By Muhereza Kyamutetera

On its website, Bank of Uganda says it “100 per cent owned by the Government of Uganda” and conducts all its activities in close association with the Ministry of Finance, Planning and Economic Development (MoFPED).
Their stated mission is fostering price stability and a sound financial system, but more importantly, it is mentioned that their vision is to be a “center of excellence in upholding macroeconomic stability.”
In my basic understanding, “macroeconomic stability” describes a situation where citizens and businesses are protected from adverse shocks in their everyday life, which in turn increases their prospects for sustained but more importantly, inclusive growth.

Inclusive growth presupposes equitable opportunities for all players in the economy with benefits incurred by every section of society. For Uganda to achieve rapid and sustained poverty reduction, we require a deliberate all-inclusive growth that allows people to contribute to and benefit from any economic growth.
Otherwise the rich will continue getting richer and the poorer, poorer till a point when the poor will have nothing left to eat, but the elites and the rich.

I was therefore, perturbed by Bank of Uganda Deputy Governor’s speech during a dinner to mark the 20-year anniversary dinner for the Uganda Securities Exchange (USE) Kasekende in which he denied that the insolvency of Crane Bank was “not caused by any problems in the wider economy” but rather by “its own mismanagement, not least by its extensive insider lending.”
Kasekende goes on to wiggle some carefully selected banking sector industry figures that purport to show the banking industry is stable and growing and uses this to chest-thump about how well the Central Bank is doing a good job.
At this point I could not stop wondering for whom does the Kasekende and his kind at Bank of Uganda, work for- the people of Uganda who pay his salary or the banks, many of whom are not even Ugandan owned?
Even if I know that Dr Kasekende already knows this, let me take this opportunity to remind him that banks in Uganda have always enjoyed an inverted relationship with the people of Uganda- always taking every opportunity to profit at the expense of the economy in which they operate.

For starters, the very foundation of the banking industry is extortionist. They raise deposits very cheaply from the public and lend the very same deposits to the public, including the very owners of those deposits, at exorbitant rates- with the blessing of the Central Bank (read as supervision)
For the time that Kasekende has been Deputy Bank Governor, since January 2010, banks have averagely paid 3.3 per cent interest on customer deposits and yet charged on average 22.6 per cent as prime lending rate- of course prime lending rate is for the advantaged few- the majority of the citizens borrow at much higher rates. And they have come up with a beautiful name- Net Interest Margins, to sanitize this theft.
As a result, year in, year out, Banks have grown faster than the rest of the economy, fattening themselves as the rest of the economy struggles.
For example while industry profitability grew by 17.2 per cent and 11.5 per cent in 2014 and 2015 respectively, Uganda’s GDP only grew by 5.2 per cent and 5 per cent respectively. But in 2016 the sins of the industry- namely high and unsustainable interest rates caught up with them- causing a 44.2 per cent dip in industry profitability. But even then the industry made a massive Shs302.1 billion in profits.
Profits galore for banks in 2017

Private sector lending and interests rates are perhaps the only good parameters that can be used to measure the performance of an economy and I would have loved to hear Kasekende talk more about this. As it is the banks, aided by the Central Bank’s adamant policy on inflation-targeting have kept interest rates high, thus starving the economy of the much needed credit.
But trust the bankers, they will lend less money, yet make more profits through a deliberate strategy to lend to a few people but at exorbitant rates and Kasekende can do nothing about it.

According to a BoU report, private sector credit between January 2017 and January 2018, only grew by 6 per cent from Shs12.96 trillion to Shs12.65 trillion, this is despite an 18 per cent rise in customer deposits. Even though all the banks have not yet released their 2017 results, preliminary gross loans to total deposit ratios (this ratio measures what percentage of a bank’s deposits are actually being lent out for productive use) for Stanbic Bank and DFCU bank show a reduction from 82.7 per cent in 2013 to 60.7 per cent in 2017 and 88 per cent to 67 per cent respectively. In other words the banks are hoarding money to sustain their high interest rates.

To compensate for this deliberate reduction in lending, the banks in 2017 deliberately kept their lending rates very high. Despite the Central Bank easing on the CBR by 21 percentage points from 12 per cent in January 2017 to 9.5 per cent in December 2017, the banks did not reduce their interest rates by as much. Shilling based interest rates went down by only 9.4 percentage points from an average 22.4 per cent to 20.3 per cent while USD based loans reduced by just 11.84 percentage points from 8.6 per cent to 7.9 per cent.
As a result 2017 is slated to be a good year- for the banks only of course.

The Central Bank industry Earnings & Profitability report shows that return on assets doubled from 1.33 per cent in 2016 to 2017. Shareholders are also set to smile all the way to the bank as return on equity has also nearly doubled from 8.33 per cent to 16.39 per cent in the same period.

Already net profits for 2017 declared by 2 of the 24 banks- Stanbic (Shs200.5 billion) and DFCU bank (Shs106.2 billion) are larger than total industry profitability in 2016 (Shs302.1 billion). Kasekende should enjoy his fat paycheck quietly.

Kasekende, should be more concerned that today, interest rates are at 22.56 per cent- much worse than the 19.57 per cent he found in place when he became Deputy Central Bank Governor. In fact Uganda today, is home to the highest interest rates in the EAC region, with the exception of Burundi and South Sudan, making our exports uncompetitive.
Rather than flaunting superficially rosy growth figures, Kasekende should be more concerned that 7-8 years ago, when he joined the central bank, private sector credit grew averagely by 29 per cent annually and last year it only grew by 6 per cent.
He should be concerned that since he joined the Central Bank, the Shilling has depreciated by 89 per cent from Shs1935.6 in January 2010 to Shs3,660.1 in March 2018 and that this has disastrous impact on inflation and Ugandan based businesses that have to import inputs.

Perhaps, most importantly, he should be very alarmed that Ugandans are getting poorer; the number of poor people in Uganda increased by 51 per cent from 6.7 million in 2012/2013 to 10.1 million people in 2016/2017.
And for all these, instead of engaging in selective amnesia and chest thumping about some selective and isolated indicators such as bank deposits, I would be proposing some serious radical solutions instead of glossing over the misery and pain of Ugandans.
Of course he also has an option of enjoying his fat paycheck quietly and wait to end his five year contract in 2020 and retire quietly.
Muhereza Kyamutetera is a social commentator, communications specialist and journalist

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By Kagenyi Lukka
11th April 2018.

While representing his boss at the Uganda Securities Exchange (USE) 20 year anniversary dinner, Deputy Bank of Uganda Governor Dr. Louis Kasekende spent more than half of the time allotted to him making shameless and scanty remarks.

During the Friday 6th April event at Serena Hotel, Kampala, Dr Kasekende, as if haunted by the Crane Bank ghosts, shamelessly peddled lies about its closure and the entire economy.

For instance The Uganda Securities Exchange hasn’t had an IPO in the last about five years. It has only stagnated at 8 companies that are locally listed with those that had earlier showed interest chickening. These include the former CRANE BANK, Kakira Sugar etc.

Kasekende further painted a rosy, yet misleading, picture of Uganda’s struggling economy.

“Furthermore, growth was wide spread across the economy with Agriculture, Industry and services recording buoyant growth in the second half of 2017,” Kasekende’s speech read in part.

The revival of economic growth has been accompanied by a very strong inflation performance, he said.

It is my considered opinion that Kasekende’s innuendos portrayed sheer elite mischievousness as reality tells the opposite.

The low rate of economic growth has been bemoaned by the National Planning Authority who through its chairman, Kisamba Mugerwa wrote a letter to the Speaker of Parliament and Matia Kasaija on March 27

Mugerwa, notes that Uganda will not attain the coveted Middle income status by 2020.

While Kasekende praises growth, figures from NPA and UBOS show that the economy grew by 4.0 per cent in 2015/16 and 4.8 per cent in 2016/17 and 5.5 per cent in the financial year ending June 2018.All this is below NDP targets of 5.8 per cent, 5.9 per cent and 6.6 per cent respectively.

Sadly, the sound economy that Kasekende fronts is characterized by growing poverty levels as per the numerous UBOS reports.

A UBOS report indicates that absolute poverty has increased to 21.4 per cent in the year 2016/2017 from 19 per cent in the year 2012-2013 .About 8 million Ugandans of 37.7 million live below the poverty line.

Relatedly, URA collections are below the target in a buoyant economy emphasized by Kasekende. Reports indicate that the collections are at about 60 per cent.

In 2016/17 URA collected Shs12.7 trillion against a target of Shs13.1 trillion. The daily Monitor reports that URA had failed to hit its target for the past four years since 2013/14 FY (Daily Monitor Wed 26 /July/2017).

“Whereas the FY 2016 outturn was lower than projected collections by Shs457.51billion, this performance was realized amidst sluggish economic growth…” A statement by Doris Akol read in part.

Any follower of current events would recall that recently, government has opted to borrow to pay salaries while fuel prices have increased immensely in a growing economy.

Yesterday, Trade Minister Amelia Kyambadde was meeting cement manufacturers to settle prices and bring them down. In Kasekende’s growing economy, the cost of cement increased to Shs50, 000 with in less than a month.

Then it came to Crane Bank which was unnecessarily looped in at dinner. Kasekende who is believed to have worked with Justine Bagyenda to give away Crane Bank at a negligible credit of Shs200 billion Uganda claimed that the bank collapsed due to internal mismanagement issues.

He however, fell short of telling us where was the supervisor was the bank for its problems to escalate thus far.
Why then were crane bank shareholders made to pay over Shs350 billion in an attempt to write off non-performing loans?

Kasekende should have also told the gathering on what the market value of Crane Bank assets was, why they (BOU) didn’t give other potential buyers a chance to buy Crane Bank but opted for DFCU bank. Further still, Kasekende and his accomplices find themselves with fewer answers to questions such as why they didn’t give shareholders a chance to recapitalize Crane Bank and why their listed auditors had consistently given Crane Bank a clean bill of health with its financial statements approved by BOU.

Finally, Kasekende and group should swallow a humble pie and accept that they made mistakes. The risk that his group stands is humongous and I think that’s why the principle Judge Yorokamu Bamwine has always candidly advised them to opt for out of court settlement in the multiple suits against them by Dr Sudhir Ruparelia.

Its Kasekende’s lies and arrogance that will cost the tax payer when justice is finally delivered.

Kagenyi Lukka is a current affairs commentator

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