UGANDANS' ADVICE KIPROTICH SHOULD IGNORE

Our Olympic gold medalist Stephen Kiprotich would not lack for advice on how to take his career forward or  spend his millions if he asked for it on our street.

Ideally Kiprotich should be looking to do two things over the next five or so years, the most productive years of his career. One, to maximize his earnings, preferably through winning races but also through signing some lucrative endorsement contracts. And secondly, investing the larger percentage of  his earnings to tide him over a long retirement seeing as he will retire in his thirties and judging by the advanced age of his parents. Here is so me of the advice Kiprotich will best be advised to steer wide off from the bad to the worst.

#7 Buy/build a big house

A house just adds to the expenses in your life, but we waive these aside by consoling ourselves that we are escaping rent, when often times the cost of maintaining your own house is more than the rent you were paying previously. Sure Kiprotich’s earning power has just undergone a quantum leap, but that does not mean his expenses should follow suit. At the height of his career former boxing champion Mike Tyson bought himself a $30m (sh75b) house that was far too big for a single black man. The palace cost hundreds of thousands of dollars to maintain, several tens thousands more in taxes annually and more thousands in manning. When his career took a nose dive the castle was auctioned off to pay his debts incurred sustaining the mansion. The reality is that assuming his career continues on its current trajectory Kiprotich will be lucky to spend a four consecutive weeks at home in the next five years. A modest three-bedroomed house should do the trick for now.

#6 Buy a farm

The investment process is about finding the best return for your money with the least possible risk. His rural background will probably seduce him to buy himself a farm stock it with cattle and grow maize, but if the truth be told most farms are loss making, income sapping vanity projects that say more about the owners ego than their financial benefits. Kiprotich can well afford a few acres of land in his home area but let him be under no illusions that he will see an adequate return in that enterprise while his career is still on going. Let him see it for what it is a sentimental trophy to assure the villagers that he has arrived.

#5 Invest with every Tom, Dick and Harry

You can rest assured Kiprotich has already got people of all colours and shapes making a beaten path to his door with all manner of business proposals. As far as I know Kiprotich is a runner and not an investor. He is unlikely to match the well timed decision to overtake Kenyans Kirui Abel and Wilson Kiprotich with only a few kilometers to the end of the Olympic marathon a week ago if he turns to investing today. He will be best served by finding himself an experienced manager who can take care of the business side of his career while he does what he does best.

#4 Move to Kampala

There will be those whispering in his ear that he should move to Kampala. The facilities are better, the housing is better, there is more to do. These will be talking in their own selfinterest with Kiprotich in Kampala they will have easy access to him, more specifically, easy access to his millions. What has got Kiprotich to this point in his career is training in the relative anonymity of the Kenyan rift valley and he should continue to do so. Kampala has done nothing to advance his career and he owes it nothing.

#3 Buy car(s)

The boy can buy himself a car or two or even three straight off the assembly line if he chose to. He can throw in a personalized number plate, KIP RICH maybe, for good effect. To state the obvious his is the Olympic champion and he does not need the latest model of Mercedes or BWM or …. Whatever to validate him. He should habour no need to impress upon the public who he is. He is a young man who if his career continues to rise will not be in Uganda more than half the year, a sensible four wheel drive to navigate the treacherous roads of his home district. The money he would have spent buying more fancy cars can be deployed to make more money. More on that later.

#2 Retire

The man has won a Gold medal, hundreds of millions of shillings are being thrown at him by a grateful nation, why should he continue to suffer in training? Isn’t this – securing his and his family’s financial future what it was all about? “I want to be a legend” he said before he flew out to London. That is what sets Kiprotich apart from the rest of us mere mortals, groveling in mediocrity. Going by Abraham Maslow’s hierarchy of needs Kiprotich is beyond hunkering after basic needs, personal security and need for belonging at worst he is about building his self-esteem  and at best self-actualizing h is full potential as a human being. Olympic gold medalists are made of sterner stuff than most Ugandans can even comprehend. Kiprotich is not about the money and he should keep that way.

#1 Have a blast

When Ugandans get money they think of how they are going to consume it first. The temptation to start when Bad Black left all will be overwhelming for Olympic Gold medalist Stephen Kiprotich. And there are hundreds even thousands of Ugandans who can help him spend his money. The amount of money pledged and given to Kiprotich in the last seven days is more money than many of us earn in a year leave alone in our careers, but he should not be under the illusion that there is such a thing as money that cannot be finished. Kiprotich is a runner the sooner he gets over this whole fanfare and gets back to training the better for him, and us as a country.

UGANDA PENSION LIBERALISATION LONG OVERDUE

The Retirement Benefits Sector Liberalization Bill 2011 is winding its way through the arduous journey of becoming law.

Among the proposals in the bill are that if contributors have saved for ten years will have access to 30% of their savings to leverage to buy homes.

So if after ten years of work one has saved sh10m, the sh3m can be used to put a downpayment on a mortgage.

This and proposals to lift the NSSF monopoly for mandatory savings are part of long overdue initiatives that will go some way to raising the saving rates in the country and growing the pool of long term funds needed to fund development projects.

As it is now workers in companies that have more than five employees are mandated to contribute five percent of their salary with the employer contributing twice as much into NSSF. While not discouraged few employers have an additional providence scheme for their workers because of the costs of doing it.

Under the new proposed law employees will still be mandated to save for their retirement but not necessarily with NSSF.

The introduction of competition in any sector is always a welcome thing – there is more incentive to innovate which increases efficiencies, pushes down prices and boosts up take of the product or service.

Uganda badly needs to build up its savings rate which is less than ten percent of GDP. Beyond providing long term savings, one can expect the high lending rates we have become accustomed to, to come under pressure.

The logic is simple if we raised national savings the banks which hold this money would be under pressure to on lend it to their clients. Good banks make their money from lending, in the absence of the credible lenders they lend to government. Government while being the safest borrower, offers lower interest than the private sector and also has finite appetite. If government options are exhausted banks will have to find other ways of lending more to the public.

It is not by mistake for instance that in the last ten years there has been an explosion of lending to individuals, increased savings deposits in the bank have a lot to do with it.

The proposal to allow a portion of workers’ contributions as down payment for mortgages could act as an incentive to spur savings. Government could go even further by allowing such savings to be tax exempt and giving waivers for additional savings beyond the mandatory requirement up to a limit.

In addition this one initiative can spur a housing construction boom as the demand for house can be expected to jump progressively over the years.

It seems like a no-brainer. Increase savings and hence available capital for industry, production is boosted and more taxes are collected.

Beyond that, the economy has an urgent need to bridge the gap in power generation, transport and communication networks. These gaps are holding back continued economic growth. To finance these we need long term financing the type of which around the world is financed largely by pension funds.

It really isn’t nanotechnology, what would need a rocket scientist to decipher is why it is taking us so long to get this piece of legislation out of the way.

Economics aside, as a guarantor of national stability nothing beats a property owning population. With a long term stake in the economy, property owners are like to resort to more peaceful means of conflict resolution than war, looting and wanton destruction.

Of course regulators will have to ensure that a lot of our savings are not expatriated but are mostly used to finance domestic projects. However it might turn out to be a disincentive if you tie the investors’ hands with such provisions when there are no local investable projects.

The challenge then for our business is to be set to absorb this money when it comes.

It is hard to overemphasize the need for long term funds in the economy and how crucial a more efficient pensions sector would be in attaining this goal, but the ball is clearly in our hands  for us to run with it or drop it.