The Agoa Girls are in Town
(Tickets $50m Only!)
If you asked an average Ugandan what Agoa means, you are likely to get one of two responses: Either they don’t know or they think it is a government factory that employs a thousand girls.
The Uganda government has been so enthusiastic about the USA’s Africa Growth and Opportunity Act, which enables our countries to export directly to US markets, that many would be forgiven for mistaking the state for a trader. Though it is a decade and a half since the collapse of communism, Uganda is only slowly learning the hard lesson that government has no business engaging in business.
Moreover, the country’s own privatisation programme is as old as the fall of the Berlin wall. Uganda has been so committed to privatisation that few would have expected the state to still be trying to run businesses.
The government at first did the right thing and lobbied the American lawmakers to open their markets to Africa. Then it went ahead and got too involved in facilitating some enterprises to take advantage of Agoa. Many of us first heard of Agoa when government directed the district commissioners to recruit at least 1,000 rural girls to come and work in the textile factory, which is in effect an export-processing zone.
It transpired that the venture was being spearheaded by a Sri Lankan investor who was taking advantage of Agoa to set up shop in Kampala. When the factory started processing clothes, the elite become critical, arguing that the Sri Lankan wa not using Ugandan cotton and was being heavily subsidised by the Uganda government, which was directly picking up his transportation bills between Kampala and Mombasa.
But they were told that with over 1,000 local girls being employed in the venture, the economic benefits justified the government’s heavy involvement.
Things took an embarrassing turn a few weeks ago when the workers, popularly known as the Agoa girls, went on strike protesting poor working conditions. The textile factory was back in the news.
Last week, the resident Sri Lankan director was summoned by parliament to explain the situation. It transpired that the investors had not put a single coin into the venture, but had invested $800,000 worth of expertise. As for the Uganda government, whose job is just to create an enabling environment, it had, er– well, put in cash in excess of $5 million. Not to mention that the premises where the factory operates are also public property, formerly housing the defunct Coffee Marketing Board.
In addition, government has guaranteed loans to the company worth over $3million and, since business is not going very well, the taxpayer looks likely to pick the tab in case the investor defaults.
Smarting from the Agoa egg splashed over its face, government can now reflect and recall other ventures that have flopped because of excessive enthusiasm that went well beyond creating an enabling environment.
Over five years ago, for example, government wanted to buy combat helicopters in order to crush the rebels in the north of the country. The purchase of weapons has always been an exclusive government role, performed in utmost secrecy by officials of the defence and finance ministries. But somehow, this time, the government decided to make it a business deal, and brought in some private company registered offshore by a Ugandan and couple of foreigners.
What followed was a series of profit-oriented conspiracies between wheeling dealing businessmen and government officials. The whole deal ended with the state some $10 million poorer and two junk helicopters that could not even fly, let alone fight.
Partnerships between government and businessmen have only one result - loss for the government. The sweetest aspect of such partnerships is that government guarantees your loans while you retain the management powers. The "smart" thing is to perform poorly and fail to pay the loans, so that the ignorant taxpayers remain holding the can. You can then go and enjoy the loans, which you need not have invested fully in the venture.
There have been several such cases and the government by now knows exactly how it loses out each time by trying to have a direct stake in people’s businesses. But, being a slow learner, it just repeats the same mistakes. The business people who manage to entice government into going to bed with them, meanwhile, are laughing all the way to the bank.
For while the balance sheets of their companies look bad, their personal lives become considerably more comfortable.
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Mr Buwembo is Editor of The Sunday Vision of Kampala.
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