In Summary
  • Many of the laws setting up government corporations are burdened by excessive powers given to ministers.
  • The President should look into the appointment and empowerment of more capable boards that are empowered to appoint and supervise qualified executives as well as make key decisions.

Not long ago, President Museveni, in a letter to Vice President Edward Ssekandi, Prime Minister Ruhakana Rugunda and selected Cabinet ministers, expressed impatience over uncontrolled explosion of Authorities and Agencies in government.
He said these corporations were consuming a lot of government resources without necessarily putting anything in its coffers. He went on to order that by December 20, the Minister of Finance and the National Planning Authority, propose a plan to Cabinet on how to reduce and or consolidate them.

While I agree with the President on the numbers and the actual roles of these corporations, even more important, for those that remain, what needs to be urgently addressed is the issue of corporate governance - made worse by political patronage and or interference.
For example, why is it that MTN and Airtel are succeeding where Uganda Telecom has failed? Why did Uganda Commercial Bank fail yet Stanbic, which bought most of its assets, made Shs191 billion in profit in 2016 and declared Shs95 billion in the first half of 2017?

Elsewhere in the world, China has shown that with good governance, State agencies and or corporations can actually be a good source of income for governments. For example, four of China’s State-owned corporations, were named among the top 10 of Forbes’ 2017 Global 2000 list of the world’s biggest and most powerful public companies. The four companies have a combined market value of $720.8 billion (Shs2,631 trillion)!
The Industrial and Commercial Bank of China Limited and China Construction Bank, are in fact No.1 & 2 respectively on the list- with profits of $42 billion (Shs153.3 trillion) and $35 billion (Shs127.7 trillion)!

Back at home, NSSF, which is now Uganda’s largest financial institution, has also shown that with good management, State corporations can actually do much better. In the last five years alone, benefits corrected have grown by 66 per cent from Shs552.7 billion in FY2012/13 to Shs917 billion in FY2016/17, while the Fund revenue from its investment activities, has grown by 88.4 per cent from Shs484 billion to Shs912 billion in the same period. Similarly, interest paid out has grown by 142.3 per cent from Shs281 billion to Shs681 billion.
But what is corporate governance? Corporate governance is basically about the management of power in an organisation - not just for its own sake, but rather for the sake of creating value for that organisation’s stakeholders. It is about who holds the power of decision making in an organisation, how it is delegated and exercised, its purpose, and what checks and balances exist to control how this power is used.

Central to good corporate governance is chain of command - the order in which authority and power in an organisation is wielded and delegated from top management to every employee at every level of the organisation.
The clearer the chain of command, the more effective the decision making process and the greater the efficiency. A failed corporate governance structure follows logically from a failed chain of command and an inability of the board and chief executive officer to implement and manage that chain of command.
I wish to borrow from the recently ended governance stalemate at NSSF, where the deputy managing director, Geraldine Ssali Busulwa, was on the record saying she was not accountable to the board or the managing director since they did not appoint her.

What in my view was Ssali’s error of judgement, seemed to have the support of the existing NSSF Act, where the board, the managing director, deputy managing director and corporation secretary are all appointed by the minister, thus creating some sort of grey-area on who is actually in charge of who.
Thank God, this stalemate was decisively dealt with by the board and the minister in time, but in circumstances where there was a weak minister, this would have been difficult to manage. In a fast-moving business world, such governance stalemates can be costly.
Just like in the NSSF case, many of the laws setting up government corporations are burdened by excessive powers given to ministers, especially in the appointment of the top executives, and the making of key investment decisions.

Over and above the inabilities of some of our Cabinet ministers, if at all the President is serious in making these State corporations more functional, one of the things the President should look into is the appointment and empowerment of more capable boards that are empowered to appoint and supervise qualified executives as well as make key decisions.

Mr Mugarura is the chief executive officer, Association of Uganda Oil and Gas Service Providers.