Banks and Telecom Companies: The Parasitic Tapeworms of Uganda’s Economy?

Back in my younger days, I had a brief sojourn in Medical school, by dint of my decision to study for a pharmacy degree.

In my studies, I encountered a parasite that inhabits a lot of humans’ stomachs, but somehow, they go about their business normally; until that is, an intestinal obstruction here, a brain complication there, malnutrition from these worms stealing nutrients from the host, etc. wakes one up from this seemingly eternal slumber.

The tap dance between Ugandans, the banks, and the telecommunications companies that serve them reminds me a lot about these parasites. You don’t really “feel them,” yet they will eventually leave you feeling unwell. But at least for tapeworms, we have deworming medicines.

You don’t really “feel them,” yet they will eventually leave you feeling unwell.

Banks and telecom companies have sold themselves as so pivotal to our economic engine that dislodging them would supposedly spell doom. The jury is still out on this.

In their financial disclosures at the end of December 2023, a tough economic year for most Ugandans, Uganda’s largest bank, Stanbic Bank posted a record 412 BN profit after tax; 15.2% higher than the previous year.

This was a 22.5% Return On Equity (ROE).

By comparison, your typical S&P 500 company has a ROE of anywhere from 10-10.5%. It looks more profitable to do banking in Uganda than in the US.

The Telecommunications sector equivalent of Stanbic Bank is MTN Uganda.

On 7th March, on her X (formerly Twitter) platform, their CEO, Sylvia Mulinge, shared their 2024 scorecard in which she announced the highest profits after tax in their history.

Riding a boom in fintech users (read: micro-lending and money transfers) to 13.8 million as well as a 22.4% growth in data subscribers, the tech giant with South African roots powered its way to “a record-breaking UGX 641.5 billion net profit in 2024”, according to their CEO.

She continued: “This is not just a number; it’s a reflection of the trust our customers have placed in us, the hard work and dedication of our amazing team, and the support of our stakeholders.”

“With this success, we are giving back UGX 506 billion in dividends to our shareholders while staying true to our purpose ... and most importantly, invested UGX 4.6 billion in community initiatives, positively impacting 6,800 lives across Uganda.”

You read that right.

Reading that statement, as well as bankers’ numbers, I didn’t know whether to laugh, cry, or celebrate for businesses making off like bandits. In a country touted as one of the most entrepreneurial in the world, it is rather dumbfounding that bankers make all the profits while more than 95% of the businesses they supposedly serve don’t make it to their fifth birthdays.

How do we explain the fact that these companies are raking in record profits in an economy where millions can barely put food on the table?

The answer might be found in the fact that the structure of our financial services sector doesn’t have any laser focus on getting money at reasonable rates to the enterprises that are building the kind of value needed to lift all boats.

This, coupled with the fact that these institutions happen to hold the highest government debt, essentially starves companies of much-needed capital and thus plays undertaker for millions of dreams of start-up founders.

These distortions reflect the structure of an economy left to inefficient market forces.

The government response through initiatives like the Parish Development Model is merely creating a bandaid to an ailment that requires radical surgery.

If we don’t rethink our economic fundamentals and build financial instruments that promote entrepreneurship and sustainable innovation, it won’t be long before the tapeworms die with the body.

They’ll deserve it.