About me.

Andrew M. Mwenda is the founding Managing Editor of The Independent, Uganda’s premier current affairs newsmagazine. One of Foreign Policy magazine 's top 100 Global Thinkers, TED Speaker and Foreign aid Critic

Wednesday, September 10, 2008

Let us liberalise social security

The principle of negotiation is that a bad deal is always better than no deal at all. Debating every investment deal to its grave is not a formula for success. 

The battle over National Social Security Fund (NSSF) purchase of land belonging to security minister, Amama Mbabazi is a classic example of the vicissitudes of public procurement in Uganda. Given the stakes and the players, this scandal may claim the political life of Mbabazi and the minister of finance, Ezra Suruma. Yet in seeking to hang the suspected culprits, we should not throw the baby with the bathwater. 

The funds last three managers (Abel Katembwe, Yoram Barongo and Leonard Mpuma) were all fired, some prosecuted and their boards were dissolved. 

This should have set a precedent against disrespect of the tendering and contracting rules. Everyone knows the evil that gets visited on those who violate them. It has not. Why? Anyone even with little knowledge of the configuration of power in Uganda will tell you that NSSF cannot make a big investment decision and it goes right. Why?

let us assume a decision involving millions of dollars was structured through a purely technical process. The powerful in this town will not allow it to proceed - unless they get a cut. They will successfully fight it to the ground. It is almost impossible to avoid some oversight, negligence, incompetence and/or impropriety in such a deal. The excluded will find the loopholes to leverage and therefore successfully torpedo the deal. Lacking in political backing, the deal will be dead on arrival, as happened to Nsimbe.

Therefore, the only way to carry out an NSSF deal successfully is to leverage it politically. Here, you get someone closely connected to state house to support the project. You also claim that it is part of the president’s grand vision to develop the country. But there are no good Samaritans at State House. The powerful will only support the deal if there is a cut for them. Secure that the mighty and powerful are on board, those involved on NSSFs side have a high incentive to cut corners. This could explain the current saga; NSSF managers may have ignored the rules because they thought that with Mbabazi on board, they would get away with it.

However, Uganda has greatly changed over the years. Our country enjoys a rare paradox. On one hand, President Yoweri Museveni seems to have centralized and personalized power at State House. Nothing of significance happens in this country without the president’s personal involvement. Yet on the other hand, power is also distributed among diffuse fragments of our political structure: the media, parliament, Inspectorate of Government, PPDA and intelligence services. Anyone of these power centers can kick off dust and drive a deal to its grave. 

Thus, even when you leverage a powerful power broker closely connected to the president, you cannot be sure that the deal will succeed. Any of the other power centers above can successfully contest their exclusion as parliament and other anti Mbabazi forces are demonstrating. It is impossible to bring all these groups into agreement. The financial and transaction costs of such an undertaking would overwhelm even the most liquid investor. 

More than the corruption of the actors, it is this set of affairs that has created investment gridlock in our country. Over the last ten years US$ 2.7 billion worth of investment has been blocked as a result of debate over disrespect of the rules in tendering. I know that many Ugandans are driven by moral outrage to oppose such investments when revelations of gross irregularities in the tendering and or contracting come to light. But I also know that many oppose out of ignorance, others are angry that they did not get a cut on the deal, some will be settling political scores, while a number (especially parliament) join the fray not so much to hold the culprits to account but to leverage their power and extort money from the investigation. 

This is what makes our democracy at once vibrant and damaging. It is great to have all these institutions of accountability to check our rulers. Yet sometimes, when we throw key investment decisions into the public gallery, the decision making process degenerates into partisan gridlock. This reminds me of Athenian democracy during the time of Pericles in 400 BC. Socrates, so openly despised their pretentions, scorned their ignorance and rebuked their fickleness that when they finally had their day to pronounce a sentence on him during his trial, they voted overwhelming for his death. 

In his final triumph over the mob, the old sage welcomed his death with unmistakable calmness!
As a journalist, I used to be among the coalition of those who worked hard to block projects whose tendering had question marks. I was naive then, thinking that we were cleaning up the system. Ten years later and many investment projects dead, we are still riddled with irregularities in tendering. 

This has taught me that these democratic debates don’t lead to solutions. Instead, they paralyze decision making. The principle of negotiation is that a bad deal is always better than no deal at all. Debating every investment deal to its grave is not a formula for success.

Moving forward, we need a coalition of people who are not merely seeking to score political points or be seen as powerful. These people, while acknowledging the irregularities in the purchase, would recognize the importance of getting NSSF’s vision of large-scale organized housing development back on track. The economic and political impact of this vision is too strong to ignore and it too valuable to kill through political buccaneering. The middleclass in Uganda should stand behind this vision.

Second, the ministry of finance should move very fast to liberalize social security which is a stated policy of government. Here, private equity firms and mutual funds would be licensed to provide the services NSSF monopolizes today. Every Ugandan would choose where to take their savings based on where they predict a good return. Privatized and liberalized social security especially in a dysfunctional political structure like ours will quicken investment decision-making and furnish firms with agility to adapt to market dynamics. 


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