Tuesday, July 28, 2015

GRIM TIMES AHEAD FOR AFRICA

While we were fixated on our slumping shilling, around the world another trend with far reaching implications for our country and continent was taking hold.

The US economy is finding its legs again, after the global financial crisis.

The same cannot be said for the EU, which looked into the abyss a few days ago with the near exit of Greece from the Euro zone. China is finding its economy succumbing to gravity – the scramble last week to avert a stock exchange crash cost more than $120b (sh420trillion), was ominous. And just when we thought we had heard it all the International Monetary Fund (IMF) has warned Japan that its debt burden about $11 trillion or about thrice the size of its economy, is unsustainable.

Apart from making for good television, these coincidences have conspired to send commodity prices – oil, gold, coffee and others falling through the floor.

"The strengthening dollar is causing a drop in world prices, as is the failing demand in the EU, China and Japan...

Already casualties are all around us.

Nigeria is struggling to balance its budget with the price of crude oil falling to $48.62 a barrel by the time of writing this story. To balance its budget a barrel of crude oil needs to be at $122. The other giant oil producer Angola have s lashed the budget by a third and has had to go, cup in hand to Beijing to contract another $25b in oil backed loans while rescheduling other debt due to the second largest economy in the world.

At home, coffee exports in May fell to $35.91m from $30.58m from the same time last year, part of the reason the shilling has fallen 27% since the beginning of this year.

A combination of political expediency and post-colonial interference  means Africa has suffered a lot of civil strife, this and the limited access for manufactured goods has failed any projects to capture more value for our commodity exports.

Clearly the chicken are coming home to roost.

We will rue missed opportunities to build the capacity to diversify our economies when the going was good, when we chose instead to splurge on vanity projects and high living.

Despite our falling shilling Uganda is actually more diversified in its exports than Nigeria or even Angola, which both rely on more than two-thirds of their revenues from a single commodity.

This latest global crisis has exploded a few myths. That the EU is past its teething pains and is a cohesive whole. That China’s economy will continuing growing at prodigious rates well into the future, carrying us all along. And that there will always be demand for our raw materials.
This is the umpteenth wake up call for Uganda and countries like ourselves.

"We need to reconfigure, our infrastructure, which is all targeted at exporting out of the region; we need to reconfigure our production, which again is targeted at western industry and we need to reconfigure our thinking, which looks outwards rather than inwards, for ideas and inspiration...

Luckily we have the East African Community (EAC). During the global financial crisis of a few years ago a slump in demand for our exports to the EU, was cushioned by an increase in trade within the region. It helped too that the South Sudanese couldn’t get rid of their dollars fast enough.

Improving trade through better infrastructure, less red tape and a focus on our competitive advantages, could insulate us much better in coming years from the vagaries of the world markets.
But beyond that internally we need to run mean and lean operations. We cannot go along subsidising the corrupt at the expense of the majority and expect to be nimble enough to adjust to a rapidly changing global economy.

If we are not utilising the full potential of our human resource, it’s because the money for building infrastructure, financing social services is being gobbled up by a handful of people. The net effect of this is that the majority are not being provided the tools to climb the social ladder – quality education and health care and good infrastructure, as a result in a time of crisis our response is not as good as it can be because all hands cannot be on deck.

When the US faced down the global crisis they looked to themselves to revitalise their economy, essentially reorganising their economy, giving relief to the worst hit and everyone pitching in the best way they could. Of course there were casualties. And of course there are people who were hard done. 

But oftentimes these people were going along for the ride when the things were good and not adding value to themselves or taking advantage of opportunities to do so and when the tide went out they were found to be swimming naked.


They say you should not fail to take advantage of a crisis. This is our crisis let us not let it go unexploited.

Monday, July 27, 2015

KAWERI COFFEE PLANTATION: UGANDA’S BEST KEPT SECRET

Tucked away in the hills just outside Mubende town is Kaweri Coffee Plantation, a 2,512 hectare (6,207 acres) operation that is arguably Uganda’s best kept secret.

In the late 1990s the German company Neumann Kaffe Gruppe (NKG) was looking to start a robusta plantation. After assessing several options in South America, Asia and Africa they settled on Uganda.

“Uganda was chosen partly because it is part of the Greater Congo Basin, which is where the robusta coffee has its origins,” said Kaweri Coffee Plantation managing director Etienne Steyn.
NKG, which accounts for one in every ten kilogrammes of world coffee demand, got land in Mubende and set about setting up a plantation to rival similar operations in Brazil and Mexico.
 Planting of 1800 hectares of coffee was completed between 2001 and 2004.

“All coffee nurseries within the district, and as far as Mbarara, were exhausted to meet the required number of seedlings needed for planting”. We now have our own nurseries,” Steyn said on a recent tour of the plantation.

There are currently about 1.8m trees on the plantation on 1650 hectares, now under coffee. Another 685 hectares (27% of the farm) is occupied by natural highland rain forest and is fast becoming a sanctuary for all sorts of wildlife – serval and civet cats, bush babies, vervet and colobus monkeys, various antelopes such as Reedbuck, duiker and bush buck, many rare species of butterflies and many species of birds.

"Steyn said that the plantation, which harvested its first crop in 2005, is set to produce 2,500 tons of coffee this season. This means Kaweri will account for two in every hundred bags of coffee produced in Uganda, the largest single producer of coffee in the country...

According to the Uganda Coffee Development Authority (UCDA) there are about half a million coffee farmers in Uganda.

But Kaweri is not only the single highest coffee producer in Uganda but may also have the highest productivity per unit area than any other operation in the country.

According to Steyn the farm’s productivity is about 2.2 tons per hectare compared to the national average for the robusta of half a ton per hectare.

Better farming methods and the judicious use of research are at the heart of these high productivity numbers at Kaweri.

“Every month we take leaf samples and send them to UK for analysis, in addition annually we take soil samples for analysis in Brazil. From these we are able to determine accurately what fertilisers and other inputs we have to apply in different parts of the farm,” Steyn said.

The farm does not however employ irrigation as there are no streams or surface water on the farm and in 2013, Geophysical surveys showed no underground water was available for irrigation purposes.

Kaweri markets a washed robusta and has the largest wet processing plant on the continent with a capacity to process 350 tons of coffee cherry daily.

Internationally Kaweri has distinguished itself as having produced a robusta coffee that is traded by name: Colobus (Screen 18), Turaco (Screen 15) and Reed Buck (Screen 12) coffees, which allows the farm to command a premium over and above the normal prices.

Kaweri does not employ the use of outgrowers although it employs at least 600 people throughout the year and up to 3000 during the peak harvest period of six months.

“During harvesting we often exhaust all the available labour around the farm and have to go further afield to hire workers to harvest the crop,” Steyn said.

The nature of the robusta tree is such that it is unlikely that mechanised harvesting will replace manual labour, so for the duration of the 99-year lease NKG has on Kaweri we can expect that it will continue to serve as a source of employment throughout the year.

Beyond creating jobs for people in the area, Kaweri supports the surrounding communities and the farm has drilled  eight boreholes, built a new primary school in nearby Kitemba village and has helped in transferring know-how to local coffee farmers.

“Support activities include the establishment of extension services, development of professional farmer organisations, capacity building on value addition processes and market access as a result they are today marketing in bulk directly to exporters – cutting out the middleman and getting paid more,” Steyn said.

"Steyn, himself a former coffee farmer in Zimbabwe said, it would an uphill task for local farmers trying to replicate the scale of the $20m (sh52b) Kaweri plantation....

Speaking from his experience in Zimbabwe he said commercial farmers have little support in Uganda.

“We had farmer associations in every district which provided extension services, lobbied for our interests, facilitated in warehousing. In addition there were agricultural banks whose services were structured taking into account the industry and its nuances,” Steyn said.

Despite a compensation case that is still winding its way through the courts and hangs over the project like a dark cloud, the farm’s target is to achieve production of 3,500 tons a season.
Industry players are genuinely impressed by what is happening in Kaweri.

“It’s a massive, well run operation and is a good story of what can be done in this country. Its just sad we don’t have a local testimony like that,” said Andrew Rugasira, founder and Chairman coffee processor Good African Coffee.

ZIMBABWE’S INEVITABLE U-TURN A LESSON FOR ALL

Around 2000 or thereabouts Zimbabwe started a crude land distribution that dispossessed white framers of their land and handed them over to black farmers – mostly supports of the ruling ZANU-PF.

This had the desired short term effect of ensuring yet another ZANU-PF victory at the polls and the undesired long term effect of crippling the once vibrant economy to the point now that the Zimbabwean dollar is officially no longer legal tender in that country and the country, once the breadbasket of southern Africa, is now living of food handouts from its neighbours.

At the time the white farmers were hounded out of Zimbabwe they owned 70 percent of all arable land, a scandal in itself but the greater scandal is the colonial legacy that set up this unjustifiable imbalance of a key resource.

"The need for land distribution in principle is undeniable in former colonies like Zimbabwe, South Africa and even neighbouring Kenya. Zimbabwe chose the populist way of redistributing land where a more pragmatic solution, which recognises the economic importance of the existing players would have been taken into account...

The difficulty for economics is that it is difficult to carry out experiments like in a lab, but when countries like Zimbabwe come along they confirm or negate economic theory, unfortunately at the expense of the citizens of that country.

The main lessons that come from the Zimbabwean experience are that in trying to redress economic injustices uprooting the productive players needs to be done systematically so as not to disrupt the economic engine you hope the disadvantaged will benefit from.

Ugandans need no lectures in this as the uprooting of the Asian commercial class in the 1970s set the country so far back to the point that even 30 years of consistent economic gains have not repaired the damage.

And secondly when political expediency wins over good economic sense the consequences will be such that the political gains will only be a pyrrhic victory.

The chicken have come home to roost. It was reported this week that Harare is now making open overtures to the banished farmers to return and take back their properties. Lands minister Douglas Mombeshora last week said a select group of farmers will be invited to take over farms with “strategic economic importance” and that black beneficiaries of the redistribution will start paying compensation to the about 4000 farmers dispossessed almost two decades ago.

Only in Zimbabwe can a politician make such an about turn and survive.

In Uganda we are currently grappling with a shilling whose fall has only be stalled after determined action by the central bank.

The dollar has risen to sh3300 against the shilling from around sh2600 at the beginning of the year.

With our huge import bill – we import almost twice as much as we export in value, one can see why such dramatic movement would cause an uproar.

Essentially the local currency is falling through the floor because there is too much shilling chasing too few dollars.

Officials say a lower export receipts, specifically the collapse of south Sudan market, the slowdown of investment into the oil sector and reduce donor inflows are affecting dollar supply. Demand for hard currency is being fuelled by our huge investments in dams, roads and railways.

It is this delicate balance that we need to look to for a solution to our tanking shilling.

Either we put a hold to our infrastructure projects, which is out of the question as they are critical for future economic growth or produce more for export, which will take a while as, for example, expanding the acreage under coffee may take a few years to see results.

"The long and short of it is that it may take a while – weeks, even months, before pressure on the shilling is lifted...

The quick fix would be to decree that the central bank of Uganda defends the shilling at all costs, which would bring temporary relief. But once our reserves are drained the shilling would collapse way beyond the sh4,000 to the dollar mark we so dread and send the economy into reverse.

The moral of the Zimbabwe story, which can become our own if we succumb to populism, is the economy has laws which you subvert at your own peril.

Tuesday, July 21, 2015

THERE IS NO MONEY TOO MUCH TO FINISH

Last week US rapper 50 cent, real name Curtis Jackson, filed for bankruptcy which is an acknowledgement that he cannot fulfil his obligations to his creditors.

He filed for bankruptcy under chapter 11 of the US bankruptcy code, which will allow him time to reorganise his affairs and work out a plan for how he will pay off his debts. My understanding is, under this law his businesses are protected from his creditors for a limited time.

So essentially 50 cent will not be begging on the streets any time soon or even ever, but that he has got into this situation should be an eye opener for all of us.

"As is often the case with people living large but teetering on the edge of financial destruction, it takes one calamity to bring the façade crashing down around their ears. The trigger for 50 cent’s bankruptcy filing was a case he lost recently in which he was ordered to pay $5m. The case involved the releasing of a sex tape on the internet without the permission of the lady in the tape...

Earlier this year 50 cent’s net worth – the difference between his assets and liabilities, was put at $140m.

A clue as how he might have hit dire straits was the revelation that he has assets and debts in the range of up to $50m (sh175b) but most of the debt is consumer debt. Essentially that 50 cents high living has been propped up by borrowing.

There are only two ways to spend money, either you consume it or you invest it. If you invest it well, your money will work for you and will continue to be the gift that keeps giving. If you yours pending is slanted towards consuming, it I s only a matter of time before poverty comes knocking – even for 50 cent.

Of course our relationship to money comes from our background. 50 cent like most top rappers comes from a back ground of poverty, crime and absentee fathers. This background comes with a lot of baggage but also with a warped mentality about money and how to spend it when you get it.

No one should assume the riches come easy to rappers, because those at the top of rap industry work as hard as any world class achievers, however the money can come in very fast once they break through. And then their old context kicks in, with these artists splurging on alcohol, babes and cars, as of to announce to the world that they have arrived. With a lack of expert advice – they tend to surround themselves with other disturbed youth from their old neighbourhood, it is often a matter of time before they are in trouble however inconceivable it may seem when they are the height of their powers.

There used to be a program on TV called MTV Cribs in which a tour of one celebrity or the other’s home was profiled.

They profiled 50 cent’s 52-bedroom mansion which he bought in the 2003 for $4.1m. It was the former home of boxing champion Mike Tyson – another celebrity with a troubled past who squandered his fortune on the fast life. The tour was surreal for one thing the palace seemed unlived in only serving as a lodge for members of the G-Unit, a collection of rappers he promotes. It was big enough though to host his collection of high priced cars which included Ferraris, Bentleys and Mercedes.

This was in sharp contrast to another artist singer-songwriter Moby, a much more modest house, with less than 12 rooms all told, whose interior décor epitomised the say “less is more”. In the living room area, which had no carpets or rags gratuitously flung around he had two chairs facing out the windows that over looked acres of forest.

Moby, whose career has not made as much for him as 50 cent, could afford bigger and grander, but his money is probably packed in investments that will keep his $32m net worth growing.

Two men in the same industry. Two men making sums they would not have dared dream about in their younger years. One is sliding down the slippery slope to poverty while the other is on a steady rise to wealth that will ensure that his family for generations to come will never want for anything.


This is not rocket science. The discipline might not be easy to execute but the formula is simple – slant your expenditure towards investment rather than consumption.

Monday, July 20, 2015

ISIS IS COMING! THERE IS CAUSE FOR ALARM!

Regional security chiefs meeting in Kampala have warned that the terrorist outfit the Islamic State of Iraq and Syria (ISIS) has recruited up to 5,000 Africans, many of them East African, to fight in the middle east.

This is not an unusual development as Al Qaeda before it, called on Muslims from around the world to join it freeing the holy lands.

But ISIS is not Al Qaeda.

With victories over the Syrian and Iraqi armies, ISIS took control of major oil fields capable of producing up to 500,000 barrels of oil a day.

Whereas recent airstrikes have severely degraded this capacity – recent estimates put ISIS production at about 10,000 barrels a day, it makes ISIS all the more dangerous because it has resources that do not depend on the goodwill of supporters or the blackmail of “allies”.

"The issue of resources is key to explaining ISIS growing global influence. Every crackpot terrorist operation is keen to be in their good books, because owing allegiance to ISIS may result in a flow of resources to them...

In the 1990s New York Times journalist Thomas Friedman referred to the super-empowered individual, he even made specific reference to the Osama bin Laden. Bin Laden had not risen to his full notoriety by the time Friedman’s book “The Lexus and the fig tree” was published in 1999, though he had already made his mark on our collective conscience with his commissioning of the twin bombings of the Nairobi and Dar es Salaam, US embassies in 1998.

Friedman explained that by leveraging new technologies these super empowered individuals could fight against nations.

ISIS is an extension of this phenomenon. With terrorist groups commandeering valuable resources to finance their terror campaigns they are able to project their will much wider than before.

Which is why the thought that ISIS is training east Africans is enough cause for shivers to run down our spines.

ISIS’ methods are so brutal that even Al Qaeda, to which it first paid its allegiance, criticised them for being too brutal. They have filmed and transmitted with maniacal glee, their execution methods, which have ranged from throwing victims from high rise buildings, to dousing a caged prisoner in fuel and setting him alight, to employing a bazooka to execute one victim. And we haven’t even talked about their beheadings of mostly western prisoners.

Beyond the obvious sense of terror they provoke, ISIS is even more dangerous because with the resources it commands it can strengthen all sort of organised criminals.

Al Shabaab it was once suspected, were financing their activities using the proceeds from poaching activities.

ISIS can’t sell their oil on the open market so they have linked up with smuggling rings to help them. Observers say that ISIS has sold a barrel for as little as $20 to smugglers who ghost it into Turkey and Iran. World fuel prices now hover at about $50 a barrel.

The huge profits that these smuggling rings make strengthens them, emboldens them and builds up their capacity to go about their other businesses.

So if ISIS manages a foothold in the region expect a rise in organised crime.

"Already coming out of the trial of suspects responsible of the 2010 bombings indicate cross border regional linkages not only been the terrorists but also with established organised crime rings.This is a different kind of war for which our security need to reorient themselves...

The battle lines are not fixed. The enemy is indistinguishable from members of the general public. And any response risks alienating governments from the very populations they are seeking to protect.
Good intelligence gathering is paramount. Greater transnational collaboration is critical. And increased personal vigilance by every citizen is imperative.


The war against ISIS rages on. To the extent that they can be pinned down, they will pose little threat to us. But we cannot take that for granted.

Tuesday, July 14, 2015

THE POWER SECTOR AS AN INDICATOR OF PROGRESS

In 1996 on my first trip to South Africa I couldn’t help but marvel at the constancy of their power supply.

Around that time power company Uganda Electricity Board (UEB) had started on their daily load shedding program, where on alternate days power was cut during the day and subsequent alternate days power was cut at night.

I asked our hosts whether they had load shedding in South Africa. They looked at me quizzically, they were not familiar with the term and what did I mean.

Almost two decades down the road the tables have been turned. South Africa thanks to state controlled power company, Eskom, is suffering the kind of loadshedding we bore in the 1990s.
It is particularly bad for South Africa because mining is a big part of their economy so the economy is feeling the pain more than we did.

Two events in recent times have also reminded me how far the power sector has come.

Last week National Social Security Fund (NSSF) received a sh4.5b cheque from power distributor Umeme. During the event NSSF boss Richard Byarugaba couldn’t hide his glee how good an investment Umeme had been for his members. Since the initial sale of shares in in 2013 a return of 83 percent in dividend payments and capital gains had been recorded, basically what this means that in a year or two, Umeme would have doubled the sh100b it had invested in the company.

"It is an amazing turn around for a company, Umeme, which barely a decade ago was being lampooned for a daily loadshedding problem that was more a problem of inadequate power generation...

The second event is the initiative to distribute 300,000 energy saving bulbs. The $1.4m (sh4.9b) project will see a million bulbs distributed countrywide.  The project is aiming for the rather ambitious goal of lowering power consumption by 85 percent.

But this is the second such program. A few years ago about 800,000 energy saving bulbs were distributed whose net effect was to cause a 30 megawatt power saving during peak hours.
So from anecdotal evidence the program works, but it also points to a philosophical shift to our power sector.

Now we are not only keen to generate more and more power, which is good offense, we are also pushing very hard to save power, which is good defence.

I have one other suggestion. Let us double power tarrifs to residential consumers or at least raise them significantly and the saved power passed on to industrialists.

Recent debates that the high cost of power was making our manufacturers uncompetitive are justified but the suggestion to force the generators to bring down their tariffs were not.

The raising of tariffs for residential consumers and shifting the savings to the manufacturers could help reduce their tarrif, making them more competitive

We have raised tariffs before. Before we broke up UEB into is component parts and liberalised the sector, tarrifs were a fraction of what they are now. Government had to raise tarrifs quite rapidly to a point where it would make sense to invest in the sector hence the increasing investment in the sector today.

An increase in tariffs would also lead to greater savings in power consumed as we become more conscientious in our power consuming habits.

A demand curve of our power consumption shows that we use power most early in the morning before we leave for work and late at night just before we go to sleep. When the manufacturers are on during the day is when we consume the least power.

"The consumption graph is a useful illustration about a lot of what is wrong with our economy – we consume more than we produce...


The progress in the power sector is yet more evidence of what happens when good sense triumphs over populist rhetoric. If some MPs like Ken Lukyamuzi had had their way would still be enjoying rock bottom tariffs on our one hour a day power supply.

Monday, July 13, 2015

CHINESE SHARES, GREXIT AND THE SHILLING


The sky has been about to fall on our heads for weeks, if the western media is to believed.
After missing deadline after deadline, a Sunday summit Brussels will finally determine whether Greece is booted out of Europe or not.

The small Mediterranean nation has racked up massive debts – upto $330b or about three times the size of its economy, that it cannot repay. In a referendum on Sunday the Greeks rejected an expired proposal offered by the lenders. It’s a catch 22 situation for the Greeks who, do not want to leave the Eurozone but do not want to pay the price to stay in – lowering government spending and raising taxes.

Europe faces a similar dilemma. They would love to be rid of the Greeks, but Greek exit (Grexit) may create a dangerous precedent that may tempt other Euro members struggling on the periphery to leave and unravel the whole European Union project.

"But half way around the world, with not as much ink spent on it as it deserves, China’s stock markets are collapsing around investors’ ears. Since the middle of June they have seen $3.25 trillion wiped off their companies’ value. This the equivalent of three times size of the African economy or the size of the UK’s economy...

For a while now Chinese retail share traders have been buying shares on credit, leading to an over valuation of the country’s markets. Recent news that China’s economy has slowed down was enough to burst the bubble.

Plummeting capital markets often signal problems in the economy.  China’s growing economy drove the rise in commodity prices to record highs. Its dwindling fortunes has slowed down its demand for world commodities, reflected in the collapse in the prices of oil, iron ore and copper among others. 

This is not good for African economies, which have their biggest exports as raw materials.

But right here at home the shilling dropped to sh3,500 to the dollar for the first time. A combination of lower export receipts, reduced investment to the oil sector and peak of the dividend remittance by foreign companies has been at the heart of this latest plunge by the shilling.

The three events are related by one truth: when the laws of supply and demand are against you it is a matter of time before the market heads south.

Greece joined the Eurozone and contracted a lot of cheap debt that was hidden off the books and did not go to the building of economic generating projects, the EU motivated by politics rather than good economic sense, bailed out the Greeks several times but this only served to prevent the Greeks living up to the consequences of their extravagance.

When the markets started to buckle in China, a country with as much as $4 trillion in reserves, the most of any single country, tried to support them. But the harder they tried, the harder the market fell.

"And of course back home calls to support the shilling, the well-worn knee jerk reaction to depreciation were swatted away by governor Emmanuel Tumusiime Mutebile this week and rightly so. If we want a strong shilling we need to produce more and export more. For far too long we have pigged out on donor money and while the going was good we put little emphasis on developing our exports and diversifying our markets...

By the way a stronger shilling would be detrimental to our exports.


Given the example of China, the world’s second largest economy, of developed-country-soon-to-be third world country, Greece and poor little us, Uganda, the lesson is clear for everyone to see – don’t mess with the market.

Tuesday, July 7, 2015

BUSINESS LESSONS FROM BUILDING A SACCO

Last month the New Vision Staff Savings & Credit Cooperative hit the billion shilling mark in net worth – the difference between assets and liabilities.

This is also the year that the Coop turned ten. During the last decade a lot of lessons have been learnt about business during the building of the coop, which it is hoped has another millennia or so ahead of itself.

1.       Start where you are

There had been attempts to start a savings scheme for staff for years but it finally took off in 2005, with 26 (not 27 members). There was nothing to start with apart from an idea, the integrity of the founding members and the indulgence of the New Vision company. Clearly it was an idea whose time had come because the record shows that by the end of that year more than 100 people had signed up.

2.       Be clear about your objectives
From day one the objectives of the Coop have been clear. In decreasing order of importance, to help members save, to provide below market rate credit and to provide an investment vehicle for them. Everything the Coop did was with this in mind. This clarity of purpose has kept the Coop focussed and growing by prodigious amounts annually.

3.       Keep your costs low. Make your money make money
US billionaire investor Warren Buffett says it is red flag for him if he hears management announcing they are cost cutting. What have they been doing before he asks, cost cutting is like breathing you shouldn’t think about doing it you do it all the time.  The coop's major costs go towards interest payments to members and not to pampering an entitled administration or bad loans or losses from Hail Mary investments.
The Coop has invested mostly in government paper which revenue stream is growing every year as the stock of these investments grow.

4.       Collect what is due to you
The Coop’s major revenue stream is interest on member loans, which accounts for eight in every ten shillings the Coop earns. Thankfully we deduct at source so we collect most money due to us. However not everyone is willing to pay, for some strange reason they think monies owed the Coop will be forgotten. So with much discomfort debt collectors were contracted in the last few years to chase down these members who have chosen to abuse our hospitality. The results have been to the Coop’s satisfaction. They say profit is an opinion but cash is fact. One can be posting impressive profits year in, year out, but without cash even the most profitable company will sink.

5.       Don’t get excited
In the first year the Coop closed with sh33m in cash on its account. At the start of the enterprise to imagine that such amounts will be seating around earning anaemic returns from the banks was inconceivable. The temptation to go into speculative endeavours may have arisen but a clarity of mission helped to keep the Coop off the crooked path.  I remember a talk once where the speaker said that if even a million shillings fell from the sky it would discombobulate most people to the point of sweating.

6.       Take care of the customers and the money will follow
It sounds like a cliché but by working to keep the processes uncluttered with too much red tape and complexity the Coop has grown from strength to strength. It is true what they say,  if you want to get rich serve more and more people. Thankfully the coop is member owned so returns accrue to the members in terms of interest and capital appreciation so there are multiple benefits for the Coop’s members. And you can achieve win-win when measured against all the conventional business metrics of success. Last year the Coop showed a net profit margin of 57 percent and return on equity of 40 percent.

Understandably the Coop has social objectives, which mean it does not run with the sole intention of maximising profit otherwise they would charging extortionist lending rates while paying out a pittance in interest on savings.

But probably the final lesson will be that everything takes time. To get to a net of a billion shillings it has taken a decade of systematic and consistent practice, repeated with uncompromising diligence.
There are no short cuts you have to put in the time before you can drive the monster truck or holiday in the Bahamas. If you have not put in the time and are partying already rest assured doom is stalking your every footstep.

Monday, July 6, 2015

JOSTLING FOR POSITION AHEAD OF 2016

The race for the presidency arguably begun with the NRM Parliamentary caucus resolution last year that President’s Yoweri Museveni should be the party’s flag bearer going into next year’s polls.

In the last few days the tempratures have decidedly heated up as former Prime minister Amama Mbabazi made his long awaited announcement that he would be seeking to be his party’s presidential flag bearer.

The Mbabazi announcement and the NRM’s reaction to it, have arguably taken out the steam from a proposed coalition of the opposition.

But in this last week perennial presidential hopeful Kiiza Besigye had a change of heart and picked his nomination forms to represent his party the Forum for Democratic Change (FDC) and James Akena wrestled the leadership of the Uganda People’s Congress from Olara Otunnu, effectively confirming he will be running for the topmost office in the land in 2016.

The Democratic Party (DP) president Norbert Mao indicated he would like to be his party’s champion again.

"Understandably all eyes or on the NRM, not only because of Mbabzi audacious grab for the top seat, but also because they remain the dominant political force in the country and able to determine the texture of the run up to 2016...

In the run up to the elections some or all of these questions have to be answered to give the electorate more clarity.

1.       WHO WILL LEAD THE NRM INTO BATTLE?

Mbabazi is causing some discomfort in NRM circles but insiders, despite their loud protestations in public, are unsurprised. His choice to rival Museveni as the party’s candidate means, whichever way it turns out after the National Conference sometime in September, they will be on opposite sides of this contest. The odds are stacked heavily in Museveni’s favour to lead his party yet again. The perception has been that Mbabazi, despite him not being wont to press the flesh and mix it with the masses,  wields a lot of influence thanks to his long stay at the top of the political pecking order. Whether he can leverage this to mount a credible campaign is not a forgone conclusion.

2.       WHO WILL BE THE OPPOSITION’S CHAMPION?

Prior to Mbabazi’s announcement taking the wind out of their sails the opposition announced it was working on fielding a single candidate. We have heard this before. Previous attempts at a coalition have come up empty handed as the individual ambitions, mutual distrust and a lack of coherent structure and plan got in the way. There is no indication that these stumbling blocks have been overcome. The unlikelihood of an opposition coalition there is the matter of a possible joining of the opposition by Mbabazi.

3.     WILL THE NRM BE READY TO DO BATTLE AGAIN?

It is not clear that the fallout from the last elections have been smoothed over. Before the last election candidates who had lost their bid to be the NRM’s flag bearer at parliamentary level, run as independents many of them beating the official candidate. They swelled the numbers of the independents in the house and have over the last five year ingratiated themselves with the Movement. 

In order to prevent a repeat the NRM amended its constitution to ensure this does not happen again. So the tempratures in the primaries to be decidedly hotter than in any other previous contest. Whether the NRM can recover from the ensuing fissures among its people and run a characteristically strong campaign yet again will be interesting to see.


As the days go by more questions may arise as the dynamics inside outside the NRM shift. It is still early days alliances are being mooted, crafted and tested, regardless there are interesting times ahead, over the next few months.