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Mwenda, Land Grabs aren’t an answer to the Commercialisation of Agriculture

Land grabbing in Uganda has received a new ally, Andrew Mwenda. According to the Observer Paper, while addressing a Policy Think Tank, he said that, “it is through land grabs for commercial agriculture that Europe managed to industrialise, a thing that should occur in Uganda. While I had chosen to dismiss this as another attention seeking gimmick by this seemingly expired economic and political pundit, an afterthought led me into crafting a response.

Some people think that Mwenda’s statement is merely aimed at courting controversy. I say, NO. Mwenda is dead serious. He represents a group of nouveau riche whose unending primitive appetite for resource accumulation is mind boggling. These so called elites will stop at nothing to centralise wealth in order to be the Russian Oligarchs of Uganda. They want at whatever cost to create legacy families akin to the Kennedy, Rockefeller, Ford families this time using crooked mechanisms that will control the nation’s resources for centuries to come. To them, the end justifies the means. Mwenda is simply spilling the secrets of their private chats to the general public.

Late last year, I did interact with a moneyed young man who came to Kampala by hitching a lift on a milk truck a few years ago and is now worth billions of shillings. He told me off the cuff that, “I don’t see why peasants still hold onto land. We should take it away from them and instead employ them to work on the newly created larger farms.” An attempt at reconciling his rags to riches story with his new found mindset left me reeling in shock. This moneyed young man is a true reflection of what Mwenda is saying. This trend of thought is highly justified by a significant section of the elites that are having it all smooth sailing after choosing to be politically correct.

Does Land size really matter?

My brother Mwenda quoted the example of Europe in the middle ages and how land grabbing was used to boost agricultural production. I would like to encourage him to desist from becoming a slave of relic thinking. What may have worked in the 18th century may not necessarily work today. There is a lot that has changed over the centuries and for one to expect superimposing 18th century Europe onto 21st Century Uganda is very mind boggling a prospect.

Research indicates that land size is not really the issue. Depending on which country you go to, the local circumstances dictate what works best. In the USA, Brazil and Europe, large farms have been associated with increased productivity while in East Asia, a region with similar demographics to Africa, an inverse relationship has been found between land size and productivity. Smaller farms are actually producing much better per unit than the larger farms.

Commercialisation of Agriculture doesn’t necessarily mean having access to large swathes of land. It is simply the production of crops and farm animals for sale. The problem with some of our allegedly exposed elites stems from watching too much TV and seeing the large farms in Europe and USA then expecting that superimposing the same here will automagically work.

After the second world war, Japan broke down land into affordable units for small holder farmers. The country had identified that “landlordism” was a source of a lot of evils to numerous farmers. They then undertook a reform that involved taking land from especially absentee landlords and facilitated the previously renting farmers to become “owner farmers.” Prior to these reforms, Landlords owned nearly 50% of all farmland in Japan hence perpetuating the Landlord-Tenant arrangement that was rife in the rural areas. Of the 5.5 million peasant farmers, a third of them rented land from these landlords and always surrendered half of their produce as rent. Today, these small holder farmers are largely responsible for the high value agricultural produce that Japan exports all over the world.

In Asia, Agriculture is largely characterised by smallholder cultivators. The average size of areas cultivated is as indicated below;

  • Bangladesh 0.5 hectares

  • Nepal and Sri Lanka 0.8 hectares

  • India 1.4 hectares

  • Pakistan 3.0 hectares

In China, 95% of the farms are smaller than 2 hectares while in Bangladesh 96% of farms are for small holders cultivating 69% of the arable land. If you are a regular in supermarkets, Asian processed foods litter our shelves and one might be fooled into thinking that their source is large scale farms. Smallholder contribution to the total value of agricultural output is significant in many Asian countries. Globally, they account for nearly 70% of the food supply.

As opposed to increasing farm size, the reverse is happening in Asia. China’s farm size decreased from 0.56Ha in 1980 to 0.4Ha in 1999; Pakistan from 5.3 Ha in 1973 to 3.1Ha in 2000; Philippines from 3.6Ha in 1971 to 2Ha in 1991 and India from 2.2Ha in 1950 to 1.33Ha in 2001.

Interestingly, this drop in acreage coincided with the successful green revolution in Asia that saw a bumper growth in the production of largely rice, maize and wheat. This implies that Uganda’s increased food production can still occur even in the current dispensation of smallholder farming. It has happened in the rice industry where our rice production has steadily grown over the years from a mere 26,000 tons in 1990 to 231,000 tons in 2012. Remember, rice growing in Uganda is largely a commercial farming engagement. The success it has registered can be replicated to other crops.

In Colombia, 11,000 land owners have accumulated 67% of the of the most fertile land leaving the rest to some 11 million people to use. They did this through dispossession and forceful displacement of millions. As a result, in 2013, the country was second to Syria in having the highest number of Internally Displaced People at 6 million. This status-quo is partially responsible for the numerous civil wars the country has faced for decades. I guess having faced years of internal strife in Uganda, our gluttonous elite need to realise that we can very easily descend into anarchy and civil war as a result of these forceful land grabbings.

Coming closer home to Africa, we have good examples of land grabs that have come back decades later to haunt the beneficiaries. In the late 19th century, Cecil Rhodes duped the native inhabitants of Zimbabwe into handing over their land to him. What followed was the dispossession of Africans from their land. Privileged whites gained land swathes in thousands of acres. This injustice stayed deep in the hearts of many indigenous people and when the conditions proved right, the land repossession occurred at the turn of the 21st century. Though handled poorly and largely politicised, it still pointed to the fact that people wanted that injustice addressed.

In South Africa, a similar land grab occurred centuries ago. However, lately, we are seeing a resurgence in the calls for land expropriation from the White landlords to the Black South Africans. One could easily have put this off as the wishful thinking of the poverty stricken masses but that isn’t the case. I am in the know of a number of elites that are warming up to get a share of the land in order to try their hand at farming. Mr. Julius Malema the Commander in Chief of the Economic Freedom Fighters has emphasised this as one of the key pillars his party is pursuing.

The question of commercialising agriculture shouldn’t be looked at from the lens of the developed countries. We have our unique ecosystem that requires unique approaches. The Africa Agriculture Status report of 2017 states, “…the type of agricultural transformation relevant today is very different from the kind of green revolution transformation that Africa aspired to in earlier decades. The new agenda needs to be much more focused on a market driven business agenda that encompasses the entire food system, not just agricultural production. But Africa is at crossroads: should it go for a food system transformation led mainly by large commercial farms and large agribusinesses, as in many rich countries? Or should it go for an inclusive transformation based on commercial smallholder farms and SMEs along value chains. A large farm, large agribusiness approach would leave millions of small farms and businesses without adequate livelihoods, whereas an inclusive approach could engage more of them in productive employment, create more attractive jobs for young people, help reduce poverty, inequality and food insecurity…” I fully concur with the observations in this report.

Africa is estimated to have 51 million farms of which 41 million of them are smaller than 2Ha in size and the number keeps increasing. It is also noted that many of these farms are efficient low cost producers which obtain higher yields on average than many larger sized farms and are able to compete in markets given a fair opportunity. So, just like the Asian green revolution, it is plausible for these farms to contribute to a successful agricultural revolution in Africa that is employment intensive and pro-poor.

The radical shift that is being proposed by Andrew Mwenda and his bunch of wannabe bourgeoisies without doubt will lead to the following:

  • Increased income inequality. The richer get richer as the poor get poorer. Colombia and South Africa are a good example.

  • Strife. With a populace deprived of its land, expect only mayhem. There might be some semblance of stability for a while due to the political status-quo but when tides change politically, trouble beckons. Liberia, Sudan and Sierra Leone have suffered civil wars sparked off by land grabbing. In 2012, Ethiopian tribes embraced arms against the military in the attempt to halt the diversion of the Koka river to irrigate a Malaysian plantation project.

  • Removal of identity. Land is not a mere item that is commercially quantifiable like these crude capitalists want to make it seem. Ugandans are attached to their land in more ways than one; spiritual in terms of the traditional rituals as well as physical linkages akin to one knowing that I come from say Butaleja District are of paramount importance.

  • Food insecurity. People have grown up feeding themselves directly from the land. To take that away and expect them to fend for themselves using alternative means is to invite hunger into their families.

My final advice to Mwenda and his crew is to reduce on the greed. You are what you are because of this very society that you now despise like a plague. You rose through the ranks because of the goodwill of this very society. Most of you have very humble rural upbringings and you benefitted from the goodwill of numerous strangers while on your way up through life. Is this the best way you think that you can repay this same society? You might dismiss me as a moralist who has no business talking to capitalists but of what use is a business that is devoid of human values?

Think again Mwenda. You grew up in a farming family, you saw how many families in your village benefitted from farming. I am sure you are bright enough to reconcile your current mindset with your past experiences. A word to the wise is sufficient!

James Wire is a Small Business and Technology Consultant

Blog: wirejames.com

Twitter: @wirejames

Email: lunghabo (at) gmail (dot) com


Agricultural Land reform in post war Japan: Experiences and Issues

Smallholder farming in transforming economies of Asia and the Pacific: Challenges and Opportunities.

Coping with the Food and Agriculture Challenge: Smallholders’ agenda

Forced DIsplacement, concentation of land property and the renter political economy in Colombia

Africa Agriculture Status report 2017: The Business of smallholder agriculture in Sub-Saharan Africa

The social Political Impact of Land grabbing in Africa and its destabilising effects

Mwenda wrong on Crane Bank, Facts speak for themselves – Part 2

Conscience is the voice of the soul,” says a Polish Proverb. In the first part of this two stage article, we purposely went on a historical journey to understand how banks have closed in Uganda, the circumstances, and eventual implications. We also did delve into the Project Nyonyi forensic report produced by Price Waterhouse Coopers which according to an international forensics expert I interacted with was a good job done.

The BoU Take Over

Armed with the forensic report, the central bank was right to kick into action. Mwenda argues that CBL still stood a chance but when you realise that the bank was being run like a dingy lodge in Kikoni, you then cannot blame BoU for the measures it took.

With the case of Greenland bank in 1999, BoU attempted to give the owners an opportunity to salvage the operation and nothing good came of it. The level of falsification of information from the bank was quite disturbing and this perhaps was the last nail in the coffin of that bank. As good students of history, I believe Mutebile and his team must have realised the correlation between Greenland Bank and Crane Bank in terms of falsification of information as well as lack of conformity to proper corporate governance of a Financial institution, hence the decision to take over.

Mwenda’s Assertions

Bank of Uganda acted in the most rush way in its resolution of Crane Bank issues which makes it suspicious. First when it claimed Crane Bank was in distress, it should have given Sudhir time to find an investor to inject new capital into the bank. Many banks were actually in negotiations with Crane to buy it.” ~ Mwenda

Basing on the historical lesson of Greenland bank, International Credit Bank and Cooperative bank, nothing justified CBL being given another chance to pursue remedial action especially under the same management that had failed to meet the minimum expectations to run a public Financial Institution. Apart from alleging that many banks were in negotiations with CBL, there is no attempt made to give us more information on which banks these were and what their offer was as well as their ability to stand tall amidst such an acquisition. Buying a bank is not merely about walking in with cash, there is a lot more to it than buying a car from a showroom.

BOU hamstrung Crane by stopping it from doing any new business like issuing new loans, overdrafts, bid bonds, performance guarantees, letters or credit etc. Crane was a bank for the business community. Stopping it from doing anything for three months was a disaster. It forced its customers who could not get a service to pull their money and business out of Crane to other banks and thereby transformed a capital adequacy problem into a liquidity crisis.”~ Mwenda

In the English language, there is an idiom, “throwing good money after bad.” It literally refers to spending more money on something problematic that one has already spent money on in the hope of fixing it. With the glaring evidence of poor corporate governance, insider lending highly linked to Mr. Sudhir Ruparelia, loans issued to one week old companies utilising collateral already pegged to previous loan applications, only a fool would allow CBL to dig a deeper hole. Mwenda conveniently avoids telling the public that CBL even before the BoU intervention was always negotiating with customers who wanted to make large withdrawals to spread them over a longer time frame. If it grunts like a pig, then it’s a pig. CBL had already dug the pit and could not be expected to get itself out of it.

Crane Bank had a good and wide branch network, a huge customer base, a great brand and $40m (Shs 144 billion) in tax assets. Its deposits had fallen from Shs 1.4 trillion to Shs 1.0 trillion because of BOU restrictions that caused a run on Crane. ~ Mwenda

Again, conveniently, he avoids notifying the general public that the net assets of CBL at the point of liquidation were negative to the tune of UGX 300Bn. The bank had client obligations of UGX 700Bn and the continued running of CBL was costing billions of shillings in losses monthly which was further eroding the company’s value.

There are other institutions that were interested in buying the Shs 550 billion worth of bad loans – at a discount of course. BOU refused this suggestion out of hand and therefore lost an opportunity to get a good deal. Instead it sold all the good and bad assets to DFCU at only Shs 175 billion ..”~ Mwenda

This is when I’m quickly tempted to remind Mwenda that selling off a bank isn’t akin to selling an old spent car. With the car, you can choose to sell off the engine, bumper, bonnet, doors, seats to different buyers. He insinuates that the bank could have been sold in bits and pieces based on who is offering what for the different portions. This is not how things are done my brother. There was need to maintain strategic balance in the banking industry hence the desire to get a takeover partner that not only knows the local market but has the muscle to ensure there is continued stability in the banking industry. I wish he could tell us more about those institutions that were interested in buying the bad loans and what their offers really were. Maybe he could win us to his side otherwise for now, this is mere samwa samwa (loose talk). Rumors do not apply here, we need to work with facts. DFCU is backed by ARISE BV that has invested over One Billion dollars in Africa.

BOU had injected Shs 450 billion of taxpayer money as liquidity into Crane Bank when it took over management. Under the sale agreement, DFCU is required to pay back this money to BOU over a period of three years without interest. Yet Sudhir had asked for a loan of only Shs 165 billion from BOU (as lender of last resort) at an interest rate of 5% to recapitalize the bank. So BOU would earn Shs 8.25 billion per year.” ~ Mwenda

Just in case Mwenda didn’t know this, DFCU was required to offer security for this UGX 450Bn injection BoU made into the ailing CBL. As a result, they attached most of the bank’s Treasury Bills to act as collateral. If they didn’t have them, then they would have probably been disqualified. The case he tries to make for Sudhir to be lent UGX 165 Billion is laughable and honestly it’s the last thing I expected from such an analytical mind. I have come across people who have lost money in the Telexfree scam, only to borrow more and get into the D9 scam, lose more money and now want to borrow more money to venture into another scam. CBL’s bubble had burst. The bank’s operations had become a ponzi scheme. No amount of continued lending especially to the same inept management would salvage it.

In fact if BOU had used the Shs 450 billion to buy distressed assets of banks, it would have saved many businesses from companies from collapse and with them jobs for Ugandans, taxes to government and promoted a healthy economy. And it would have earned interest of above 15% and made a huge profit…. DFCU took public funds for free.” ~ Mwenda

Again we are talking about treating symptoms here. How did CBL get to this point? As revealed earlier when analysing results from the PWC report, it is evident the bank was led into this state by its lead owner. This would be akin to rewarding a lion for eating a farmer’s cows. This is a situation where we are dealing with white collar crime. Once again, it would be good to have a list of some of the “many businesses” that Mwenda says collapsed and how many people they employed. I wouldn’t be surprised if reference here is to the shell businesses that were set up to merely act as conduits for money being siphoned out of the bank. As for DFCU taking public funds for free, I think that has already been dispelled earlier when I shared about the T-Bills put up as security.

Let us remember that BOU claimed that Crane Bank was insolvent, riddled with many bad loans and over statement of its actual financial position. So they sold its assets for Shs 175 billion only. What the news of DFCU profits for the first six months of taking over Crane Bank reveals is that BOU was either extremely incompetent and/or grossly misunderstood Crane Bank’s actual financial position. Or may be there was fraud. What we now know is that BOU sold very good assets at basement bargain prices. Why?” ~ Mwenda

I believe it is time to go for a quick lesson in accounting. When assessing banks for take over, the principle of Fair Value is used. It is the rational and unbiased estimate of the potential market price of a good, service or asset. It is usually done by specialists. In the case of CBL, a fair value assessment was done on customer deposits, physical cash and balances, loans and advances, computer software, listed stock and bonds, shares in private companies, land and buildings, furniture and fittings as well as other movable assets. So, when DFCU took over CBL, the fair value attached to the bank’s assets, less the acquired liabilities came up to UGX 60Bn. However, this does not mean that it’s money they actually inherited, it is the business potential of what they took over which might materialise or not. Based on accounting principles, this was reflected on the Profit & Loss of DFCU, hence the reflection of that profit that Mwenda dwells upon without bothering to find out how it got onto the books. When Fair Value is included, you have to make an effort to earn it tangibly, failure to do so implies that you have to remove it from the Profit and Loss statement. So, depending on how things go within the next one or two years, this Fair Value from CBL assets could easily diminish to zero thereby impacting the profit situation negatively.

DFCU had invested nothing to get these loans worth 800 billion. Given the average interest rate in Crane Bank of 25%, DFCU was inheriting an asset with income of Shs 200 billion (in form of interest per year). Yet it would have invested very little to earn this interest. It was obvious this was a deal made in heaven for DFCU.~ Mwenda

It is obscene to assert that DFCU invested nothing to get the loans of CBL when he is aware that the bank borrowed from its parent company US$ 50 Million in order to meet the core capital requirement of 12.5% by the Central Bank. Was it a deal made in heaven? No. DFCU exhibited the muscle required to manage this takeover without doubt. It’s a bank that has been around, established a solid reputation and shown consistent growth year on year. There is no evidence at least as of now of them cooking up their books, something which had become a pass time at Crane Bank. That 800Bn loan portfolio talked about is largely to cronies of Sudhir who chose to live large at the expense of public money and DFCU only needs prayers to recover that money. Without mentioning names here, I’m sure by browsing through the tabloids, you notice that all of a sudden, certain names that were famed for flashing money all over the place are no longer featuring, the noose is fast catching up.

What would have happened if CBL had been shutdown and liquidated?

To effectively understand the effect of a total closure of CBL, let us imagine a one Isma. Isma is an account holder with Crane Bank. He has a personal as well as a business account for his Workshop. Isma was given an opportunity to make supplies to a customer and as part of the agreement, a 50% deposit amounting to UGX 60 Million was wired to his business account. On his personal account, Isma has savings to the tune of UGX 17 Million which he hopes to grow to UGX 25 Million in order to buy his first plot of land.

One morning, he wakes up and he’s told, Crane Bank has been closed. First, he has to deal with the headache of the customer’s supplies, where is he going to get money to process them? Next is the uncertainty of his personal savings. This is a very grim possibility. I recall just after completing university when Greenland Bank was closed, a media house I had gotten accustomed to went down the drain overnight in the process. It was called the Crusader and one of its directors was Mr. Onapito Ekomoloit who eventually had to move on and seek employment elsewhere.

The next thing Isma hears is an announcement from the Bank of Uganda that all depositors in Crane Bank will be reimbursed upto a maximum UGX 3 Million Shillings which is what the Deposit Protection Fund guarantees. So, for his personal account, he should get ready to lose UGX 14 Million, money he has been saving over a year. While for his business, he loses at least UGX 42 Million of client money. Do you see the potential disaster?

In the case of Greenland Bank and ICB, the government strategically chose to pay up all depositors their outstanding dues on humanitarian grounds and thereafter went ahead to announce that in future, it would stick to what the law requires of it.

Did Mwenda want to see a scenario where depositors with UGX 100M in CBL walk away with a paltry UGX 3 Million? This would have further eroded the confidence in the banking industry hence the move to allow DFCU continue with operations of the bank while guaranteeing customers their money’s availability. The truth is, Sudhir and his cohorts had messed up the bank. Simple!!!

Whatever the case, DFCU demonstrated the ability to create continued stability in the banking sector of Uganda hence our need to applaud them for the take over. True, there were mistakes on the part of BoU especially in terms of supervision but that is a story for another day.

A close analysis of Crane Bank and its Investor(s) clearly reveals a systematic trail that begun years back to perpetuate questionable practices with the aim of disenfranchising the bank’s customers. Fraud risk factors are classified based on three conditions:

  1. An incentive or pressure to commit fraud – Yes there was
  2. A perceived opportunity to commit fraud – Not identified yet
  3. An ability to rationalise the fraudulent action – Yes, especially after altering the shareholding

These and many more issues may be addressed in a subsequent article if you the reader would like to know more.

So, Who raped Crane Bank?

John 8:23 ~ Then you will know the truth and the truth will set you free.

James Wire is a Small Business and Technology Consultant based in Kampala, Uganda

Follow @wirejames on Twitter.

Email lunghabo [at] gmail [dot] com

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