Closing and merging public agencies

Why the new government reform measures should not throw away the baby with the bathwater

THE LAST WORD |  Andrew M. Mwenda | The decision by government of Uganda to reduce the number of semi autonomous government agencies, commissions and other bodies is a very good and long over due. Beginning the mid 1990s until only recently there has been a proliferation of these bodies many of which duplicate roles and functions. Therefore the justification for merging some of them and taking others back to their mother ministries is agreeable. However, and like many reforms, this one runs the risk of throwing away the baby with the bathwater.

It is important to understand the reasons for the creation of specialised government agencies. At the beginning of Uganda’s reforms, in the early to mid 1990s the civil service was poorly paid, poorly motivated therefore inefficient and corrupt. Consistent with President Yoweri Museveni’s principle that to be effective amidst limited resources, one must always prioritise, government identified those areas like revenue mobilisation, facilitating investment and later investment in roads and energy as strategic sectors that needed to be paid special attention.

This explains the creation of institutions like Uganda Revenue Authority and Uganda Investment Authority in the early 1990s and later in the 2000s, the creation of Uganda National Roads Authority (UNRA) and Uganda Electricity Generation Company Limited (UEGCL), Uganda Electricity Transmission Company Limited (UETCL), Uganda Electricity Distribution Company Limited (UEDCL) and Rural Electrification Agency (REA). The idea was to attract very good professionals by paying them above the normal civil service scale so that they can be agents of reform and implementation of functions that were critical for our recovery.

In the early to mid 2000s, I was one of the leading critics of this strategy. I argued that government sought reform by addition to rather than transformation of the civil service. This tended to create islands of efficiency in a large sea of incompetence and corruption. These islands would make people in the mainstream civil service feel neglected and demoralise them. For me, this was likely to become a source of frustration and envy, further undermining public sector performance. But with hindsight I was wrong and was imposing theoretical knowledge on a complex social landscape.

It is difficult to transform an entire civil service; especially given the limited resources available to the state in poor countries. Therefore, the benefits of an “islands of efficiency” strategy exceed its costs. The creation of URA from the Ministry of Finance was very successful and has been borrowed by other nations of Africa. However, in Uganda the creation of semi autonomous agencies became a fashion. They mushroomed everywhere even in areas where they were not a priority. It is this loss of selectivity that discredited this strategy. However, in reversing it, we should not lose sight of its original justification, aims and achievements.

I have two sectors in mind – roads and energy. Uganda has sustained an impressive rate of economic growth for over 30 years. This growth has brought a lot of pressure on existing infrastructure; especially on roads and electricity supply that were beginning to chock future growth. Hence there is a special need to invest in these areas. Yet cabinet recommended UNRA be dissolved and taken back to the ministry of works, and that UEGCL, UETCL, UEDCL and REA be merged to create an entity akin to the old and inefficient Uganda Electricity Board (UEB).

Now, the idea behind UNRA was to create an agency to design, build and maintain roads, so that the ministry can concentrate on policy. UNRA, even with all its weaknesses, has performed very well. As the president often boasts, one can now drive from any border point of Uganda to another on a smooth paved road. So why is government dismantling a successful organisation and taking it back to its parent ministry? How is it duplicating the functions of policy at the ministry of works? How does its dismantling improve efficiency and effectiveness in designing, building and maintaining roads?

UNRA has a staff of 1,400 employees, over 70% of them engineers. They are paid salaries above the civil service scales. How many would accept a pay cut? It is possible most of them will leave and those who accept pay cuts may do so because they are expecting to compensate their official pay with corruption. In any case, the sector will suffer a second purging in three years. In 2015, the newly appointed Executive Director of UNRA, Allen Kagina, fired almost 80% of the staff, thereby losing all the accumulated experience, memory, values and skills in one stroke. She has been rebuilding these almost from scratch. Now government in yet another stroke may cause the same loss. Does this make sense?

Let us come to the energy sector where the Uganda government has been a leading reformer in Africa. A joint World Bank and Africa Renewable Energy Program for 2016 shows that of the 39 countries they studied; only Uganda and Seychelles were fully recovering their operational and capital costs. Therefore, unbundling UEB was good. It has attracted private investors in both the generation and distribution of electricity, making our country move from energy production deficit to surplus and has transformed our distribution network from a dilapidated loss making sector into a highly attractive one even by the leading global equity funds.

For example, when Uganda sought to privatise electricity distribution in 2002, all the international firms that came to do a due diligence refused to invest in the sector. Then Umeme came and transformed the sector into a profitable business. In 2012 and 2015 when Umeme issued the Initial and Second Public Offering respectively, it was over subscribed by 168%. In fact it is the success of Umeme that led to investment in generation that is responsible for the surplus.

In my view, therefore, UEGCL and UETCL should be left as they are. But UEDCL can be merged with REA. However, UEDCL should sell off all the remaining assets it is managing like the pole treatment plant. So rural electrification can become a division of UEDCL. This way we can have a lean institution that continues to develop the distribution network in rural and other areas where Umeme cannot go.

The overall aim of government is (or should be) to deliver public goods and services in an efficient and effective manner to her citizens. This aim should not be lost the pursuit of cutting costs. It is very possible that in dismantling UNRA and recreating UEB, government is going back to a bad past, not a better future.