Do not dismiss government intervention

By Olive Kigongo

There has been uproar in the public recently about a proposed bailout of businessmen who have been hard hit by the recent economic times.

The loudest view seems to be that affected businessmen do not deserve government help, that giving businessmen public money is a waste and that a "bailout" is tantamount to nationalising businessmen's losses, while they privatise their profits.

It is not a secret that the economy has been struggling in recent years. The continued global economic downturn, falling commodity prices, recent shilling depreciation, rising lending rates and regional instability, among other factors, have all come together to contribute to the prevailing situation. As a result, our businessmen have found themselves with their backs against the wall through no fault of their own. Of course, there have been instances of financial indiscipline, but everybody, even the best of companies, are struggling.

For instance, there are some of our members, who, in anticipation of new business from an improving situation in South Sudan or Government's heavy investment in infrastructure or the beginning of oil production or a general improvement in the economy, positioned themselves for the eventuality.

They took out loans, expanded their plants, took on new labour and ramped up production. When the anticipated business did not come through either because South Sudan has fallen back into a cycle of violence or because the local content in the infrastructure projects is being ignored or because oil production is facing yet another delay, they have had to answer some hard questions in their business.

A businessman or an entrepreneur is one who sees an opportunity and organises resources to take advantage of it. If he makes a profit, that is his reward for taking the initiative. If he continues to make prudent decisions in a conducive environment, he will continue to be paid into the future.

Beyond his own personal gain, he assumes added responsibility in his society to keep his enterprise ticking along - a responsibility to the government to whom he pays taxes, a responsibility to his suppliers and financiers who he owes money, a responsibility to the natural environment in which he operates and last but not least, a responsibility to his employees for whom he provides a livelihood. His collapse will not be his own loss, but extends outwards beyond himself into the community and further out. Seen in this context it is hard to understand the vitriol being spewed at the suggestion of a bailout of Ugandan businesses.

To begin with the discussions that are being held with the Government that we are privy to, are about more than a bailout of individual businesses. In fact the focus is on stimulating the economy, essentially in the hope that if, like in the ocean, the tide rises all boats will be carried along. Hence, the key recommendation that the Government makes good on the hundreds of billions of shillings it owes its suppliers. A recent report by the Auditor General puts this at sh1.3 trillion a figure, if cleared in one swoop would provide much relief to this economy.

We also support suggestions that for the banks to relax their criteria on what constitutes a bad loan, in order to give businessmen room to manoeuvre, reconstitute themselves and get back into active production.

In fact I would go as far as recommending a stay of action on bad loans for a limited period during which the full extent of the damage can be ascertained and proper remedial action taken.

But first there must be a transparent and open criteria for which companies deserve to be bailed out and what will be the nature of government intervention to stimulate the economy and bailout companies beforehand.

This is common sense.

If you have widespread loan delinquencies, our financial system will come under enormous strain and much larger and costly bailout will be required to hold up the whole economy.

There is no doubt the economy needs to be jump-started but it is also true that there are some businesses that are strategic and should not be allowed to go under.

At UNCCI we are calling for a calm and reasoned approach to a very real problem.

The writer is the president of the Uganda National Chamber of Commerce and Industry