Jul 8, 2013

In the Press: Monitor, when a story deserves more than just a massage

He has a right to criticize, who has a heart to help.

Abraham Lincoln 

The Auditor General’s report makes for good reading, as always considering it punches holes in government business.

The story on Page 4 of today's Daily Monitor is damning on a company called Phenix Logistics, one of the exporters and producers of garments in Uganda – local content – of which the government owns 94 percent.

The story, in the headline, reads "Money spent on Phenix a waste of state resources, AG tells govt."  

Quote from the AG’s report: “The government has continued to inject funds in a loss making company, with the latest being the guarantee of a loan from JBIC amounting to Shs4.2billion….” So does the AG here say the government is wasting money? The problem is that Phenix Logistics is loss making.

The Daily Monitor goes on and reads “…which also wonders [The AG’s report wonders?] why govt keeps increasing its shareholding in the firm yet it has never received any dividend..” But it is already loss making. How do you receive a dividend if you’re loss making?

“However, in the same year [2000], the firm borrowed Shs4.2billion from Uganda Development Bank, which it later failed to pay.” So Ugandans would want to know why Phenix Logistics borrowed this money. What was it for?

Interestingly, the Monitor story further explains that each time Phenix failed to pay a debt, it was converted into equity – not exactly a bad thing though – from 0 to 49percent then to 79percent and more recently to 94percent.

So what did all the money borrowed do? What is the production capacity? What are the challenges – if any – or inefficiencies going on at Phenix? How cheap are their products on the local market compared to the imported garments? How much has the plant benefited from AGOA? How many people does it employ? What is the export value of the products? Has it paid taxes? Is production subsidized? The private sector failed to make it profitable,  the government is failing. What exactly is the problem at Phenix Logistics? We have several private sector businesses that are not yet profitable – Orange, Airtel, Warid, UTL – but still their owners keep pumping money into them, in order to prop up performance, and maybe they’ll be profitable – or not. Such is the nature of business.

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