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

Saturday, November 29, 2008

Museveni hates local business

I argued last week that there is a small but very vocal group of Ugandans who have taken their legitimate anger against the regime of Yoweri Museveni into a condemnation of the Ugandan society generally. This trend is beneficial to Museveni and company because a cynical political class that despises its own people cannot be a vehicle for progressive change. This lesson was vividly brought to me during a lunch discussion with a Western diplomat about our nations major challenges.
I argued in that discussion that Uganda has registered significant positive change in the economic realm over the last 20 years. This has produced a fast growing economy and with it a fairly large educated middleclass that can be harnessed to provide the necessary software for change. Yet a section of the Ugandan elite at the lunch discussion could not respond to the substance of this argument. Instead, it responded by attacking my moral character accusing me of selling out to Museveni. This blackmail has become effective. I have met many people who are afraid to take particular positions in public debate for fear of being misunderstood. 

One of Musevenis gravest failures has been his inability to recognise the talent and ingenuity of Ugandans; and I wonder how he hopes to successfully lead people he despises. Sadly, a section of his opponents seem to share his disdain for Ugandans; and I marvel at the similarity. Museveni has spent his presidency berating against indigenous Ugandans for lacking entrepreneurial talent. He has thus been giving public land and taxpayers money for free to Indians and Europeans. 

These actions beg the question: if foreigners are so talented, why do they need favours given at a Ugandan taxpayers expense to succeed in business? Take Mehta and Madhivan: the factory-gate price of a tonne of sugar at both Kakira and Lugazi is US$ 750. Yet a tonne of imported sugar from Brazil arrives (Cost, Insurance and Freight) in Kampala at US$ 325. Government imposes a tax of US$ 400 per tonne to make Kakira and Lugazi competitive. Ugandans subsidise Mehta and Madhivan to remain in business. 

Yet although Musevenis racial undertones can sometimes be blinding, we should not think that he is motivated entirely by racism even though his personal racial inferiority complex plays a part in his statements. Rather, his opposition to the emergence of an indigenous business class is largely a function of his politics. 

Since the late 1990s, Museveni has consistently taken political decisions to undermine the emergence of a strong indigenous business class, a reversal of his efforts in the early 1990s to actually create one. He thus supported the collapse of Greenland Group, the Kato family empire, John Katuramus Give and Take, Sembule Group etc. To achieve this objective, he has always used legitimate economic arguments to mask his political motives. For we must remember that all of these people made serious business errors out of greed, ignorance or incompetence that justified state action or inaction leading to their collapse.

The collapse of indigenous owned business houses was supported by the West, World Bank and IMF, Museveni and the current vocal group that opposes him. Yet we have seen Western governments prop their own companies that made similar errors instead of letting them go under. The long term effect of letting indigenous owned companies in Uganda buckle was to stifle the emergence of a sizeable indigenous private enterprise class that can be independent of state patronage.

This strategy is politically significant. It shows that Museveni is afraid that a successful indigenous business class (Marxists call it a national bourgeois) can become a centre of opposition to his politics. It is therefore no coincidence that he began disbanding them after 1996 when he began his project to become a presidential monarch. By financing his opponents, a local business class can change rulers. Museveni wants a private sector that is either dependant on him personally for its success or is politically removed from Ugandan politics to pose him a political threat. He can use such a pliant business class to finance his politics.

This explains why the largest number of beneficiaries of money and land give away bonanzas of the last ten years has been non-indigenous businessmen. By enriching only non indigenous capital, Museveni has created political safety for himself. He knows they are politically impotent; if they disagreed with his economic policies, the best they can do is to lobby him for favours or bribe his officials for individual exceptions to the overall bad policy environment. Alternatively, they can stay and suffer the costs of bad policy or in mute despair, they can leave the country. But they cannot fight back. Why? 

Museveni understands that such a racially alien business class has no capacity to transform an economic policy disagreement into a political disagreement. This is because it lacks the necessary social ties with indigenous social groups to organise a mass political base for its economic agenda. Consequently, rather than confront the state, it can only work around it by seeking particularistic favours. This promotes the personalisation of decision making and with it, corruption. 

It is this fact that should help us understand why land and money give away bonanzas have been done at the behest of the president personally rather than as public policies pursued by the institutions of state in Uganda. The aim is to stifle the growth of an independent private sector generally yet promote the growth of particular individual businesses that are convenient to the government. The result: failure to develop a locally rooted business class that can leverage politics to force state policy to aggressively pursue a strategy of capitalist transformation.

I must admit that Museveni has at times supported (or appeared to support) some indigenous Ugandans with tax rebates or cheap capital after 1998. James Mulwana and Hassan Basajabalaba are examples. But note that his approach has been consistent i.e. supporting specific individuals rather than indigenous capital generally. Yet even here, his support has been largely aimed at keeping such individuals on the life-support machine of state patronage rather than to allow them to become viable and successful business groups.

- Continues next week.

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