrastructure are done by foreigners thus as they repatriate profits, thus there is no twinkling down of income. This explains why a big factory will be surrounded by very poor communities because income does not trickle down. Therefore by selling UTL to the Nigerian firm, we shall be supporting the Nigerian economy and an increase in capital outflow will definite slow down our economy. Economies grow by depending on external markets through attracting foreign exchange. I do not know of any Ugandan investor who owns a multi-national corporation oversees that attracts huge foreign exchange.
How come state-owned enterprises in Kenya are doing well? In fact, Safaricom was in contention to buy UTL while Kenya Commercial Bank remains the largest bank in Kenya with several stations in other countries like Uganda. So we need to ask ourselves what governments like in Kenya are doing to keep their state enterprises competitive and profitable while maximizing welfare for its citizens. Then, if we can’t manage UTL, how shall we manage the new project of the National airlines?
In conclusion, we must develop a culture where by we should address the management problems by tackling the root causes but not transferring the problems. The government has enough human and financial resources to foster organization capacity, efficiency and effectiveness in its institutions. The culture of failing to manage state-enterprises manifests a deep crisis in most government institutions. It indeed justifies cabinet’s decision to merge most government agencies because they seem not to be doing their work.

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