Tuesday, March 19, 2024

PERPETUATING POVERTY AMONG OUR ELITE

At the end of last month a video went out showing a convoy of high end 4WDs cars ferrying the final year students of a secondary school to their prom.

The young men, who probably harangued their parents to hire the cars may be excused, we all know how it was to try and impress the ladies at that age, but you have to wonder about their parents and school administration for allowing this to happen.

I will never forget a few years ago seeing one of our friends shelling out sh300,000 for a pair of Timberland boots for her small brother to wear at his final year social, and thinking she was absolutely mad to be paying the equivalent of his school fees for a few hours of flossing.

Inflation has clearly set in, because I can imagine in addition to multimillion shilling outfit, parents now have to hire 4WDs and limousines for the boys to wow their female counter parts.

It makes me laugh to think that we used to be ferried in the school truck for socials. Alighting with all the dignity one could muster from the back of the truck, must have been a very funny sight. Bless the ladies of those days, they could see beyond that to the potential of their boyfriends.

"These same kids will grow up to be tone deaf MPs and thieving officials wherever they work. They have been set up for a life that they cannot afford to maintain through hard and diligent work...

It is no wonder then that one big shot on social media last week declared that to be rich in Uganda you need to have a net worth of $1.1m (sh4.98b), live in a house valued at at least sh500m, own two sh120m cars and have your kids in schools that charge at least sh5m. What he described was high living and not necessarily wealth.

And that is the thing, we think wealth is most manifest by our spending habits. So these young men are unwittingly being sold the idea that you need to look rich to be rich, which is far from the truth.

It has been shown that wealth depends more on your discipline with money than how much you earn.

There is the urban legend of the manager who cannot make his salary stretch to the end of the month, while his driver, who earns a fraction of his salary, not only gets to the end of the month but has enough left over to invest in his growing empire of mizigo rentals.

The difference between the two men is that the boss is focused on a consumption lifestyle while the driver is focused on investing.

And that is the crux of the matter. There are only two ways to spend your money, you either “eat” it or invest it. In the former case you look rich even while living hand to mouth, while in the latter case you may not look rich today, but you will be building wealth, which may very well lead to a higher standard of living in the future.

A friend of mine has been investing diligently for the last 15 years. He has maintained his expenses as a proportion of his income, to about 30 percent. So while ten years ago his expenses may not have been much to write home about, his expenses now have grown to almost sh5million a month. The remaining 70 percent he reinvests, increasing his income annually in the process.

His mantra is he would rather be rich than look rich.

"I believe our lack of understanding of how to create wealth is why our political leaders jump at any opportunity to dip their grubby fingers in the public till and our company officials do the same....

They think that building wealth comes from grabbing. Being men and women of above average intelligence they soon realise that in order to sustain their high consumption living they need to grab more and more. Which explains their bottomless greed. Hence their need to stay in government. There are enough former public officials walking around shell shocked, wondering where all their money went, because they do not have access to the treasury.

The trick with money is that if it is left seating around it will diminish with time. A function of inflation. And if our brains are wired towards consumption rather than investment, there is no money that cannot be finished.

The lessons our children should be learning are, how to earn money through hard, honest work, to live below their means, saving the surplus and then how to make that money work for them through investment. The biggest lesson of this process would then be that it takes time to create wealth.

Coming full circle to the young men and ladies at the aforementioned prom. By enabling this ostentatious display of wealth, our parents and schools are sending the wrong signals to their young wards, that pretending to be rich makes you rich...

In trying to keep up with these artificial standards these young men and women will not be averse to reaping where they did not sow when the opportunity presents itself.


Tuesday, March 12, 2024

MTN CONTINUES TO POINT TO THE FUTURE

Last week telecom company, MTN reported its 2023 net profit jumped 21.4 percent to sh493b, on the back of double digit growth across all revenue centers, including voice, which in 2022, for the first time registered lower revenues than the previous year.

In 2022 net profits came in at sh406b. Top line revenues were up 16.1 percent to sh2,629b from sh2,265billion in 2022.

While voice revenues grew by 11.6 percent to sh1,117b, data and mobile money revenues continued the now established trend of beating voice revenues for the third year running, accounting for 53 percent of revenues.

"Shareholders will be glad to learn that final dividend of sh6 per share is planned pending approval from the Annual General Meeting. This brings the total dividend per share to sh18 or a 10.6 percent dividend yield which compares favourably with fixed deposit rates in the market....

As an investment proposition the sh170 a share is becoming increasingly attractive as the earning per share is now sh22.02 up from sh18.14.

In a later conversation with CEO Sylvia Mulinge, who was reporting on her first complete year at the helm of Uganda’s largest company, she attributed the good results to her team’s execution of strategy. A focus on people, infrastructure development and the sharpening of the customer value proposition, led to the company’s market leading performance.

She was unsurprised by the recovery in voice revenues, pointing out that Ugandans are still buying more feature phones than smart phones, so there is still a lot of scope for voice revenues to grow, even if data and mobile money revenues will continue to dominate. In Kenya last year there were about 600,000 more smartphones than feature phones on the market.

Relatedly, as a sign of things to come data subscribers increased by 22.4 percent to 8.2 million. Given that MTN’s total subscriber base stands at 19.5 million, doubling of data subscribers is a real possibility in coming years.

This has far reaching ramifications for improving the ease of doing business in the country with the uptake of delivery services and other e-commerce options. MTN is aiding this growth with their MTNKabode programme by selling smartphones on credit, helping smartphone penetration grow to 39.1 percent. The comparable figure in Kenya is upwards of 60 percent.

 But even more exciting for me is the progress that MTN’s mobile money is making.

For starters the value of transactions jumped 44 percent to 133trillion from 92trillion in 2022. To put this in perspective, this year’s government budget is sh52trillion. What this means is that more and more of the money in circulation is being liberated from under our mattresses into the formal financial sector, where it can be useful not only to others who borrow it, but also to the owners who earn interest from it. MTN paid sh42b in interest on savings in 2023,  more than doubling the 2022 figure of sh19b.

And finally, that MTN has sh1,488b in deposits, which would easily have made them a top ten financial institutions in terms of deposits. The previous year deposits closed at 1,207b, a 23 percent increase, which means the deposits can double every three years.

The two movements, in data services and mobile money uptake, is where the telecom industry is going to have a transformative effect on the economy.

Mulinge is intimately familiar with the road ahead for MTN, having been Safaricom Kenya’s Chief Customer Officer, before she came to Uganda,

“If you think about the demographic dividend of this country, 70 percent of the population is under 35 and they're largely digital natives, so many of them will want to get on to our platform;” Mulinge said.

And then “Who is going to own the home? Because whoever gets into your home first, in terms of fiber connectivity and everything it will be very difficult to dislodge them.