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

Monday, January 20, 2020

Museveni opens a Pandora’s box

How the president’s intervention to halt the procurement of Kampala-Jinja expressway is a disaster

THE LAST WORD |  Andrew M. Mwenda |  Last week, I had a meeting in Mukono, a town only 20km east of Kampala. The meeting was scheduled for 2pm. Knowing the heavy traffic on Jinja Road, where Mukono is located, I left Kampala City Center at 1pm. This gave me one hour to navigate the traffic jam. Jinja Road is a major artery connecting our landlocked country to the sea. It is congested with long queues of trailers that make traffic jams on that road a nightmare. But Wednesday last week was record breaking. I got to Mukono at 4pm.

This traffic congestion, coupled with the delays it imposes on motorists, has serious economic implications. There is a lot of working hours motorists lose in traffic when going to office or markets. Add to this the delays in transportation of goods from the coast to Kampala. The actual cost of these traffic delays can run into hundreds of millions, if not billions, of dollars per year. For a country with a GDP of only $34 billion, this is too high a cost.

Yet President Yoweri Museveni has written to the Inspector General of Government (IGG) asking her to stop the procurement of the Kampala-Jinja Expressway (KJE) apparently because there is “corruption” in the ongoing process. I have argued before that corruption in Uganda is embedded mostly in the efforts to fight it. Ironically if Uganda reduced the number of institutional checks put in place to fight corruption, it could reduce the problem.

The KJE is a project worth $1.2 billion. This is a lot of money for our poor economy. Public officials everywhere have power to allocate lucrative rights over scarce resources. It follows that many would seek to appropriate a share of the profits they help allocate i.e. be corrupt. Again as I have always argued, these corrupt transactions do not automatically lead to poor outcomes. That depends on the interaction of many other factors within a country.

For instance, there can exist within a country’s polity strong pressures for results: ensure delivery of the right quality of road, done within the appropriate time and at the right price. In such circumstances a contractor does not have to inflate the price of the road. He can pay bribes out of his profits. Take the example of KJE. Out of the $1.2 billion cost, the contractor’s profits (if we assumed them at 10%) would be $120m. He can cut only one 6th of this ($20m) to pay bribes to officials at UNRA to buy long-term favours from them without affecting the price, quality and speed of building the highway.

Alternatively, a contractor can add a 5% mark up on the cost of the road ($60m) to cater for the bribes. So KJE would cost $1.26 billion instead of $1.2 billion. This is an insignificant extra cost. Indeed, when companies bid, the prices can vary based on their cost efficiencies. Therefore a 5% extra cost by any supplier does not lead to poor outcomes. If the polity has capacity to enforce results, the contractor will to do the right quality road, within the right time frame at 5% extra cost. The idea that the existence of graft in a transaction automatically leads to bad outcomes is therefore mistaken.

In Uganda’s case, the costs of fighting assumed and/or alleged corruption in public procurement far outweigh benefits sought. Let us assume there was corruption in UNRA’s procurement of a partner to do KJE. Knowing Uganda, the bribes would not exceed 5% of the cost i.e. $60m. This payoff to UNRA staff would have had little likelihood of adverse outcomes because the maintenance of the highway will be in the hands of the contractor for the next 25 years. If he does a poor quality road, he would have a crisis at his hands when it breaks down in a few years. The firms involved are all international with reputations to protect.

However, the intervention by the President has led to a halt on the procurement process, which will delay the commencement of construction by not less than a year. If the IGG recommends a re-tendering, that will delay the project by three years. Even a mediocre economist will tell you that the cost of this delay on our economy cannot be less than $900m over three years. This means the cost of trying to fight alleged corruption in the current procurement process exceeds benefits sought. I have many examples of this stupidity in the last 17 years – NSSF Pension Towers being one.

The greater stupidity is to assume that officials at the IGG, the institution requested to investigate alleged corruption at UNRA, cannot be bribed. With a contract sum of $1.2 billion, those who failed to qualify and are now seeking a new chance to re-enter the procurement process. They will stop at nothing to cause the IGG to cancel the entire process and order a new one so that they can have another chance. So the lobbying and bribing at the IGG is going to be intense. I suspect it is agents of companies that were not pre-qualified that went to Museveni alleging corruption. Therefore, real the corruption is these allegations of corruption.

When I was still young and intelligent, I used to be a big fan of institutional checks and balances in procurement. But I was being theoretical. As an investigative journalist at Monitor, I learnt how the corrupt use (actually abuse) these checks and balances to paralyse procurement and multiply corruption. Unscrupulous bidders would come to the press, or go the Central Tender Board (the predecessor of PPDA), parliament, police, CMI, ISO, State House, etc. to cause a cancellation of the process.

The wheeling and dealing would get dirty: officials at IGG, police, intelligence, State House staff, etc. would be bought off or accused of having been bought. Then MPs, journalists, columnists and pundits would be bribed to “expose” corruption and make self righteous arguments calling for cancellation of the tender or contract. Companies with good reputations would be unwilling to go dirty. So they would pull out of the process and leave the field to crooked ones.

What began as a seeming effort to fight corruption, I realised, was actually a charade to entrench it. I become critical of attempts to halt procurement process on the allegations of corruption. With his instructions to the IGG on alleged corruption in KJE, Museveni has opened a Pandora’s box. Please watch the wheeler dealing that is going to dominate the “investigation.”



No comments: