{UAH} Crane Bank Stumble: Is it a symptom of an economic epidemic?
|
12:53 PM |
No comments |
By Norbert Mao
Finally it has happened. The Bank of Uganda has taken over management of Crane Bank, hitherto the third strongest bank in Uganda. The terse central bank statement says operations at the bank will continue normally. But this has not stemmed customer panic.
Economic management is based on assumptions. And when the assumptions are false it follows that the policy conclusions from the assumptions will also be false. When Museveni raised the fallacy that markets are omnipotent to the level of an orthodoxy, the result is what we are reaping today.
Public policies are not neutral or even altruistic. They serve the interests of the dominant groups with political power. Whether it is the land bonanza for industrial parts, allocation of CHOGM funds or tax breaks it is based on power relations. The peddlers of policies, however, false will hire the best brains to defend them. Where they fail to convince people, they resort to confusing people to the extent that the stakes become hazy.
Markets are a place where interest clash and at the same time converge. It is a place of agreement and antagonism. For instance, tenants want low rent while landlords want high rent. Buyers want to buy cheap while sellers want an arm and a leg. The common interest is that a deal should be closed. That is the reason markets fluctuate. To stabilise them you need a visible, transparent and accountable hand of a government.
Crane Bank is choking due to loan defaulters. Borrowers are defaulting because the economy is broke. Some of this money is owed to businesses that owe Crane Bank. The so-called domestic arrears has infected the cash flow of Crane Bank. So the central bank has stopped it from issuing letters of credit for instance. The central bank asked Crane Bank shareholders to put 10 million dollars to stabilise the bank but they failed. In the meantime, the rumour mill did its part. A run on the bank ensued. Depositors started withdrawing their money causing a liquidity crisis. The central bank has now stepped in to stop the bleeding.
We are facing an epidemic and treating one case will not stem the tide of the carnage unless the root cause of the problem is correctly diagnosed and the correct prescription made and treatment applied.
Defenders of Musevenomics claim that Uganda has prospered. Mathematically that may be correct but this begs the question about the quality of the growth. Without creating jobs and modernising agriculture the growth is hollow. Our economy has just swollen. It has not grown. Swelling is quantitative. Growth is qualitative.
It's like a pancake seller who makes 1000 shillings investing in a basket and making another 1000 shillings and you say he has grown his business by 100 percent via a vis a trader which a capital base of 10 million shillings who makes 1 million shillings and you say the pancake seller has more growth simply because the trader has only increased by 10 percent! A large percentage of a small sum remains a small sum.
In 2006, during the Presidential Science Awards at Munyonyo Speke Resort Museveni said the Ugandan economy was still at the stage of early man. The then Finance Minister Ezra Suruma called for more government interventions in the economy. He was promptly fired from. Museveni meanwhile continued his rhetoric of saying "government has no business being in business". The result of this lack of strategic policy focus is what we see today: Adhoc interventions, thinly spread poverty alleviation programs, corruption, incompetence and policies guided by a greedy few.
Without strategic government intervention and planning, the market will be chaotic. There will be no systematic corporate culture. A little bird told me that due to the cosy relation between the Museveni court and the Crane Bank owner, cash-strapped businessmen close to the regime approach Museveni who recommends them to Crane Bank. Crane Bank processes loans and takes possession of their land titles. When these borrowers default and Crane Bank threatens to foreclose, they run back to State House. Crane Bank gets a call to give them a break. Meanwhile, the loan gets very bad. When such cases become too many, the bank suffers irreversibly.
The Uganda government has lost its way. When you lose you way you change direction. It is futile to focus only on security, infrastructure, the civil service, and feeble interventions in terms of monetary and fiscal policies. Because of this pseudo-capitalism not backed by production, the donors continue to reward Uganda with more aid. It is a merry-go-round to hell. A purely capitalist economy superimposed on a peasant economy is nothing short of a comedy.
The writer is the leader of the Opposition Democratic Party
--
Disclaimer:Everyone posting to this Forum bears the sole responsibility for any legal consequences of his or her postings, and hence statements and facts must be presented responsibly. Your continued membership signifies that you agree to this disclaimer and pledge to abide by our Rules and Guidelines.To unsubscribe from this group, send email to: ugandans-at-heart+unsubscribe@googlegroups.com
0 comments:
Post a Comment