Friday, September 9, 2011

Why it is a bad idea to have freedom fighters running an economy

I have spent a significant amount of time trying to understand our economy and where the leaders went wrong. The government blundered when it privatized all its entities. Because it now has to largely depend on tax collection to raise its budget. This makes it hard for it to subsidies any sector of the economy which might need help. leading to the rise in the cost of doing business for companies which eventually affects the common man. However if it still had enterprises to create income, it would be able to decrease taxes on some basic goods so that even with the sky high inflation, the condition would be livable. The government should borrow a leaf from the western world during the credit crunch. Governments used the episode as an opportunity to buy back some enterprises. Many companies in the Uk were bailed out by government and in so doing the government bought back these enterprises. There are pros and cons to this action, in most liberal economies it is urged that the market should be free and thus less government intervention. however in a country like Uganda that is facing abnormal inflation levels, it is now the government should have control over some parts of the economy. But because it sold off all its enterprises like Fresh Diary and Uganda Airways, it largely has to depend on collecting income to be able to run its operation. this is the reason why Taxes on the telecommunication industry are some of the highest in the world despite companies filing for tax relief. because it needs the money equally as much. giving the sector tax relief means they are going to loose out on billions of shillings which they will not be able to get from else where.

Why UEB was a better deal than UMEME
The transition from Uganda Electricity board to UMEME, the current sole provider of electricity in the country was anything but shady. like other deals done behind close doors, there were loop holes but there was nothing much a common man could do about it. Back then it simply looked like a branding campaign for the company to change its out fit and it came in a time when the load shedding was at its peak. Electricity was off for a full day sometimes. Generator dealers made a hefty sum of money in that season. A couple of years down the road, there is not much difference between the two companies in their service delivery and the cost of having a light bulb on, in the UMEME era is certainly more expensive.
When UEB was running the system, it was directly answerable to the government, meaning they served the interest of the country. however these days UMEME can increase tariffs at their desecration without consultation from the government. Unlike UEB, UMEME is an enterprise that seeks to make as much money as possible even if it means making the service unaccessible to the people in the village.
Also now government only benefits from the cooperation through taxes which can always be down played by the cooperation which makes the government a fool. Because the money UMEME is making is nothing compared to what is contributed to the government coffers. Before the profits realized from UEB were invested back into the different government sectors which meant the government had more money back then and this reduced the tax burden on the people.

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