The Vice President Calls for Ugandan Asians to Return

 

It was reported some time ago about the trip that the Vice President of Uganda made to Canada to try to invite former Ugandan Asians back to the country.  Disgruntled Asians felt that they were not always recognised as the essential ingredients of the engine of commerce and as investors in the economic development of Uganda. The Asians still feel that there was ample evidence that most of the time they were held in fair amount disconcerting suspicion.  Idi Amin capitalised on that popular dislike of the Ugandan Asian.

The Vice President’s call for the Asians to return to Uganda was flattering.  It seemed to have taken a long time to realise that Asians had significant part in lubricating the economy. Some sources even claimed that the GDP of the country fell by 40% when the Asians finally vacated their key positions in the economy.  There are no figures available to confirm this claim.

What was it about the Asian community that made them so special in commercial terms?  Can they not be replaced by other very successful and often shrewder operators such as the Lebanese, the Chinese or even the Nigerians?  I was amazed to see Nigerians at Hong Kong airport taking goods for sale to various parts of Africa. Now that is commerce.

There were divided opinions on how the Asians secured a grip, if not a stranglehold, on the East and Central African economies. The Asians became the more notable producers of wealth when their main “rivals”, the multinational corporations (the MNCs) were detested by many African governments. Large MNCs representing the trading houses and producers of household goods that became famous brand names- soaps, washing powders, off the counter medicines also became dominant. But they had to externalise their profits to meet the needs of international investors and shareholders. They were also mostly the producers who added more value than the growing numbers of Asian traders but who made up for low value addition by sheer numbers.

The Asians had rooted themselves in the countries of their adoption, namely Kenya, Uganda and Tanzania but also Zambia and Malawi where their presence was probably more acceptable than the MNCs. The Asians were noted for creating highly effective distribution chains, taking goods from the main cities to the villages. The Dalgetys and Motor Marts had no compunctions either. They were the mega-traders who wanted to move profits out of Africa to satisfy the appetites of shareholders.

The Asians were also investing more and more, in the main, but they were involved in creating baseline infrastructure – low cost local shops and housing for the lower paid where as the MNCs, driven by the quest for larger profits were investing in 5 Star hotels, office blocks and manufacturing plants.

However, some of the innovative examples of diversified investment came from the Asians, who were good at spotting niches – fishnets, plastics, furniture to meet local needs.

Since independence, African entrepreneurs have taken over the low cost import substitution industries (toothpaste, matches, writing pens, notebooks) where as the Asians started to move into high cost investment – medicines, telecoms, banks and computers.

So why did the Vice President of Uganda want the Asians to go back to Uganda?  Idi Amin had removed the low cost baseline commerce that the Asians were traditionally good at.  But they also provided informal loans and working capital to each other, a market that major commercial banks did not break into.

In East Africa, the loans that ‘lubricated’ Asian commerce and trade were guaranteed by the Asian mega-trader and not the commercial banks. The Asians had access to private sources of commercial lending or trade subsidies- many an Asian importer or manufacturer was willing to give credit to their own kith and kin; sometimes families and relations who had been set up to share the risks and rewards  through the ownership of the supply chain….

An interesting example of the impact of this form of intra-Asian finance was the building construction industry, which was dominated by the Sikhs. The more successful Sikh owned building firms were also informal money-lenders. They provided trade guarantees and working capital to the subsidiary companies in the food chain, thereby tightening their grip over the entire sector.  It suited the rich Sikh builders to fund the baseline providers of services– the less well-off but highly skilled plumbers, electricians, painters and carpenters in return for guaranteed access to cashflow. In the same way the Gujarati traders at the top of the pyramid were prepared to fund the dukawalla who was willing to work in the villages. By providing trade credit, perhaps goods on 60 days credit, the top Gujarati trader was a) expanding his own trading influence, b) taking lower levels of risk by funding trusted borrowers and c) ensuring loyalty of the trader in the charo, who would not normally switch suppliers. The Ismaili community also had internally sponsored ‘banking practices’. The Ismaili ethic of sustaining the whole community was partly funded by the internal but informal money sources.

The  financing and co-financing practices of the mafia come to mind, except that the Asians were not  ruthless. This is not to say that they did not make their fellow traders suffer; there was anecdotal evidence of traders and suppliers being pushed to the edge where the ‘patriarch’ of the business line was occasionally offended. There was a further factor at work here. Where business was funded through caste-based “clans”, there was also intermarriage. The sponsor of working capital would not fund a business if the owner’s son was not minded to marry sponsor’s daughter. Let us leave it at that….so as to protect confidential information.

Returning to the Uganda Vice President’s visit to Canada to woo the Asians, it is not generally understood that the Asian community’s commercial dominance  in Uganda had been secured by living in the country for over a century, by accepting a subservient role in business compared to the British multinationals that eventually bore the brunt of Ugandan President Milton Obote’s and Zambia’s Kenneth Kaunda’s “watershed speeches” when they nationalised British multinationals and in the case of the latter also drove them into the ground by failing to run them profitably. The only stable element in the commerce of these countries was the Asians; they were too small to be nationalised and too intricately connected to allow African governments to dismantle them…  Only Idi Amin had the brutal force to evict them lock, stock and barrel.

But there was a further tragedy. Asians who had progressed through trading were looking at other opportunities. They had amassed considerable wealth but the younger generation was not always interested in retailing. They were more interested in making inroads into high value added industries in manufacturing and technology. Their parents had created the financial leverage through success  in retailing but it was the younger generation which was going to move into the higher levels of investment opportunities. Idi Amin booted out potential entrepreneurs who were going to create thousands of jobs through industrial development.

It is no longer a case of replacing one group of departing Asians with another group of Asian people. What may be missing in Uganda today is the cultural and economic cohesiveness which held Asian trade and commerce together but more importantly the delicate interdependencies and the informal funding mechanisms which created access to internal sources of low cost finance and also guarantees for accessing growing local markets for higher value goods. It had taken a generation of Asians to secure that. The next generation is looking at new and vastly different arenas.

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