He is arguably one of the oldest serving governors. A day off at office is noticed by all and sundry. That is how Bank of Uganda governor, Prof. Emmanuel Tumusiime-Mutebile (“ETM” or “Mutebile”) has established himself at the central bank.
However, recent happenings point to his possible exit. The issue at hand now is the timing? Will he be let go before the elections or after?
The governor’s contract will be expiring in January 2016. There two are options: it is renewed before the end of 2015 or the process of finding a replacement is commenced as soon as possible. If the appointing authority chooses not to renew his contract, who will replace him and when? Will they keep him to handle the 2016 elections and then let him go? For going he must. But when?
Keep in mind; this is not an ordinary man.
He has tried to ensure price stability and received several global accolades for balancing the economy and politics. That is not an easy feat. The challenge remains who can fit his shoes?
Mutebile joined BoU in January 2001. He was re-appointed for a second five year term in January of 2006. In November 2010, he was reappointed for the third year term – making him serve 15 years at the helm of Uganda’s banker of all banks. As the president seeks another term in office in 2016, will he reappoint ETM for the fourth term?
It is easy to see the incumbent’s achievements: his policies have been praised by all and sundry as spot on. The central bank’s primary roles is to ensure price and economy stability. For long, he has managed including the rough times of 2006 and 2011 elections, where a lot of money is said to have circulated in the economy. Thanks to the Governors foresight, there was a removal of some “old” notes from the economy and things went level. 2016 is another test. Will he remain just to have this period through? At Summit Business, we don’t see government bringing another Governor just as 2016 elections pick momentum. If there are to be any changes, will come after the elections and the dust has settled. No one would want to bring a new governor or become a new governor at a time like this. Unless such a governor comes to only manage the 2016 election period and leave after. Here is to ETM’s name:
Growing the financial sector
The ETM is credited for growing the financial sector through effective regulatory regime. Under his tenure, the banking sector has grown to 26 banks, which meet the minimum capital requirement. Late 2010, BoU directed all commercial banks to raise their minimum capital requirement to Ugx. 10 billion ($4.34 m) by March 2011 to Ugx. 25 billion ($11M) by March 2013.
Statistics from Bank of Uganda show total banking assets increased from Ugx. 15.1 trillion (US $ 6.O8bn) in June 2012 to Ugx. 15.7 trillion (US$ 6.32 bn) in June 2013. Then hit Ugx. 18.6 trillion (US$6.695 bn) in June 2014. That is phenomenal. Compare this to December 2009 statistics when total assets of commercial bank were estimated at just Ugx. 8.73 trillion (US$8.73 trillion).
By April 2011, bank branches in Uganda were 400 and total commercial bank assets were valued at Ugx. 11 trillion and employing over 8,500 people. By November 2012, the branches had reached 500. However, the banking sector largely remains in Kampala, with some districts like Lamwo, having no bank.
Reforms in the financial market
Bank of Uganda has focused on ensuring developed financial capital markets as platform for the mobilization of equity for indigenous enterprises to support economy.
In 2008, BoU introduced a five year Financial Markets Development Plan. This has seen some changes in the finance sector. The forex market, at present has four participants: Bank of Uganda, inter-bank market, Forex Bureaus and retail customers or end users of forex services.
On the other hand, domestic financial markets have seen tremendous growth. The market consists of securities market — here government securities are traded. In the treasury bills and treasury bonds market, there are treasury bill primary market, the treasury bills secondary market, treasury bond market and the treasury bond secondary market. Notwithstanding over 16 companies listed on Uganda Securities Exchange.
For a country that imports more than it exports and whose exports are mainly raw agricultural products, Mutebile deserves a pat on his back. In 2011 post the election time, the central bank managed to stabilize the economy following the inflation that followed the frenzy spending by politicians in the hunt for votes.
Inflation in Uganda has averaged 6.93 percent from early 2000. However, in October 2011, it reached an all time high of 30.48 percent. But it was managed, and today it hovers at just 4.9%!
This achievement could not go unnoticed. In 2013, Mutebile was named best Africa’s Central Bank Governor of the Year thanks to his leadership in fostering price stability, a key factor that boosted investor confidence in Uganda’s economy. The award was given to him at an annual International Monetary Fund and World Bank Group meeting in Washington.
The award is given by The African Investor, an Investment and Business Leader Award 2013 to governors and institutions which have turned around their economies. Outstanding performance is not new to ETM, whose works at World Bank were rewarded with heavily send off and plague still hangs in his sitting room.
With these great milestones amid many challenges, a lot is expected from Mutebile’s successor. We need a governor who must ensure the independence of Central Bank. How many professionals are able to withstand pressure from politicians and remain standing?
A new chapter
Prof. Bategeka, formerly with Economic Research Centre believes there are dozens of qualified Ugandans to take over from Mutebile.
‘‘Already there are names flying around. These are qualified but I believe more Ugandans are out there.’’ he says.
Stephen Kaboyo, the Alpha Capital Market Boss, agrees but is quick to add; Mutebile has set high standards for the position of Central bank boss.
‘‘Mutebile’s performance makes him a giant in the region. He has outperformed on key mandate. His shoes are too big. In case the appointing authority does not renew his contract, the successor must be the right person.’’ He says.
A senior official at the Ministry of Finance who preferred to remain anonymous says given where Mutebile has brought this economy, the appointing authority need to be given time to ensure right candidate is appointed for the top job.
“ The position of Central Bank Governor needs someone who is qualified, high caliber, high integrity individual to match those of Mutebile, whilst, the economy risks going back to the dark days, if the selection process is not given the attention it deserves.’’
He adds: the right candidate must be someone who has achieved something over the years. A candidate whose integrity is not questionable, someone whose management skills are beyond the ordinary – with ability to manage such a big institution.
Analysts say, while there are host of qualified Ugandans, the best candidate must be someone from within the bank – someone who has worked with current governor, seen policies formulated reforms. Bringing someone from outside would need such person to go through the learning curve.
Besides, the technical competence, the job of Governor BoU is highly political.
There are a number of other things to consider for post of Governor. Someone must have reputation of excellence and own conscience to face up to influence and remain to the bank strategy.
However, an official from Bank of Uganda sounded a caution.
‘‘If we are to realize Vision 2040 and may be become regional economic power house, issues of politics, religion, regional balance should be ignored in the selection of next governor.’’ His comment comes rumour that religion is likely to influence who becomes next governor, especially Catholics Vs Protestants. The president has always down played this and preached national unity. It is also being rumoured that a Muslim could this time take the day. It is said the current governor is said to have a say in selecting his successor. We are sure; we won’t allow someone who will destroy his legacy.
Mutebile’s tenure has had its own challenges. Currently the shilling is weak against the dollar. The worst is yet to come as we head into the likely intense 2016 elections. Remember the election 2011. There was reportedly a lot of printing of money not backed by production, and this left the economy in shambles: interest rates reached all time high 30%, banks suffered high bad loans and saw the foreclosure of many small businesses. If the new governor is to continue, he must be able to balance this period. Otherwise, his legacy risks a sudden death.
Either way, the economy must move on with or without ETM. Unfortunately, the odds are not in his favor. If he presides over the 2016 elections, he will leave before the term ends as the resultant inflation will be too much to bear. He will give an opportunity to the new person as the public will then be yarning for a saviour. If this is to happen, ETM must be willing to dance to the politicians’ music, which we see a risk too much for him to take. Why now? At his age, legacy could be more important than attaining political favor. And that is what makes this leadership change unpredictable.
Just as government did in Ministry of Finance by replacing Hon. Maria Kiwanuka with a politician, arguably to handle the 2016 process, this strategy could be deployed at BoU. A politician could be appointed temporarily and after the elections term or before it ends, he is changed.
This will one is a tough balancing act and let’s see the cards the appointing authority will show us at the end of the game.