By Denis Jjuuko
When Stanbic Bank acquired 80% of UgandaCommercial Bank (UCB) in 2001, before the ink used on the contract could even dry, they were in the market selling off UCB’s properties. UCB had many properties including the UCB Towers that defined Kampala’s skyline at the time. Stanbic argued that they were a bank and not a real estate company and properties were not considered as core assets. They said they will concentrate on their business — banking. So they moved into a rented property a few streets away.
Ugandans have been celebrating Uganda Revenue Authority (URA)’s 22 floors of concrete in Nakawa. URA is not a real estate business rather a tax collector and therefore where they do business should not be an issue as a building is not a core asset. The government said that they spend Shs90 billion a year on rent and, therefore, they want to save some money by ensuring that every agency has its own office block. It is the wrong thing for Uganda’s economy.
The core business of most government agencies is to provide services to the public. Most of them are spending a lot of money building towers. Those who are not building, are lobbying for them or in court settling issues with bidders who are alleging irregularities in procurement processes. Most of these agencies just need office space and properties aren’t core assets. They aren’t like schools, hospitals or factories where a building is key. Government agencies are suffering from the “me too” syndrome where they want to chest thump about buildings as if they built them on profit or real savings.
By government agencies moving into their own office towers, they are denying the private sector income. Those who invested in real estate in Kampala are looking at a bleak future with empty spaces as government moves into its own buildings. If you drive around Nakasero between Garden City, Mulago and Sheraton road junctions, you will see many empty office buildings. The agencies just needed to negotiate better long term leases with the land lords like MTN did with the owners of its head office. One of the reasons government gets raw deals from landlords is because they take long to pay and corruption, which real estate developers factor in when dealing with government agencies.
These agencies have also created gyms thereby stifling those who invested in fitness facilities. With government agencies moving into their own premises, they will collect fewer taxes from the real estate sector. The money being spent on self-actualization projects by public officials should have been used to deliver much needed services that create real jobs or improve the welfare of our people.
There is an argument that by government moving into its own properties, they will save money. That may not be entirely the case. URA will spend as much money to maintain that building as they have been paying in rent. I have previously argued that it is more expensive to own a house than rent one. Water, electricity, security, and insurance costs will go up. Another department will be created to manage the building and they must put money aside every year for repairs and the like. Since they have a gym, they will probably create another department for fitness. But also buildings, like cars, depreciate. For example, Uganda House is less valuable than it was 20 years ago today even when the land on which it sits has appreciated. You can say that about any building in Kampala today that has been there for 20 years or more.
In order not to kill the goose that lays the golden egg, government agencies which own land and want to build fancy towers could look for equity partners who would bring in the money to build and manage the building. URA has been efficiently operating without the need for 22 floors. They have been okay without gyms. So what makes them need them now? If they had brought in an equity partner, they would occupy a half the building and pay some money to the equity partner for property management. The equity partner would then rent out the rest of the building, manage the gyms, restaurants and the like. After the equity partner has got their money back, they would transfer the building to the agency or they would sell the rest of the building on a condominium basis. That way, agencies would occupy their own building without the government diverting money from much needed services to building towers.
The writer is a communication and visibility consultant. email@example.com
*Photo from the Internet of URA Towers in Nakawa.