BIG COMPANIES WERE ONCE SMALL

The New Vision’s “Pakasa Youth Awards” never ceases to inspire. The series of articles that has been running since July, highlights mainly youth taking their destiny into their own hands and setting up businesses to survive.

And they businesses span from real estate development to mandazi making; earning hundreds of millions a year to a few thousand shillings a month but despite their varied experiences and the challenges they have faced, the common denominator among them seems to be the sense of hope ringing in their narration. A quality they do not teach you in business school.

About five years ago a World Bank survey conducted with the help of Makerere University Business School (MUBS) determined that Uganda was the most entrepreneurial country in the world. A subsequent survey showed us to be second only to Chile.

The question was asked that if we were the most the entrepreneurial country in the world, even ahead of the US and Europe, how come we are not in the league of bigger economies?

There are basically two types of entrepreneurship – necessity and opportunity. In the first instance enterprises are set up to meet subsistence needs while in the second businesses are set up to take advantage of market gaps.

The study found and the Pakasa Youth Awards illustrated that the overwhelming number of Ugandan business are set up to meet daily requirements.

The study showed that the challenge is for Ugandan businessmen to transition into opportunity entrepreneurs.

This is a challenge that the likes of Enterprise Uganda grapple with every day. To illustrate the issue, according to Enterprise Uganda’s research there is only one indigenous Ugandan business that has been handed down from one generation to the next.

Handing over a business goes beyond handing over the physical infrastructure and staff there are the softer issues of the vision, mission which inform the culture and work ethic of the business going on, I think this where our businessmen and women trip up.

It cannot be easy to be develop a thriving business that will outlive you if your attitude is one of subsistence – that you will eat everything before you die.
Which brings us to an interesting presentation made last week by one of our leading businessmen.

In a presentation to Institute of Chartered Public Accountants of Uganda (ICPAU) “An entrepreneur’s journey to business growth and development and personal development” Mohan Kiwanuka, proprietor of Oscar Industries, outlined what it takes to be an entrepreneur.

He made very many telling points but the nominees of Pakasa would be well served if they went away with two lessons.

The first, that growth is imperative to survival. Because good ideas are copied Kiwanuka counseled, “Growth is not an option. It is a survival imperative. It raises the bar to block or disadvantage potential competitors.”

A business’ growth can be managed by expanding existing capacity, supplying additional market needs, expanding your product range or supplying yourself, he said.

He went on to say that the entrepreneur is the most important past of the business and it, the business, will fail or succeed depending on three questions the business owner must answer – Do You know yourself? Do you understand your environment? And are you committed100%?

He rounded off his presentation by saying, “The future is in your hands oh sorry in your heads”

In a 20-page presentation Kiwanuka, who should know, spared no space on profit& loss, cash flows and all those technical accounting terms, his presentation dealt on the mind of the entrepreneur.

The point is that for the Ugandan businessman to transcend to the next level of his craft, he has to work more on his mind than on the external environment.

The Pakasa youth will be well served to heed Kiwanuka’s advice. They need to dream beyond feeding, housing and clothing themselves and make serving more and more people wherever demand for their mandazis, saucepans or bushera can find a market.

A business can only grow as big as the vision of its founders and all big businesses started as small businesses.

ECONOMICS OF VENDORS OR NO VENDORS

Last week Kampala City Council Authority came through on a promise to get vendors off the streets of the capital.

This was always going to be a political issue more than a straight forward administrative action. And so it turned out as Mayor Erias Lukwago threatened to variously resign or seek interpretation from the constitutional court of his role in running the city.

There are concerns about what the vendors will do now that their livelihood has been taken away from them. There is even the suggestion that this previous bread winners will turn to a life of crime to make ends meet. The political tacticians are off course looking to see how to take advantage of this new disgruntlement or harness this for more support.

Aloof from all the hoolabalooh, seemingly above it all – as she should be, is the KCCA Chief Executive Jennifer Musisi. The way she is going about her job will be a test case for whether we, as a society, can still recognise professionalism, laud it, support it and most importantly, get out of its way as it goes about its business.

She will provide a home grown test case for another theory – The Broken Windows theory. The theory first introduced in 1982 suggested that that monitoring and maintaining urban environments in a well-ordered condition may prevent further vandalism as well as an escalation into more serious crime.

Further popularized by author Malcom Gladwell in his bestselling “Tipping Point”, he used the theory it to explain the dramatic fall in New York’s crime rates in the 1980s.

The vendors are one of the manifest signs of a city out of control. So are the portholes. So is our kamikaze driving.

According to the theory if you are in a neighbourhood and there is one broken window, if it is not fixed will tempt criminals to break a few more windows and if they are not fixed more vandalism will occur escalating into full scale robbery and eventually murder.

New York City went about fixing neighbourhoods – cleaning them up, fixing street lighting and painting over graffiti, to eliminate any incentive for an escalation of antisocial behavior.

Drawing parallels to the Kampala’s vendors. The law says they should not be on the street. By allowing them to establish themselves over the years we have abetted criminal behavior to the point where vendors were normal and this week Kampala road seemed rather dull. Who knows how many other more serious criminal behavior started to take root under our very noses? We could say that the vendors eviction is a process that will not stop there but will continue to filling portholes, painting buildings, regularizing traffic and maybe finally eliminate jay walking – crossing the road without the green man blinking.

The headache for the planners is what to do with these able youth who have been displaced and essentially deprived of a livelihood? Actually any planner worth his salt would just be as pissed as the vendors for this turn of events. Because it would be their problem to get them jobs. But then again if they were not kicked off the street the planners would probably continue with business as usual, leaving the vendors to eke a living off the streets with no real security of tenure. Now someone has to think. Or will they?

Thinking is what we need more of.

The vendors were proving more than an inconvenience. They were unfair competition for shop owners who are saddled with rent, payrolls and taxes. In fact it became so bad that in a classic case of “If you can’t beat them join them” shop owners had resorted to giving their stock to vendors to sell on their behalf.

If we are to get more and more of our businessmen into the formal sector this is clearly not the way to go.

Maybe the price of getting these vendors off the street will be to train them in vocational and entrepreneurial skills, that way they can become not only better businessmen but also learn a skill that they can sell. Or see an escalation of crime in the city as the vendors try to find their feet.

Regardless of which way this goes it does not negate the underlying principle of doing it. That the situation was allowed to deteriorate to this level is not KCCA’s problem the backlash though, may affect all subsequent programs of the authority.

UGANDA EX-VP BUKENYA RODE THE TIGER

When history is written it will be said that former vice-president Professor Gilbert Bukenya broke all the forty-eight laws of power and then some.

"An intelligent man, a personable mobiliser, an effective communicator all this counted for nothing when he came up against the rough and tumble of politics, where nothing is as it seems, principles are dynamic and the impermanence of alliances can live your head spinning...

His academic history suggests he was no ordinary mind, coming through St Mary’s Kisubi, doing Medicine at Makerere University before doing his post graduate studies in Public Health.

His vaunted academic career – he eventually served as the Dean at Makerere’s Medical School and international exposure, allowed him to operate with ease among the high and mighty, while his humble upbringing – his tuition was largely met by the earnings from his mother’s waragi business, gave him an earthiness that allowed him to connect with the lowliest of society.

In hindsight therefore it should not have come as a surprise when he found his way into politics, rising to the second highest office in the land. The May reshuffle brought to a close his eight year tenure as Vice President.

His lost bid to become the NRM secretary general earlier this year and his current battle in court, where he is charged with fraud in relation to CHOGM procurements, are seen by many as the final act in a political career where the barrel chested professor dropped the ball at a most crucial turn.

At the beginning of his tenure he embarked on an ambitious program of rural transformation. The plan seems to have been to introduce a highly in-demand crop that was easy to grow and which the rural farmers could find ready market for. Enter upland rice.

The crop, which unlike paddy rice needed less water, could grow anywhere in Uganda and after piloting it in his Kakiri home area was soon out in the country spreading the gospel. The natural progression of the plan was that once farmers had a steady income from the rice and other suggested agricultural ventures, they would own bank accounts, which would allow them into the formal financial sector and one step away from better housing and mechanized agriculture.

At the height of the program’s success the professor gave an interview in which he alleged that a powerful clique of cabinet colleagues wanted him out of cabinet. Apparently the attention the good doctor was garnering countrywide for his upland rice, was making more ambitious men jittery.

He might have survived that round, but the less than transparent procurement processes – which he was in charge of as head of the cabinet sub-committee to ready Uganda for CHOGM, always meant he was going to be an open target for his political enemies – imagined or otherwise.

It is no secret that his stellar mobilisation skills aside, the decision to appoint him Vice President was informed by his being Muganda Catholic and it was always going to be that he would be the man to watch in case he decided to leverage these two historically powerful constituencies.

"If he had taken the bullseye on his back for granted, it was made very clear to him by the time he cried “mafia”...

He narrowed his options by defying the NRM earlier in the year to stand for the position of Secretary General, which left a bad taste in the party’s leadership's mouth. And for better or worse the NRM for the forseeable future will always be a credible force to reckon with that you would rather have for you than against you.

Whereas there maybe some sympathy for the man, his court case is not likely to have him coming out smelling of roses.

And if you have not torn all your hair out by now, his announcement this week that he is going to retire entirely from politics one thinks was ill advised and not well thought out. His remaining an MP is probably his last card. While out of the inner circle – either in government or the party, he could still keep in touch with the heartbeat of the party and wait for another day.

"It maybe too early to write sixty two year old Bukenya’s political obituary but the signs are not good for him looking to the future...

YES, WORKERS SHOULD HAVE A LIVING WAGE

Last week the issue of the living wage reared its head again.

Members of Parliament called on government to set a minimum wage to stop worker exploitation by investors.

They argued that despite the rising cost of living businessmen have continued to pay their workers peanuts.

In 1995, sh75,000 was recommended as the minimum wage for unskilled labour. This was never effected.

Proponents of the move say that improved wages will lead to higher worker productivity.

While government and opponents of the minimum wage bill have argued that to raise labour costs would dissuade investors, because one of Uganda’s main attractions for investors is low-cost labour.

As with many of these arguments both sides are right but not in the way that either intended.

One of the things holding back the economy is the low productivity of the Ugandan labour force. Compared to our neighbours the Ugandan worker produces less per unit input compared to his Kenyan or Tanzanian cousins.

The State of Uganda’s Population Report released at the end of last year showed that six Ugandans are employed to do a job that can be done by one Kenyan. Also, one Tanzanian national can do a job that is done by four Ugandans.

There are questions about our people’s work ethic, while this has something to do with our dismal figures, low productivity is more a function of how much capital is injected into our work processes.

A farmer using an ox plough is using a much more capital intensive approach to his farming than his hoe using neighbor.

Two things can happen for the ox-plough farmer.

To begin with he needs considerably fewer workers for the same piece of work, invariably increasing the productivity of his labour, meaning he can cultivate more land.

Secondly, with the increase in revenues and the reduction in staff numbers he can afford to pay his workers better even if his neighbour’s workers are toiling “harder” and longer. It is also in his best interest to pay his workers higher because they now have higher skills that are not readily available in the area. But also he needs to pay them higher to discourage his rivals from poaching his already trained workers.

Using this analogy the opponents of a living wage are right that a higher wage will dissuade investors from setting up shop on our shores, but the investors it will be discouraging are the investors who cannot or will not invest in higher technologies or capital intensive industry. Our low labour costs make us ideal for the “hoe-farmer” investor.

The pro-living wage lobby are right that low wages offer little incentive for higher productivity, but not for the reason they suggest. A higher living wage will force businessmen to invest more in technology, cut down on their workforce and pay the higher skilled labour a higher wage.

It seems like a chicken and egg question. Do high wages cause higher labour productivity or does high productivity raise wages?

Our poor productivity numbers are related to the low quality of the investors we attract.

The question then will be, what will we do with the newly, inevitably redundant workers?

That is where education comes in. The smarter workers will look to constantly upgrade their skills, keep in touch with the latest technologies and improve their own work processes. Government too should be constantly be revising curriculum at the school level and encourage an adult education industry to help workers retool.

So yes for the greater good of the economy and to catapult us to the next stage of development, we need to set and enforce a minimum wage for our workforce.

MAKERERE DONS GOING ABOUT IT THE WRONG WAY

Makerere University has been closed indefinitely following a breakdown in talks between the campus staff and government over pay increases.

The staff at the university are pushing for a minimum monthly wage for assistant lecturers of sh8m.

I will be the last to begrudge anyone their wage demands, after all you get paid according to what you negotiate, but I think the dons of the ivory tower are going about things the wrong way.

According to sources familiar with the situation the teaching staff of Makerere want government to pay their salaries because they know they have reached the limit of how much they can reasonably extract from students in fees and secondly, the demands are based on the fear that in an increasingly competitive sector Makerere will earn less and they need to secure their salaries by insisting on a vote from the treasury.

I have heard it said that Makerere was once referred to as the Harvard of Africa (must have been long before my time) so I shall refer to how the original Harvard handles its finances as a pointer to how Makerere should be thinking.

But first of all, the desire to be paid by the government is a losing strategy on two fronts.

To begin with the incentive for Makerere staff to be more productive in terms of teaching students will be removed. As it is now teaching staff’s pay is also pegged to the size of the class one teaches. This incentive system has glaring weaknesses but at least it ensures that lecturers make an appearance in the lecture theaters. It does not take rocket science to work out what will happen when lecturers start drawing salaries from the consolidated fund.

And related to that improvements in staff productivity will not be recognized as readily at the finance ministry, as it may if spending decisions are controlled by the Makerere Administration.

A man after dreaming about acres of diamonds sold his land and set out into the world in search of his fortune. He went prospecting all over the world failing miserably sometimes or striking it rich only to squander all his wealth. Frustrated and dejected he returned to his village where he expected he could throw himself at the mercy of friends and family. On arrival at his old home he found it was a flourishing diamond mining enterprise fuelled by diamonds from his old plot.

Everybody except the dons of Makerere do not realize how much gold they are seating on.

It’s a stretch to compare Makerere with Harvard, but for illustrative purposes America’s oldest University has some interesting pointers.

In 2008 before the credit crunch Harvard had an operating budget of $3b a year. However the university managed an income of $9.3b the previous year of which only(!) $600m or just over 5% came from student fees. And we know Harvard’s student fees are not to be laughed at.

So where does Harvard get more than 90% of its income? About half of the budget is met by income from its $35b endowment fund – this was the value before the credit crunch, and then in order of size donations, merchandising, publishing and from licensing of patents the University holds. This is aside from the fees from hiring out their buildings and land or consulting. Meanwhile they earn about $1m a year from ticket sales when University teams are playing.

Yale is not very different with student fees account for just under ten percent, with the bulk of income coming from their own endowment and the medical services.

These vaunted institutions of learning do not create new revenue streams because they like to but because they long came to the realization that there was only so much they could charge students to enroll.

Makerere University’s intellectual properties (if it has bothered to license them at all) are worth millions of dollars if only their value can be unlocked for the benefit of the institution.

What Makerere needs is time-tested, entrepreneurial managers who can unlock the billions of shillings of assets that Makerere owns and controls.

But maybe we should not be too harsh on Makerere’s the same syndrom is coursing through the general society. When we have a need our first instinct is to look outside ourselves for help while we have all we need around us – as individuals, institutions and even as a country.

Makerere does not need handouts from government, in fact it is Makerere’s best interest not to need them.