Credit: Independent Magazine
Anxiety is building about what the future holds for management of Uganda’s economy as the curtain slowly comes down on three prominent figures; Bank of Uganda Governor Tumusiime Mutebile, his deputy Louis Kasekende at Bank of Uganda, Secretary to the Treasury Keith Muhakanizi
For years now, navigating Uganda out of intricate political-economic situations has always been the handiwork of these technocrats. Mutebile, especially, has been at the forefront of managing Uganda’s economy since the early 80s.
He was the Chief Economist in the Ministry of Planning before President Yoweri Museveni came to power and rose to become Permanent Secretary and Secretary to the Treasury Ministry of Finance, and finally longest serving central bank governor.
His deputy, Kasekende, is a traditional central banker having joined BoU in 1986 and rose through the ranks with a short stint at the World Bank as executive director and the African Development Bank as chief economist. He has been DG, first from 1999 to 2002 and then from 2009 to present.
Muhakanizi is a long-serving Ministry of Finance technocrat who honed his skills as Deputy to the late legendary Permanent Secretary Chris Kassami. When Kassami retired in 2013, Muhakanizi succeeded him.
Having been at either Finance and Planning since 1982, Muhakanizi has over the years mastered the inner workings and built a network of technocrats across the board given that the Finance Ministry is the centrepiece of the entire government. Over the years, he has also mastered the politics.
The departure of these officials over the coming years is likely to mark a dramatic shift as it is accompanied by the departure of other technical staff; either through natural retirement, early voluntary departures, or shuffles resulting from recent controversies.
The Deputy Secretary to the Treasury, Patrick Ocailap, also looks set to retire from the Finance Ministry while the future of Kasekende; who was once viewed as a natural successor to Mutebile at BoU, is uncertain.
Mutebile and Kasekende have increasingly come under pressure to leave BoU owing to the countless scandals at the central bank, especially concerning their role in the shabby closure of commercial banks.
While President Museveni has not pressed the exit button for these officials, the contract of 70-year old Mutebile ends in early 2021. That of 60-year old Kasekende ends earlier in 2020. Some of President Museveni’s handlers say that both are out of a job, the magazine quotes.
At the Finance Ministry, Muhakanizi might quit the ministry soon. He has not been in good health. And the contract of his deputy, Ocailap expires early this year.
Strong leaders important
While there are formidable technocrats at Ministry of Finance at Director level, there is anxiety that the inevitable changes are forced rather than planned moves.
Succession at Finance became a toss-up after Lawrence Kiiza, the former Director Economic Affairs, who was seen as Muhakanizi’s potential successor, retired early in 2017.
Muhakanizi has been tipped by some to be the next governor of BoU, although this or his stay at Finance will likely depend on his return to full health.
Also Ocailap who for a long time appeared set to succeed Muhakanizi has hit the civil service retirement age of 60 years.
Many observers fear that the Uganda economy is entering uncertainty amidst tough times in the political economy sphere.
Strong leaders like Mutebile and Muhakanizi were central to the strong performance of the Ugandan economy up until the late 2000s, according to research by scholars such as Sam Hickey, a Professor of Politics and Development at the University of Manchester has done research on politics and development in Uganda since 2002.
In the case of the Finance Ministry, he found that strong leaders like Mutebile and Muhakanizi were central to the good performance here.
Therefore, Hickey indicated that the anxiety about the pending departure of these officials is well placed.
“These figures have been in situ for a long time and I don’t get the sense that they have planned for succession in any institutionalized form,” Hickey told the Magazine in the interview.
Indeed, some observers cite the example of the energy sector to demonstrate the challenge of such lack of succession. Since the 1980s, the energy sector was under the stewardship of Kabagambe Kalisa. Then in 2017 following a fall out with President Museveni over the mismanagement of Karuma and Isimba dams, President Museveni fired him and replaced him with Stephen Isabalijja.
Isabalija, who had only served on the fringes of the Energy sector as the Chairman Board of Directors for power generator UEGCL and was new to mainstream government, was unable to hold fort as new Permanent Secretary and was fired in less than a year. President Museveni then appointed a relatively young man, Robert Kasande to head the sector.
Both MEMD (Energy Ministry) and PEPD (Petroleum Exploration and Production Directorate), observers say, had well-established plans of career-progression and leadership succession in place that fitted well with the expertise, stature and experience of the staff involved.
The sacking of Kabagambe and appointment of Isabalija, they add, might have disrupted this.
Hickey and Badru Bukenya; a researcher at Makerere University Kampala, have evaluated the performance of the Finance Ministry since the reforms it undertook in the early 1990s and are working on another paper about the performance of BoU over the same period of time. They work under a global research centre; Effective States and Inclusive Development (ESID) that investigates politics that promote development.
The researchers chose to study BoU and Ministry of Finance partly because preliminary research showed the two institutions as top performers amongst government institutions. Their research is aimed at learning what makes them key performers. Some look at their recommendations in terms of how to improve or replicate good performance based on lessons here.
Economist Fred Muhumuza, who has also served as an advisor to the Finance Minister told The Independent Magazine that his anxiety is only about the governor because despite his weaknesses, Mutebile has been that Governor who looks the President in the eye and could push him off certain decisions.
“Technical people are there who can do the work,”Muhumuza told The Magazine, “The challenge will be finding someone like that.”
For Finance, Muhumuza said if the president wants; even if Ocailap has reached retirement age, he can hire him on contract.
“Muhakanizi reached retirement but he has been there on contract,” Muhumuza told The Magazine.
Major succession has happened before at Ministry of Finance when Muhakanizi took over as PSST in 2013. He replaced Christopher Kassami who had held the job since 2001.
A draft research paper on the performance of the Finance Ministry by Hickey and Bukenya explains that before Muhakanizi came in, at least two other senior bureaucrats who had played a central role in the reform period also left at this time. Another major figure, former Minister of Finance Planning and Economic Development, Gerald Ssendaula, had retired in 2005.
Ssendaula was seen by most as the last of the technically strong and politically respected leaders to hold this position.
Hickey and Bukenya’s paper notes that none of Ssendaula’s successors possessed his combination of technocratic expertise and political heft. Despite some being solid technocrats, none were able to resist the political pressures that Finance was increasingly placed under, particularly in terms of the rising level of supplementary budgeting.
It is Muhakanizi that brought back the reformist zeal last seen under Mutebile.
“He is very good, wants things done, meetings are all to the point, agreement on who does what,” an official is quoted as saying of Muhakanizi in the research paper, “he has brought a lot more vigour – he can wade into the murky political waters with some degree of confidence.” This was partly because of his close relationship with the President.
As a result of this vigour, the paper adds, three major reforms were undertaken during this period, each to address different aspects of the crises identified then; namely the Integrated Payroll and Personnel System, the Treasury Single Account and the new Public Financial Management Act.
These kinds of reforms had last been seen under Mutebile, a seasoned economist and reformer, who spearheaded the design and implementation of the Economic Reform Program that restored Uganda from the economic crises of the 1970s and 1980s to much better economic performance while he served as the most senior technocrat at the Ministries of Finance.
“Mutebile was also highly respected, a hardliner, he would tell President over my dead body,” another official is quoted in the paper, “So we technical people were very motivated to work because we knew if we worked hard and did our work it would be accepted”.
In 2001, Mutebile was moved to the central bank as governor.
“When Mutebile proved to be very difficult, he sent him to the Central Bank,” another official is quoted in the paper, “That was the reason, because he (the President) was told ‘over my dead body’. And the whole mechanism softened because the late PS (Kassami who succeeded Mutebile) was not as tough; and Museveni brought in his ministers who would dance to his tune.”
But critics say Mutebile lost that shine along the way.They cite among others, the Hassan Basajjabalaba case amongst other things, when Museveni bailed him out.
In 2011 Mutebile was alongside former Finance minister Syda Bbumba and former Attorney General Khiddu Makubuya accused of irregularly paying out Shs. 142 billion to businessman Hassan Basajjabalaba in a controversial compensation for cancelled contracts to develop markets in Kampala. While Bbumba and Makubuya were later fired, Mutebile was cleared by parliament and stayed on the job.
In another incident in the same year, Mutebile flared tempers when he told a parliamentary committee that President Museveni directed him to draw an unbudgeted US$750 million from the Treasury to buy Russian fighter jets.
Challenges for new leaders
The good news is that if any changes occurred now, they would be occurring at a good time.
The economy has an upswing or as Finance Minister Matia Kasaija put it recently; “the economy is on wheeeuuuuu!”
In case you missed it, the Minister was on Jan.09 speaking to journalists at the Uganda Media Centre in Kampala.
“I want to assure you now and assure the country now,” he said “the economy is on wheeeuuuuu!”
He matched the whistling sound with a swing of his right hand upward as if imitating an airplane taking-off mode. Once again it was clear that had not made it into politics, Kasaija might have made a successful comedian. But even in politics, he finds a way to display the talent. In any case, no one could miss the message.
Within days Twitter had exploded with memes of Kasaija’s comedy which trended for weeks on social media and in conversations on the economy and even other things. He awakened many who appeared to have given up on Uganda’s economy after a stretch of poor performance.
But while it is the way that Kasaija made his point that mostly made the news, the Finance minister set the stage about what many agree is improved economic performance.
Weeks before Kasaija made the statement, Bank of Uganda had released figures showing that the best balance of trade position in years. The central bank indicated, for example, Uganda was enjoying trade surpluses—exporting more than it imports—with all her neighbours; including Kenya, the region’s economic giant.
For the first time in years, Uganda had over the last 12 months to October 2018, exported goods worth $780 million to Kenya and imported about $400 million from Kenya.
Adam Mugume, BoU’s executive director for research and policy who presented the figures attributed this performance to improved agricultural productivity, economic stability, low inflation, and a stable the exchange rate.
Then a month later, a team from the International Monetary Fund (IMF) gave Uganda a further thumps up. It noted that the economy grew by 6.1% in FY2017/18 and was projected to grow at 6.3% in FY2018/19, and investor surveys indicate that business conditions and sentiment are strong. Credit to the private sector has improved, revenue collection was up by 0.3% of GDP, and exports grew by 9%.
The IMF confirmed BoU has successfully balanced its inflation objective with supporting economic activity and financial inclusion is improving with around 85 percent of the population now having access to financial services.
“Over the next 5 years, growth could reach 7 percent,” the IMF added, “if infrastructure and oil sector investments proceed as planned, and private sector credit remains supportive.”
This appears a major departure from the circumstances of the same period last year.
Back then, the team at Finance was looking for money to fund a Shs29 trillion budget. Yet Uganda Revenue Authority (URA) had already recorded a huge tax revenue shortfall twice the size of the one the previous year. Kasaija under attach for borrowing Shs750 billion from the domestic market; a move many said could hurt the economy. And the IMF was breathing fire under the bellies of Finance officials.
“The key guiding principle behind fiscal policy is that government debt should be kept within manageable levels,” the IMF Country representative Clara Mira told The Magazine at the time.
The Uganda budget, she added, should effectively and realistically prioritize expenditures, including all unavoidable expenditure, contractual etc.
“Supplementary budgets should not become the norm,” Mira said. In her view, the area of taxation needed a ratcheting since, despite progress, Uganda still has a low tax to GDP ratio compared to other countries in the region.
Then officials at Finance failed to convince the IMF they had observed certain conditions that inform the review of the country’s economic performance under the Policy Support Instrument (PSI) arrangement.
The PSI is an instrument of the IMF designed for countries that do not need balance of payments financial support.
The PSI helps countries design effective economic programs that, once approved by the IMF’s Executive Board, signal to donors, multilateral development banks, and markets the Fund’s endorsement of a member’s policies.
Uganda’s PSI program expired in July 2017. According to Mira, the IMF and government started negotiations following the authorities’ expression of interest in October/November 2017. Again, diplomatically, Mira noted that if the authorities so wish, they stand ready to continue the process on the basis of the approved 2018/19 budget.
While the IMF does not lend Uganda money, many people have been lending to Uganda on the strength of the IMF’s PSI. If there is no PSI, those people will not be lending to us. Already many agencies have already decided they will not be lending to government.
Uganda’s PSI was last approved by the IMF on June 28, 2013. A new one was supposed to be established in 2016 but Uganda did not meet the conditions and instead, a one-year extension was approved on June 6, 2016.
After the one year, the conditions were still not met and a further extension through July 28, 2017 was approved on June 19, 2017. That extension expired too.
The pessimism persists despite the February praises for the performance of the economy and its managers from the IMF.
“I read IMF’s statements with a lot of caution because they tend to be short term,” Muhumuza was quoted in an interview, “They can issue a statement now and change it a few months down the road citing some changes in the fundamentals.”
Muhumuza insisted that for as long as electricity tariffs and fuel prices are as high as they are, one cannot claim that the economy is performing well. He said the touted growth is not inclusive.
The IMF has also noted that poverty is increasing from 19% in 2012/13 to 21% in 2016/17 and per capita income is declining.
As the old team bows out, those are the challenges that Museveni and any new team will have to deal with.