In defense of oil cash bonanza

Why it was morally right to reward public officials for winning Shs1.6 trillion worth of government revenues

“It is not easy to stand apart from mass hysteria, to argue against something that everyone, especially the most respected political leaders, academics, and experts are saying and instead argue that they are mistaken or deluded.” Leo Tolstoy, 1897.

Ugandans are angry, extremely angry, that their government paid out Shs3.58 billion as a cash bonus to public officials who helped our country to win $434m (Shs1.6 trillion) in Capital Gains Tax from two international oil companies. I find it strange that our people are angry with the government for rewarding exemplary performance. This is especially intriguing because Shs3.58 billion is less that 0.2% of the money that was won. In fact the arbitrator awarded Uganda costs of $4 million (Shs14.5 billion) and the bonus is only 25% of these costs. Why then is there a hue and cry?

Recently, Stanbic Bank Uganda announced that it would pay a bonus of Shs1 billion to its Managing Director, Patrick Mwehire, for exemplary performance in 2016. They made an unprecedented Shs200 billion in profits during a period when many banks in Uganda are struggling. This is 0.5% of their profits. There is a need for government to borrow some lessons from the private sector to improve public sector performance. This is one of such lesson.

Every decision we make has an opportunity cost i.e. the value of the second best alternative forgone when we make a choice. We think, and correctly so, that our public officials are very corrupt. Therefore, we should have expected Ugandan officials working on this oil tax dispute to do what all corrupt public officials do i.e. negotiate for private benefits at the expense of the common good.

For example they could have asked for a bribe of $2m (Shs7.2 billion) each and let the oil company win. The oil company would have paid $84m (Shs302 billion) worth in bribes but saved itself $360m (Shs1.3 trillion). This choice was open to our public officials. But they did not pursue their pecuniary interest but the national interest. Such exemplary display of the public spirit, which is rare among our public officials today, should be rewarded.

Uganda’s success on this matter is even the more inspiring because there is not a single country in postcolonial Africa that has ever won a Capital Gains Tax dispute against these multi-national oil companies.

I am reliably informed that since Uganda’s success other oil producing nations of Africa have had to amend their laws to follow our example. This achievement was unprecedented and rewarding public officials who did it with less than 0.2% of the proceeds was the morally right and fair thing to do.

There may have been problems on the criteria used to choose who to benefit and whom to exclude. But that is a debate on the procedure, not the substance of the bonus. I am willing to listen to that.

Some people have said the bonus was not legal. First, the law does not explicitly ask our president to contribute money to public causes like the building of a church or a school or our national football team. But he often does with our approval. Secondly, the law does not prohibit him from such acts of public generosity. Yet this bonus payment is actually backed by law and ethics of public service. Articles 98 and 99 of our constitution allow the president to reward public officials for exemplary performance.

Secondly, the standing orders of our public service, especially Regulation 7.0 of the Code of Conduct and Ethics for Public Officials provides for rewarding public officers who exhibit good ethical conduct. This can be in form of a promotion, increase in salary, getting a medal or a cash bonus. Some have argued the payment done through a supplementary that had not been approved by parliament. Yet government is allowed to spend up to 3% of the budget in supplementary expenditures without approval of parliament. So far they have only spent 1.8%.

Many Ugandans today seem angry at practically everything the government does. One reason could be that Yoweri Museveni has been president for far too long. So people are suffering from Museveni fatigue. They are, therefore, always looking for every excuse to vent their anger at his seeming permanence in power. The other reason is that government has become exceptionally poor at communicating its actions and the justifications behind it in spite of (and also, maybe because of) the oodles of money it spends on public relations.

Take the example of the oil industry, which has brought tears to many a poor country. Museveni has done three things that are likely to set Uganda apart from other oil rich poor nations of this world. First he facilitated the training of a highly technically competent team in the science of the oil industry, even though this is less so on the business side. Second he has ensured that this group is incorruptible, something I wish he could have spread across the entire state. Thirdly, he has personally and actively shielded the oil team from political interference. This has led Uganda to sign some of the best Production Sharing Agreements in the world.

Contrary to this reality, many Ugandans think there is a big problem with our oil sector. Clearly, therefore, there is a big gulf between Uganda’s oil reality and the perception of the public. This failure to appreciate the good about our country is a result of a toxic combination of high emotions and little knowledge of what is going on. But it is also a wider problem facing Africa in general. With the sole exception of post genocide Rwanda, there seems to be widespread citizen disgruntlement with politics and economics in Africa.

The state in Africa is the most demonised institution. Western media and academia have created a narrative that the state in Africa is dysfunctional. African elites have bought this narrative line, hook and sinker. A lot of the criticisms are true. However, like all narratives, they are built on a selective use of facts. And no narrative is more powerful (and dangerous) than when it makes use of (and abuses) obvious facts. Thus many African elites think their politics is bad and their economies are failing. Yet our economies are growing at impressive and sustainable rates than at any time before; our countries are rapidly democratising by historical standards. We need to defend good when we get it lest we discourage those who seek it.

****

amwenda@independent.co.ug

****

editor@independent.co.ug

Tweet