DONOR RELIEF: Uganda Nordics Substitute Financial Aid With Trade

 

Eddie Bazira, chairman Uganda Nordics Business Expo during his address to the business community last week in Kampala
Eddie Bazira, chairman Uganda Nordics Business Expo during his address to the business community last week in Kampala

By Alfred Wandera

The entrepreneurial world has survived for years on the philosophy of “give me the fishing rod and not fish itself and I will beg no more for the fishy stuff”.

The proponents of this school of thought had in mind the idea of boosting extrovert approach to doing business, which means hands-on experience as opposed to introvert character that encourages sitting back in wait for the readymade products.

Uganda having been hit hardest by the cutting of aid by donors, and driven by the urge to cut tremendously on donor aid, Ugandans in Diaspora, especially those living in the Nordic countries – Sweden, Denmark, Norway, Ireland and Finland – conceived the idea of Uganda Nordics Business Expo.

BACKGROUND

Uganda Nordics Business Expo is born out of the need to reduce reliance on donor aid and rather focus on promoting trade between the donor countries and the aid recipient countries under the theme “From Financial Aid To Trade”.

This comes in the wake of increasing rate of corruption in most government ministries and offices that has fueled donors to cut their aid to Uganda, one of Africa’s foreign aid beneficiaries. This has been attributed to the fact that most of the funds sent to Uganda do not reach their final destination, hence blocking development and acquisition of some basic essentials.

Statistics indicate that Uganda continues to be one of the top recipients of donor aid on the continent, according to figures from the Organisation for Economic Cooperation and Development (OECD).

Uganda received $1,786m in 2009, an increase of $145m over 2008, to make it the 6th biggest recipient of official development assistance (ODA) on the continent.

ODA does not include aid from non-governmental organisations and other institutions apart from the World Bank. Most of the funds are meant to be used in humanitarian need, strategic importance and economic potential of the recipient country. But in recent years, it has also been found out that the criteria for determining what countries should get the most development assistance are often heavily dependent on bilateral relations and geo-interests of the specific donor countries.

However, most donor countries appear to tie their aid to good governance, aid effectiveness and accountability.

The failure by the central government to tighten and monitor where this aid goes has gradually led to increased corruption hence an indicator that the entire donor funding has hit the brick wall.

It’s clear that most of Uganda’s budget depends on foreign aid to fulfill its roles of providing better services to the overwhelming population.

During 2012/2013 financial year, Finance minister, Maria Kiwauka, noted that there has been an increase in donor funding and grants.

In FY2010/11, this kind of funding amounted to $1,391m comprising 84.4% loans and 15.6% grants.

New loans and grants are concentrated in three main sectors; the Works and Transport (33%), Agriculture (23%) and Water and Environment (20%), where they are intended to fund priority investments as outlined in the respective strategic plans of each sector.

In FY2012/2013, government targeted mobilising for grants and loans amounting to Shs2,679bn, which represents 25% of the National Budget, and consists of project and budget support loans.

With the increased borrowing, total debt service including interest payments are projected to amount to Shs1, 101bn in financial year 2012/13. Meaning that Shs10, 057bn will be available to support economic and social development programmes.

The visible multiple increase corruption mostly in government ministries prompted donors to cut aid to Uganda causing threats that government might not fulfill its dreams in this financial year.

The US and the European Union are the top donors to Africa, followed by the World Bank, France and the United Kingdom.

Denmark, Luxembourg, the Netherlands, Norway and Sweden continued to exceed the United Nations ODA target of 0.7% of GNI.

The largest increases in real terms in ODA between 2009 and 2010 wererecorded by Australia, Belgium, Canada, Japan, Korea, Portugal and the
UK. Aid flows from OECD Development Assistance Committee (DAC) donor countries totaled $129bn in 2010, the highest level ever, and an increase of 6.5% over 2009. This represents about 0.32% of the combined gross national income (GNI) of DAC member countries, less than half of the United Nations ODA target of 0.7 per cent of GNI. Corruption especially in the Office of the Prime Minister largely led to the
suspension of aid. Norway, the United Kingdom, Ireland and Denmark said they have suspended aid to Africa’s top coffee exporter pending investigations into reports of the theft of $13m by officials in the Office of the Prime Minister.

“Norway has suspended any disbursements to Uganda government institutions until further clarification has been provided,” said Ambassador Thorbjorn Gaustadsather, pointing out that Norway’s total aid to Uganda amounts to about $70m a year.
in a recent interview with Business Sense, senior economist, Prof. Augustus Nuwagaba, argued that many countries have succeeded minus external support. However, Prof. Nuwagaba adds that such countries have put most of their efforts onto handling corruption and putting emphasis to key sectors in the economy.
Nuwagaba notes that, because most of the aid doesn’t reach the final beneficiaries, there is no need of borrowing since its just increasing the country’s Balance of Payment (BoP) with funds that benefit only a handful of Ugandans.Most of the aid sent to African states is either ‘dead debt’ or makes Africa to highly have dependency economies.

“Kenya did not get aid for 10 years; most of its emphasis relied mostly on balancing of its budget. It gives only 2% to public relations, an indication that balancing the budget leads to minimal borrowing because key sectors are always given extra chances,” noted Nuwagaba.

He further illustrates what the neural Classic Economy theory explains “all development is initialed within”, adding that development can never be ignited from outside and can only be propelled from outside. The only country, according to Nuwagaba, that has transformed out of aid
is South Korea, but even in South Korea, the money from US was used properly under South Korean Economic Policy on import substitution and export promotion.  “Our economy should be flag-shipped; we should concentrate on a few sectors that have multiply effects. The external aid has potential to create development, however, this can only be achieved with stringent measures and handling,” said  Nuwagaba.

UGANDA NORDICS BUSINESS EXPO

Bazira (C) charting with members of Uganda Nordics Business Expo in Kampala
Bazira (C) charting with members of Uganda Nordics Business Expo in Kampala

Following Prof. Nuwagaba’s illustration of what the neural Classic Economy theory explains; “all development is initialed within” and his argument that aid can be best utilised on import substitution and export promotion, this is what forms the bedrock upon which the Uganda Nordics Business Expo rests. According to the organisation’s chairman, Eddie Bazira, they are a non-religious, non-political and non-profit making entity that brings together Ugandans of all walks of life.

The organisation began three years ago as Uganda Diaspora in Sweden and united all Ugandans living in Sweden, with 1000 members, before it expanded to include Ugandans in the Nordics.

“We meet to discuss how to promote our economic and social status in the Nordics and Uganda. We think of starting cooperatives, create jobs and do business with Ugandans back home,” Bazira told Business Sense during an interview in Kampala.

“In April 2012, we worked with Ugandans in Nordic countries and organised the first Uganda Convention on a boat between Denmark and Norway. It was a social forum where we discussed how to develop ourselves and strengthen our presence in the Nordic countries.

“We also organised Uganda @50 last October and we invited over 200 people including school children, politicians, and the business community. It was a weeklong event in Stockholm, Sweden, and that is where the issue of Uganda Nordics Business Expo was born,” added Bazira. During the Uganda @50 do in Sweden, Bazira says a number of resolutions were reached including organising business expo to create a platform for Ugandan business community to showcase their products, services and expertise to the Nordic business community with the view of shifting from financial aid from the Nordic countries to trade. “Depending on financial aid and handouts from the donors and Diaspora community will not yield development. The idea of Uganda Nordics Business Expo was conceived at the time when the western world had cut aid to Uganda. So the question was; despite the aid cut, how can our business community survive? So we wanted to create a link for direct foreign investment between the joint venture companies in the Nordics and the business fraternity in Uganda so that they can often meet and trade directly, instead of relying on aid,” says Bazira. Bazira says they encourage Uganda business community to present their ideas to the funders so that the money is channeled directly to them and not in form of aid through the central government.

The body has representatives in each of the Nordic countries with a coordinating committee in Uganda that organises traders and entrepreneurs in the country, Uganda Nordics Business Expo partners with business organisations like Kampala City Traders Association(KACITA), Uganda Manufacturers Association (UMA), Small Scale Industries Association, Private Sector Foundation of Uganda, Women Entrepreneurs Association, Uganda Chamber of Commerce and Industry, Uganda Farmers Association, Uganda Export Promotion and Uganda Investment Authority, among others. “We have asked these bodies to identify traders and farmers in the associations whom they think can benefit from the business expo. We have also invited the minister of Trade, Amelia Kyambadde, to grace the function that is slated for June 6 to June 9, 2013 and we are in touch with the Embassy of Uganda in the Nordics,” says Bazira.

He says the traders and farmers benefit from the business expo by matching they make with respective companies in the Nordics that are willing to do joint ventures with them and organisations interested in equity financing.

Traders can thus get capital – material or cash – to develop their own businesses to international standards so that they look beyond the local market, adds Bazira.

The Nordic companies that have already agreed to work with the Uganda Nordics Business Expo include Swedish East Africa Chamber of Commerce which has more than 120 companies in Sweden; the Swedish Trade Council, a Swedish government funding body that does joint ventures and equity financing; SwedFund, a joint venture and risk capital financing company and Swedish International Development Agency (SIDA) that funds business and development, among others.

“These Nordic companies always prefer seeing what their business partners have so that they can do equity financing. For example if a Ugandan has 10 hectares of land and wishes to carry out plantation farming, the Nordic company values the land and the labour the Ugandan entrepreneur will provide so that they can inject in equal share of capital like machinery and cash to run the farm. At the end of it, it is equal partnership,” says Bazira.

THE EXPO

Asked whether they have capacity to organise such a function of international magnificent, Bazira argues that they are capable basing on their past experience having organised two events before – Uganda Convention Nordics and Uganda @50 Nordics.

“We have a budget of $120,000 for the tactical and logistical aspects in the preparations of the expo. The event is set to take place between June 6 and June 9, 2013 and will be conducted on Siljaline Cruise, a boat cruise, between Stockholm in Sweden and Helsinki in Finland and back to Sweden. It will be a 72-hour boat cruise with 2000 people on board,” said Bazira.

He added: “To register to participate in the expo, one needs to meet the package of $2850 that caters for return air ticket, visa and insurance fee, accommodation, meals and ground transport once in the Nordics. We have outsourced Kibira Tour and Travel Company to handle all our delegates’ itineraries. We also do visa handling for all our delegates through our office located at Suite 520, Equatoria Building opposite KCCA Central Division headquarters.”

Bazira urges the business community to partake in the expo arguing that it will provide them with a unique opportunity to propel their businesses to international level so that they can trade beyond the local markets. “This will increase their revenues and offer them exchange of technology and promote trade partnership with the Nordic business community,” says Bazira.

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