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COVID-19 has not only caused financial distress to many businesses in Uganda and globally at large but it has also escalated and exposed how fast successful businesses and individuals could fall into financial distress or even bankruptcy due to internal and external factors and shocks.
Media is nowadays frequently feeding our eyes with businesses that are being auctioned by creditors/bailiffs due failure of debtors to fulfill their obligations to clear their debts.
Whenever one of the major businesses folds, debate ensures mostly on social media ranging from those that commiserate with the stakeholders – the employer, employees, tax body/lost revenues, and other incidental or indirect beneficiaries of that business that has shuttered.
On the other hand, the news is met with a scorn argument to the effect that some of these businesses are not only maladroitly run but also prior to folding up some of these businesses happen to have been running on legerdemain, scumbag and cover-up of all being well for years and just like the proverbial accident in waiting, it eventually happens in many of the businesses thus the owners are not entirely guileless in this equation so they assert.
Enter a news item that featured in the Daily Monitor and the weekly Observer newspapers recently to the effect that the government had awarded one of the lucrative deals to a company belonging to one of the city moguls whose, interestingly, businesses have been in the financial storm for a while.
Many viewed this action as a disguised helping hand/bailout to the city tycoon by the government and yes you have guessed it right it enkindled ire on both mainstream and social media towards the government.
It remains to be seen whether this gesture is a harbinger of perhaps others that are in offing for other private companies because the tycoon in the frontline is not the only Ugandan having financial woes.
The debate has reminded me of one of the conundrums on the very subject in recent times that surfaced in the USA during the financial crisis of 2008-09 when the once proud Wall Street firms teetered on the edge of collapse.
In 2008, President George W. Bush asked Congress for $700 billion to bail out the nation’s big banks and financial firms, which attracted anger among sections of Americans.
Shortly after the bailing out of some companies, one of the New York Times editions of March 2009 revealed that some of the companies on the public dole were awarding millions of dollars in bonuses to their executives.
A case in point is the American International Group (A.I.G), an insurance giant brought to ruin by the risky investments of its financial products unit.
Despite having been rescued with a massive infusion of government funds (totaling $173 billion), the company paid $165 million in bonuses to executives in the very division that had precipitated the crisis!
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Back to Uganda, the USA bailout saga begs a million questions firstly, how does the government ensure that taxpayers’ money doesn’t go to waste in private companies? In other words, does the government put in place mechanisms to ensure that the individual bailed out is living a frugal lifestyle or put in place a sound management process that ensures business sustainability of the rescued business?
Or is it business as usual of bailing out individuals only for them to surface living large, and delivering motivational speeches in posh hotels?
Lastly, are there any paragons so far on those that were bailed out before? If there are any perhaps the government should be fronting them as justification for future bailouts in parliament.
Otherwise, the current criteria and method look like it is being done in a camaraderie way of individual buddies which is putting the government in the spotlight, for unlike individuals ideally government should not only have procedures but those very procedures should be transparent to the taxpayers’ dime.
Musekura Kenedy
Musekura Kennedy is a Student at the Law Development Centre (LDC) and is currently under clerkship at the Court of Appeal of Uganda.