DR. IAN CLARKE: Are Statutory Authorities useful?

Several months ago, a list of all the government agencies which were to be reintegrated back into government departments was published. The reason stated for this reorganisation was to save money and while being frugal is laudable, I doubt that this exercise will achieve much in the way of cost savings. There are various arguments for and against the setting up of officially regulated agencies and on balance I agree that we should be careful when it comes to mandating any new ones because of the law of unintended consequences. But for those that already exist I do not think they will function more efficiently as part of a government department.

One of the first agencies to be merged into government was the Rural Electrification Authority (REA), which has now become the Rural Electrification Department (RED) of the Ministry of Energy and Mineral Development. RED is supposed to carry out the same work as REA, but the process of reintegration has taken two years, during which time nothing has moved. No new rural electrification projects have taken place even though the financing from World Bank was already in place. I am informed that the reintegration is now complete, and the new RED can start its work. This will involve setting out terms of reference for consultants who will in turn develop the scope of work and contracts to be put out for tender to private companies, after which the work can start. This process could take a further one year.

Having set up an ‘authority’ with all the costs involved, then dissolved the same authority to made it a department, has certainly cost a significant amount of money, but on top of that, the loss of productivity was massive. The New Forrest Company, one of the major forestry companies which supplies electricity poles, has not been able to pay its suppliers for months, while all the small contractors sourcing timber have been thrown out of work and the farmers who grew trees have been left without a decent market. The big beneficiaries have been the Chinese who have set up numerous plywood factories between Mityana and Mubende where they can buy the eucalyptus cheaply. So, could someone please explain how the disruption of the whole value chain was worth it so that an authority could be reorganised to a department, when it appeared to be functioning adequately in the first place? If it isn’t broken why fix it?

I should make it clear that I am not a champion of statutory authorities. In Uganda we have numerous authorities including the Insurance Regulatory Authority, the Higher Education Council, the Nurses and Midwives Council, the National Environmental Management Authority (NEMA) and the Uganda Coffee Development Authority (UCDA) which play significant roles in society. These authorities were set up through acts of Parliament and given statutory powers. The Higher Education Council regulates Universities and higher education institutions while the Insurance Regulatory Authority regulates the insurance industry. Such authorities are necessary for the organisation and regulation of various sectors and are mandated to make regulations for the good functioning of players within their sector. They also have power to levy and collect fees.

However, the powers of such authorities can also be abused through rent seeking behaviour – defined as behaviour to increase ones own wealth without creating new wealth for others. Rent seeking comes in several forms. The illegal form is when individual members of an authority ask for bribes or facilitation – just to carry out their duties such as issuing a licence or approval. Such behaviour takes place commonly though it is condemned publicly. An authority as an institution can increase fees and levies, none of which improve the productivity of the sector but must be added to costs, increasing the cost of services such as university fees or medical insurance provided by the private sector. If those running statutory authorities see themselves as facilitating and improving the smooth running of their sector, the role of the authority can be very useful; it is when authorities use their statutory powers to impose unfair burdens on organisations that they become burdensome.

There are Authorities in which the leadership genuinely tries to make a difference and improve the sector, while there are others in which the leadership has been gifted a position of power which they use for personal benefit, so in the final analysis an authority is neither good nor bad, it depends on the people who run it.