Tuesday, January 28, 2014

FINANCE TRUST, UGANDAN WOMEN SHOWING THE WAY -- AGAIN



Last week Finance Trust Bank celebrated its ascension to a fully-fledged commercial bank.

This was a story 30 years in the making and would serve as a fantastic role model for how people working together, diligently and adopting to the trends can build a viable enterprise.

The bank started in 1984 as an NGO to allow women save and access credit. It now has 230,000 depositors (not all women) with deposits of sh43b and 25,000 loan clients who owe the bank sh58b.
This is an inspiring story on two fronts.

The co-founders Professor Mary Okwakol, Mrs Ida Wanendeya, Justices Mary Maitum and Caroline Okello saw a need and constructed a vehicle to address that need at a time when opening businesses or endeavours of any kind was less than ideal. The Uganda of 1984 was a hellhole. While everybody was lamenting, they rolled up their sleeves and got to work, and when the good times rolled around they had the structure to take advantage.

And secondly that these ladies not related by blood cooperated with a common interest to alleviate the plight of women, shows that our companies need not start as family businesses, but partners who have a common vision can do just as well, if not better.

"A nation is only as viable as its private sector....

But the private sector starts and grows from the individual initiative of people starting businesses to often times meet their own personal needs and those of their families but also as a way to take advantage of a gap in the market. If a family or small business stays around long enough it finds, out of necessity, it has to grow beyond the satisfying individual needs.

If in 1984 you wold have told the founders of Finance Trust that three decades down the road their kaoperation would have an asset base of sh91b they wold have laughed you out of their office.
They say we overestimate what we can achieve in a year and underestimate what we can achieve in ten years.

"The major challenge of our economy is that there is not enough indigenous capital, local business of a credible enough size. Part of the reason is that our businesses have failed to transcend a generation, that our indigenous businesses when taken over by the children find it hard to replicate or surpass the success of their parents or founders. This failure means that our biggest indigenous businesses are few and small. To create size takes time as Trust Finance has shown...

It is important, even critical, that we have more indigenous businesses growing into national, even regional businesses.

The logic is simple.

 The indigenous business spends more of its profits in the country than the foreign multi-nationals, which while the offer very useful services are operating from a very different mind-set.

The indigenous business owner is more likely to invest in the country, in other business, in social services, in real estate, which creates employment here and services too.

While the indigenous businessman will benefit from the bonuses and dividends that accrue from his company, he is more likely to get involved in social projects, which will hurt his bottom line in the near term but will have far reaching effects on the society in the long term. The manager at the multi-national will not jeopardise his bottom line for fear of a lower end-year bonus.

And finally the indigenous businessman is the bedrock on which national stability is built, whichever country you are talking about in the world. To the extent that you have a wanting indigenous business community is the extent to which your national stability is not very durable.

The ladies of Finance Trust have offered a good example of what we can do and that if we get down to it we can achieve a lot, instead of whining Tusabe Gavumenti Etuyambe!!!!

Tuesday, January 21, 2014

RETIREMENT IS KNOCKING LOUDER AND LOUDER



Last week I celebrated my 42nd birthday. I don’t need a birthday to remind me of my fading mortality – tennis on Sunday does that very well for me thank you, but with every passing birthday the urgency of retirement grows.

At my 30th birthday I got into my head that I should retire from employment by the time I was forty. That hasn’t happened yet but thanks to that resolution I am much clearer about what it wold take to retire any time soon.

In my attempts to plan my retirement I have learnt a few things that maybe helpful for all other mere mortals, read people who do not have access to or are unwilling to plunder state coffers to pad their nests.

1.      Start planning from the end and work backwards

How much would it take to keep you in retirement? For a start take your current annual salary, that should be the return on investment from any of your investments that you will be relying on in your retirement. So for example if your annual salary is sh10m given the 91-day treasury bill yield of about 10% you would need assets of sh100m. The easy way of thinking about it is if you retired today your asset base should be at least ten times your current annual salary. They say the best time to have planted a forest was 20 years ago, the next best time is now. Start building that asset base today.

2.       Be clear about where you are now

In line with the above goal it is good to have an unvarnished picture of your current financial health – your income, your expenses, your asset, your liabilities and your net worth. Emphasis should be on building your asset base faster than your liabilities in these two figures lies the truth about whether you will survive or not in retirement.

Not to burst any bubble, but if you are relying on your NSSF money to provide you a comfortable retirement, take your current NSSF savings and divide by your current annual salary to get how many years you will survive on it. I haven’t found anyone who can live beyond four years on his NSSF monies and that is a short time if you retire at 55 and live to 70, or even 65.

3.       If a deal is too good to be true it is 

In our attempt to build our asset base any number of deals come our way. To be able to get a grip of what is being offered it would do well to invest in some education to shore up your financial literacy. For example what is a realistic return in investment? If someone comes around peddling an investment showing a return 20% a month you have to wonder, especially since the central bank is offering less than a percent a month. A sound grounding in the basics of financial literacy will be the gift that keeps giving...

4.       If not for you, do it for the next generations

One of our most debilitating tendencies is to think that the wealth we create is for us to eat. Essentially we have just taken the subsistence mindset of our forefathers and scaled it up. In the west they talk of building wealth for generations to come. When you have a legacy in mind -- a much long term view, you think differently, you behave differently, you spend differently. Imagine how much sacrifice, work and thinking would take to build an enduring institution that will live beyond yourself and your children?

Everything starts with an idea, a way of thinking. What I have outlined above is far from a turnkey solution but it is a way of thinking. These are the principles the variations are as many as the people reading this article. It is not impossible to settle into a comfortable retirement where you enjoy your current lifestyle or even better – even if you don’t rob the bank...

Monday, January 20, 2014

THE AFRICAN COALITION IS COMING TOGETHER



President Yoweri Museveni has just been in Angola to participate in the International Conference on the Great Lakes region (ICGLR) part of whose agenda was to discuss the happenings in far-off South Sudan.

The ICLGR is a gathering of countries who beyond their close proximity have similar security and economic interests.

Just like the European Union, the organisation formalised its membership after the war in Congo at the beginning of this century, which pitted Uganda, Rwanda and Burundi on one side against DRC, Angola, Zimbabwe and Chad on the other. All the other 19 members were affected by association and were heavily involved in behind the scenes negotiations to resolve what was once dubbed, “Africa’s World War”.

Security remains top of the region’s agenda with the disfunctionality of the DRC causing nine of the members to forever keep an eye on the happenings in Kinshasa.

"At the core of the continent’s problems is its arbitrary fragmentation a century ago. This fragmentation left many countries economically unviable, gave post-colonial leaders overinflated sense of importance that has served to accentuate instead of wipe away these artificial boundaries....

But faced with the challenge of growing poverty on the continent which will soon or is already rendering the region’s arsenals impotent, this wily veterans have come around to the realisation that 
 “It’s the economy, stupid!”

The group whose membership stretches from Egypt to Botswana represents a population of at least half a billion citizens, an economic force which if leveraged properly can have a transformative effect on the continent as a whole.

It can be argued that the perennial chaos in the center of Africa is holding the continent back. It is these great lake economies that, are the least covered by economic infrastructure, account for the majority of the continent’s human misery from disease, war and general poverty and its I the region –less so lately, that was plagued with the greatest political instability.

Imagine if we had, a credible rail and road network from the Mediterranean to Cape Town, developed the region’s hydro-electric potential, which would have led to the easier exploitation of our vast natural resources for the benefit of our people and raised the quality of our human capital to be a more productive work force?

The potential is mind boggling. It is not by mistake that we have been running around like headless chicken for the last half century.

"In a previous era the continent’s big men could not be bothered in trying to facilitate economic growth – after all the US or USSR could always prop up their anaemic treasuries in exchange for loyalty. The fall of the Berlin wall meant these handouts dried out and those leaders who could not see the writing on the wall got booted for their inability to deliver services.

More than 20 years of economic growth since 1989 and
the region’s leaders are beginning to realise that total is greater than the sum of the individual parts, and greater collaboration on economic and security issues can keep the economy growing and wean them off irritating donor money....

Progress will not advance in a straight line, but as they say even if it means slowing to a crawl progress should always be seen to be taking place.

A line up of the organisation’s leaders may not provide comfort to human rights activists, but all of them are survivors and pragmatism has dictated that they transcend their mutual suspicions to make this thing happen. Eventually the rest of us mere mortals will be the beneficiaries.

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BOOK REVIEW: MUSEVENI'S UGANDA; A LEGACY FOR THE AGES

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