DON’T LET THE FACTS GET IN THE WAY OF A GOOD STORY

I am a sucker for the happy ending story, especially about businessmen who started from scratch and made it big. But like the next guy I can not help but have my head turned by hot money tales.

The tales of people striking “deals” – often by being paid a bribe or illegal commission for “work” done.

Here a few of my choicest not in any  order of preference.

1. Money in the boot. The procurement deal had gone down as planned with the official responsible set to collect his several hundreds of millions as a result. On the appointed day the official called the seller to his watering hole near the top of one of Kampala’s hills. They shared a few beers before the official said he would like to leave. The seller sent his two hanger-ons to go transfer the money –packed tight in carton boxes from one car to the next. A fellow patron looking out of the washroom window counted 6 boxes shifting from one car to the next. On return to his table he made a rough calculation that assuming sh50,000 bundles stacked six high, two across and eight along the length each box had at least sh480m. Do the math!

2. The driver with a home in Munyonyo. During the height of the Public Service  corruption scandal the story that threw me for a loop was the arrest of a driver whose job it was transfer money from point A to point B. They arrested him as he drove out of his gated home in Munyonyo area, driving his less than five years old Toyota Hilux double cabin car.

3. Christmas comes early. It had been a long weekend and a good stiff drink would do before he went home. When he checked at the ATM in addition to the sh237,564 he was expecting there was a 10 preceeding the figure. He checked in three other ATMs in the vicinity and yes he had ten million more than he expected and it was only March. All was soon revealed when on Monday he got a call from the accountant at work ordering him to route nine million of the money to another account. Christmas did not come early for him again because the accountant in question was fired soon after, but apparently the racket had been going on for years.

4. Changing X5s like underwear. They had known him from when he was just out of O-Level. He was helpful around the club and several of them can claim to have helped him pay his way through university. Through connections at the club he got a job at a leading multinational in the finance department. The rumours begun – he had built himself a house with a pool, he had hundreds of millions of shillings invested on the stock exchange, his breakfast daily cost sh50,000 delivered from a high end restaurant. But the straw that broke the camel’s back was when he totalled his new BMW X5 and before they could commensurate with him the next day at the club he drove in, in a new X5.

5. What a million dollars looks like. He was literally sweating from the experience. His friend had had a briefcase delivered to him with the equivalent of a million dollars in it. Wads of a hundred dollar bills stacked four by two by 12 – okay that was $960,000 but he said he got a million dollars maybe the $40,000 was in his coat pockets. The challenge was how to launder the money, pass it through legitimate businesses to hide its source and justify his coming into such an amount. At the corner of your neighbourhood there is a block of apartments going up at record speed, could that be him?

6. What goes on in the basement? The call had come in to organise a $700,000 payment within hours and the management was in a frenzy, cobbling together the figure from several of their branches. The client came in at 12:53 – its the kind of detail you remember when you are passing on such amounts of money. A senior executive had come down to the front office to personally supervise the transfer, maybe get a tip for his “effort”.  The client came in picked up the money, stuffed it in a sports bag. He was escorted to the basement where he had parked his car. He walked to a car opened the passenger door placed the money on the floor below the dash board and walked off. But not before the beautiful lady in shades, short skirt and heels had been seen.

Whenever I hear these stories I wonder how we can be breathing the same air with people carrying around millions or billions in their boots.

If you hear another one please share – the story, I mean.

WHY IS UGANDA A DIFFICULT INVESTMENT ENVIRONMENT?

In the last two weeks we have witnessed the swearing in of President Yoweri Museveni and the 500-odd MPs of he 11^th parliament.

We await the announcement of the new cabinet with bated breath, not least of all the business community.

The Uganda National Chamber of Commerce & Industry (UNCCI) president Olive Kigongo and businessman Patrick Bitature in these pages have called for a private sector friendly house.

They appeal to the politicians because while the strength of any economy is dependent  on the viability and vibrancy of the business community, the politicians are the ones who lay down the rules and ensure their enforcement, or not...

Enforcement of the law is important because it provides a predictable environment in which investors – local and foreign, can make  educated calculations on how to invest in the country. If there is uncertainity investors – local and foreign, stay away or adopt a wait-and-see attitude and don’t invest as much as they should. that’s common sense. Even if for love of country I would not put all my eggs in this basket when I am not sure I can keep my eggs leave alone produce more eggs.

Amidst all the political high drama of the last few weeks, some news fell between the cracks.

At cigarette company BAT’s annual General Meeting last week the country boss Kirunda Magola complained that there is an increase of smuggled cigarettes in the country, which are easily identifiable as they do not carry the statutory required warnings on their packets.

This suggests that not only are they not paying taxes and are allowed to sell in our shops despite being obviously contraband, but they are also dampening BAT sales hence denying us much needed revenue. It also means that we may be letting in substandard products that we have no control over.

That is bad enough, but it is also  affecting our neighbours because the country has become a conduit for this illicit trade, affecting legitimate businessmen in the region.

And BAT are not the only ones complaining of government’s inability to enforce its own laws.

A few years ago a major fuel company pulled out of Uganda because, while they were enforcing all the standards required by the law at their stations, at great cost to their margins, other players were flaunting these with impunity, undercutting the major players and in the process turning Kampala into a fireball waiting to happen.  

We are shooting ourselves in the foot.

"Government officials can talk all they want how the country is a good investment destination with double digit returns on investment, widening market and liberal policies, but businessmen listen more to their fellow businessmen and know better than to swallow wholesale everything the government tells them....

Then net effect of this is that legitimate businesses steer away and the more unscrupulous types come calling.

They have their local backers in high places who, for a few dollars more, ensure government looks the other way, the genuine businessmen be damned.

In defending the illicit trade they appeal to some false nationalism -- “Its our people eating at least” but the road to hell is paved with good intentions.

What we are doing as a country is nurturing organised crime and the networks that feed them. The networks that are used to smuggle cigarettes or fuel or batteries are the same networks that are used to smuggle guns, drugs, facilitate human trafficking, the movement of terrorists and assassins.

"Very soon, if its not already happening, these organised gangs coopt government officials into their nefarious schemes and we could very soon become a gangster state....

It has happened before.

In Montenegro, to go around UN imposed sanctions on the former Yugoslavia in the 1990s they leased their ports to cigarette smugglers. When things returned to normal the cigarette smugglers – by this time they had branched out into prostitution and gun running, did no t go away and the new government could not make them.

It got so  bad that Italy at one time put out an arrest warrant for former prime minister Milo Djukanovic for his or his government’s alleged role in the cigarette smuggling business. 

The last elections showed that government needs to urgently create millions of jobs by the time this political cycle ends, we can not do that by letting tax dodgers take root in this country.

THE KABALAGALA MAN

There is this gentleman who sells kabalagala – the small pan fired delicacies often made using ripe bananas and flour, by the roadside. That would not be anything to write home about except that this young man is often neatly turned out in a tie and often in a suit.

His kabalagala is polythene rapped in packs of five, which cost a convenient sh1000. He is respectful, always has change and he is joy to buy from, especially when you are stuck in traffic.

Unfortunately I havent talked to him at any length about his business but I notice every time I pass by he is doing brisk business from his box which I estimate contains more than 500 kabalagala when full.

Last year’s lockdown must have put the brakes on his progress but I see he is back at his slot serving with a smile.

We have said before in this column that for most of our businessmen its not about the economy failing them, but because they just have bad customer service...

Contrast the young man above with the lady who serves out of a restaurant I frequent. I have happened upon her sleeping at her station and often have to be prompted for service when she is awake. On occasion she doesn’t have change and when you leave your change with her , the impression is that you might as well say good bye to it. She is in business because she has a captive market, but she could do so much better if she improved her body language around her clients.

Or the other day I go to get my second Covid jab and the health center is a mess with no order, people milling around you could not tell who had come for the first or second jab and therefore who should be given priority. I jumped the queue --- there was no line to speak of,  on account of my graying pate. But it was no thanks to the young nurse who was standing on the verandah a bowl of fruit in her hand, chomping away at here fene. I had mistaken her for a fellow vaccinate. Wen I asked what the procedure is she said I should just seat  and somebody would come around to attend to me.

Yeah right. I ignored her and headed for a more elderly doctor who seemed to be actively trying to get us vaccinated. Now if she had been more helpful I may have found it in my stone cold heart to fork out a tip on my way out. A shilling saved is a shilling made.  

"It is easier and cheaper to grow the business off your existing customer base than to go out looking for others. Poor customer service means this can not happen and your business is more invested in roping in new hapless clients who would rather not do business with you if they had known how you behave...

I am sure there is a study somewhere that has n ailed down how much business lose due to poor customer service but I am guessing it must be a  huge number. I am willing to bet people would more than double their revenues if they brushed up on the way they treat their clients.

And I am probably understating it.

Imagine you have a clean place of business, so on first impressions you are ahead of the game. Despite constant entreaties since childhood not to judge a book by the cover we all do. Then your front line workers if they are in clean uniform, ready with a smile and seeming dedicated to meeting your every need you are making significant strides.

This is probably a good argument for treating your staff better. You treat the well they treat your clients well and they keep coming back.

Taking it a bit further what if this same front line workers are schooled in every aspect of the business, so for instance they know why six inch nails should be used for the job you want not the four inch ones you had ordered, they move from just pushing things down your throat to being consultants. Have you ever been to a restaurant and somehow haven’t decided what to eat but the waitresses can recommend something for you and tell you why? Pure bliss.

And then the actually delivery of the service has to be live up to the foreplay. If there is a delay come back and inform us of progress. There is nothing that makes me want to pull out my hair in frustration than a waiter who after a lot of clapping and whistling – I have found that “Gwe!” works best, than they turn up at your table and tell you what you have ordered is not available, 30 minutes later.

In brand building there are four basic components that need to be addressed; awareness, if no one knows your brand its not a brand and then associations, when people think of your brand do their think of dependability and quality or shoddiness and crap. Then the experience people enjoy or suffer interacting with your brand. If you can tick off positive attributes on those first three then the fourth, loyalty will follow.

What good customer service does for you is improve the association attributed  to your brand and the customer experience. Funny thing is if this a good, by word of mouth awareness increases and loyalty follows.

Last week an AfriArena study showed that Uganda is doing badly in attracting start up capital.  According to the report in 2020 Uganda only managed to attract $11.3m (about sh40b) compared to neighbours Kenya who did $305m. Even smaller economy Rwanda bit us to the post accounting for $11.6m in startup capital to the continent.

UI am sure there are many high sounding reasons for this state of affairs, but i am willing to bet that because of our poor customer service we are unable to scale up or show the ability to scale up our businesses to the point that they are attractive for outside investment. That is a saddening thought.

REBECCA KADAGA, THE END OF AN ERA?

This week Rebecca Kadaga made way for her successor Jacob Oulanya after weeks of acrimonious campaigning, that was brought to a decided close when the National Resistance Movement (NRM) top organ nominating Oulanya as the party flagbearer in the race for speaker.

After her Sunday snub by the Central Executive Committee (CEC) Kadaga opted to break ranks with her party and run as an independent the next day.

"Only the romantics thought Kadaga had a chance in a house firmly in the grip of the NRM. President Yoweri Museveni, filling in for the Chief Whip made personal calls to key members to ensure Oulanya took the day...

The drama that preceded the count however masked another interesting story, that Kadaga is one of a pioneer group of politicians that benefitted from the NRM’s overhauling of the country’s politics.

When the NRM took over Kampala in January 1986 they were the most formidable fighting force but were politically weak on the ground. Were elections to be held within the next 12 months they may very well have been sent packing back to the bush.

To their credit they could have decided not to bother with politics, like Idi Amin before them but they decided they need to create a political base. They did this by suspending political party activity and allowing people to run for office on individual merit.

The first change froze the parties in place and the second allowed budding politicians to jump the party queue and compete for office, an opportunity that may not have turned up soon give the party processes of the time, where a small clique of men decided who run or did not.

Not only did Kadaga benefit from these two moves but also the introduction of the women’s district seat in the 1989 National Resistance Council (NRC), another initiative that ingratiated the NRM with the woman vote and expanded their political base even further.

Apart from the Constituent Assembly, where she did not participate, Kadaga has been the woman MP of Kamuli District since 1989.

"Kadaga was the last man standing of a crop of politicians that included former vice presidents Specioza Kazibwe, Professor Gilbert Bukenya, former prime minster Cosmas Adyebo and a motley crew of ministers like Victoria Sekitoleko, Francis Babu and Aggrey Awori who maximized on the NRM’s initial political machinations...

It is arguable that while in their individual rights they may have climbed through the original party structures and enjoyed some success, it is probable that they would not have risen to prominence as quickly.

And the trend has continued. Of all the MPs that were in the last house only three in ten managed to make it back to the house. Individuals in the constituency do not have to pledge allegiance to the party structures there to present themselves as would be the case before.

The trend is particular pronounced in the ruling NRM where in some constituencies dozens can show up to try and win the party flag.

Initially, as stated above it was a way to build a political base, for which it has proven extremely successful. Today it continues to renew the party at every poll. As an example the only ministers from the original cabinet in 1986 there remains only Prime Minister Ruhakana Rugunda, who is ex –officio. Kahinda Otafire, who has only just returned to the house after an electoral loss in 2016 and General Moses Ali.

"One of the better legacies of the NRM will be that they flung open the doors to political office like no one before them. The party has remained coherent despite the regular bloodletting and it is not expected that Kadaga’s exit will change that...

That being said high profile politicians like Kadaga and Kazibwe before her have shown, especially young women, that politics is a field in, which they too can aspire to and perform in.

That may not be a stated legacy of the Kadaga two decades in the Speaker’s office but it is one that will reverberate down history.

Her ouster while not a hard departure from the past, is a useful marker of when the Movement made a final break from the old parties and now runs largely on its own steam, with leaders who have been nothing but movement or even have known no other party in their life time.

Me thinks it also marks another interesting milestone in the NRM project that will be revealed in the fullness of time.

THE PRICE IS WHAT YOU PAY AND VALUE IS WHAT YOU GET

My favorite American, Warren Buffet says price is what you pay and value is what you get. Value for money is when you pay as little as possible for good value.

This is at the core of his investment philosophy but it is really common sense, or not. If it was common sense Buffett would never have become the richest investor in the world.  He has made his billions from the lack of common sense of other investors.

He looks to buy companies – whole or off the stock exchange, that are selling at a discount, hence representing good value and holding them “forever”. Benefitting in the short term from their dividend payouts and in the long term from their appreciation.

Interestingly his company Berkshire Hathaway doesn’t pay a dividend, it paid out once in the last 50 years and Buffett thinks he must have been in the bathroom when that happened.

Not the subject of this discussion but why he doesn’t pay dividends is because he argues that his shareholders will be better served by him reinvesting the dividends for them as there is no better investment vehicle on the horizon. A share of Berkshire Hathaway, at the time of writing this was trading at $431,421.70 (about sh1.55b).

Buffett and his investment philosophy we shall shelve for another day.

If you took his quote and flipped it around it would read something like, how much you get paid is commiserate with the value you deliver to the market.

I got to thinking about this when I passed a driver who had broken his seat, was sleeping, feet on dash board as he waited for his boss.

And I thought this guy has one of the most valuable commodities in the world hanging loosely on his hands – Time.

Then I wondered what could he do with his time to increase his value to his boss or in the job market or to the general economy?

If Buffett is correct the more value you deliver the more you get paid.

"You are not being paid enough (who is?) either because you are not of much value or the market does not see your value. So the question for everyone who wants to get paid more is, how does one increase their value and have the market recognize that value?

This probably is a whole course unit, or should be, in some university somewhere so we will be only be scraping the surface of the subject in the 700-odd words that we are allowed here.

To begin with value is determined by the market and not by you. You can go to Harvard and master in rocket science and come back to Uganda, you may die a pauper despite the high price of your education and the sophistication of the subject you are a specialist in. If you stayed in America you are more likely to be paid better, especially now that the private sector is sending rockets to the heavens.

On an individual level you increase your value by increasing your knowledge and experience, that’s why a university graduate would be paid more than a S4 dropout. But an S4 drop out can study and become an accounts technician and by the time his contemporaries are off to university will have a job and by the time they come out after three or four years, he could have got his ACCA and be more valuable to the market than his graduate friends.

A combination of experience and marketable qualification will make the difference.

If you are in business the value of your company will increase to the extent that you can develop a competitive advantage – develop production processes that cannot be replicated that produce a quality good that many want. Again you would have to invest in the knowledge of your people and processes and develop the competence that only come with time.

Back to the driver dozing in his boss’ car what would he do to increase his value to the market?

Going back to school is not practical, in the traditional sense, but maybe he can use his smart phone for more than just Facebook and premier league scores. He could improve his English, learn business administration, acquiring the skills of a personal assistant – in addition to his driving skills, and become more valuable to his boss.

If he used those same skills to start a business, he would serve more people than his boss, immediately increasing his value. There in is a major trick, to make more money you need to serve more and more people. And to do this successfully you not only have to have built in yourself or business, value but communicate it to the market. It will not serve you to have the sweetest rollex around when no one knows about it.

 

RACE FOR THE SPEAKERSHIP TO END IN A PHOTOFINISH

The decision or non-decision by the ruling party’s Central Executive Committee (CEC) not to name the party’s choice for  the race for speaker earlier this week, was the shot heard around the world.

Two term speaker Rebecca Kadaga  wants to retain her place and her deputy Jacob Oulanya wants to unseat her. Both are members of NRM’s CEC.

CEC passed the buck to the parliamentary caucus to decide who between the two, will be its champion in the race for speaker.

"On the one hand the move may signal a vote of no-confidence in Kadaga, who has not endeared herself to the party’s apex body, by declaring they have no business deciding who will be speaker....

On the other hand, it may be that CEC is not convinced by Oulanyah’s bid, or not convinced enough to throw their fellow veteran under the bus.

A few weeks ago a discussion on Urban TV’s Cross Fire show concluded that the open campaigning by the two, which President Yoweri Museveni put a stop to, was playing to the CEC gallery. That CEC would decide and that the new MPs were not the target market for the acrimonious campaign.

Now CEC has thrown all those calculations out the window.

But prior to the CEC decision Prime Minister Ruhakana Ruganda wrote to parliament asking that the elections, which were supposed to happen today be pushed back. His argument was that the NRM MPs needed time to caucus and decide on the matter.

This serves as a good show of democracy, after all why should CEC be deciding for MPs who will lead the house.

"But if the NRM was behind Kadaga they would need no time to send out the signal that Kadaga is their favourite....

The need for time suggests there is still more work to be done whipping some MPs into line. The former chief whip Ruth Nankabirwa, for who there is no love lost with Kadaga, lost her seat and that gap will be felt in coming days as someone else is chosen to keep NRM MPs in line.

The NRM’s chosen one will most definitely be the next speaker of parliament. 

In the 529-member house the NRM has 336 or about 63 percent of the seats. The vote for the speaker is decided by simple majority, so they already have the numbers. And if there is any doubt there are the NRM-leaning independents who are most of the 74 Independents in the house.

Of course, you can expect that the opposition MPs will gladly vote for an alternative NRM candidate as a way to spread dissension in the ruling party’s ranks but its doubtful that they can make an impression on the proceedings.

The stakes are understandbly high for Kadaga and Oulanyah. 

Kadaga has made it clear that there is no other position in government that can appease her, she will take the speakership or nothing.

"After two decades in the speaker’s office – she deputised Edward Sekandi for two terms, It would take some getting used to warming the back bench and living without the influence of the speaker’s office....

While in Oulayah’s case, to fail to become speaker may mean another stint in the political wilderness.

Oulanya’s ill advised leading of the no-hope Aggrey Awori presidential bid of 2001 set his political ambitions back. Joining the NRM and  encouraging the perception that he engineered the north’s cold shouldering of the opposition in favour of Museveni, suggested it was only upwards and onwards for his political career.    

Hovering over the debate is Museveni who has not come out openly in either candidate’s favour, but for who, the person who occupies the speaker’s seat is critical for his government.

A cooperative speaker and by extension a pliant parliament is good for him.

Nevertheless the race looks too close to call. 

"The NRM doyens may want to sway the vote one way, but if not properly induced, the rank and file have shown a disturbing propensity to vote the other way...

The antagonists must be biting their nails down to the quick and spending sleepless nights with their strategists, but for the rest of us mere mortals we are rubbing our palms in glee in anticipation of high drama next week.

A TALK WITH THE ROLLEX MAN

I had to stop and look again when the neighbourhood rollex guy took delivery of four trays of eggs on a wet and cold morning.

Just in case you missed it four trays of eggs contain 120 eggs. I could not believe he could sell in a day all that rollex, the popular street food which is basically an omelette rolled up in a chapatti. I had to hurry off to a meeting but made a mental note to talk to him about his business on my return.

An hour later he was down to three trays.

The rollex guy, let’s call him Musa, for sh2000, the cost of a rollex, agreed to field some questions to the extent that he could.

From his work station, a small box with a tin roof, he told me he sold at least 50 rollex a day and that all the eggs went into the omelets none in the chapatis. So assuming at least two eggs an omelet he had projected he would sell 60 rollex that day for gross sales of sh120,000 every week day...

After all expenses – wheat flour, cooking oil, charcoal, he reckons and what sounded like protection money, he pockets about sh30,000 to sh50,000 a day. He wasn’t quite sure.

He has been at the same spot for at least three years, he said. The Covid-19 pandemic has however dented sales. Before the lockdown he says he was selling much more.

A hundred rollex? I asked. He was not sure but it is possible, he thought.

I had slowed down his chapatti making so I had to move along.

Maybe he was content with his lot but as a thought experiment I wondered what for starters he would need to do to attract investors to his business.

An investor is defined for our purposes as one who is looking to commit money where there is promise of return.

"There are the four Ms the investor is looking for, which should jump out at him when assessing a business, before he can reach for his wallet...

Does the business have meaning for him, beyond that it will make him money. Food is a very emotive subject and the investor who understands, enjoys, appreciates food would be a good place to start. He might even understand the vagaries as the industry and will not cut his losses at the first down turn.

Does the business have a Moat. In medieval Europe the castles were surrounded by a ditch filled with water, with access restricted to a draw bridge. The ditch is called a moat and kept the enemies or competition in our case away. Essentially does my man Musa have a competitive advantage that we can exploit to sell more rollex or increase the price.

The third M is management. Is the investor confident in the manager’s ability to show a return. In serious companies this may be reflected not only buy consistently good returns on investment annually but also a steady increase in equity, the share of the company that belongs to its owners.

And when all is said and done is there a good margin of safety between the value of the business as calculated by taking its projected revenues and the price at which it is being offered. Essentially can he buy the company at a discount to its actual value.

So back to my man Musa the key questions to answer will be the last three, I am going to assume anyone wanting to invest in a rollex stand enjoys food, or at least rollex.

Musa may struggle to show his competitive advantage. I looked up and down the road and at interval of at least 100 meters there was another similar stall doing the same thing. And I am willing to bet the taste of rollex stand do not differ significantly. It also seems to me that startup costs don’t seem to be enough of a deterrent to other players getting into the market.

But maybe a competitive advantage can be developed. One of the impediments to selling even more rollex Musa said is that some people are wary of buying food off the street. An investment in some white paint, to whitewash his shed, a white apron and chef’s hat may improve the perception of cleanliness around Musa’s stall. A source of running water too, besides the grimy jerry can he now has.

A menu in full view may help too in not only attracting clients but further differentiating himself from the competition.

Make sure he is current with all municipal dues and is the worst came to the worst, organize for the competition to get a friendly visit from local authorities, harass them off the street.

Musa’s ability to show he is a good manager would be helped by him organising his books. No serious investor will bet good money on Musa’s flowery tales of how his revenues are increasing without some intelligible records. Does Musa have a bank account? I didn’t ask, but that would would be a good place to determine the businesses cashflows. Maybe he has a SACCO or mobile money account.

Ralatedely, the investor cannot determine the value of Musa’s business and therefore how much he can commit to the venture. If Musa can demonstrate that he actually makes sh50,000 and show that this happens over a longer period—six months say, the investor may be able to get a rough value of the business.

The point is that Musa will struggle to find investors to take him to the next level in his current state, what he might get is charity, the kind where the giver has no interest in his business and its future progress.

Musa is not unusual.