OUR BUSINESSMEN NEED TO BECOME CORPORATE

Last week warring factions in South Sudan signed an agreement to cease fire following weeks of fighting during which the advantage see sawed from one side to the other.

There a lot of Ugandan businessmen are waiting with bated breath for the resolution of the conflict so they can jump back into one of the most lucrative but lawless markets in the region.

Among Kampala's chattering masses there has been criticism of government, that they aided the then rebel SPLA against the Khartoum government but Uganda has derived little commercial benefit from the world's newest nation. The feeling has been that Kenyans had jumped in and snapped up all the prime business opportunities.

The outbreak of fighting in December may have changed that perception dramatically. It came as a surprise that anything from 20,000 to a million Ugandans were actively involved in South Sudan in as diverse roles as boda boda riders to humanitarian aid workers.

We knew through anecdotes that our northern neighbours were buying up our produce while still in the fields, but we didn't know that our northern neighbours had now overtaken Kenya as our biggest trading partner accounting for than a billion dollars in exports in 2012, with some estimates suggesting that figure was set to double in 2013.

Officials estimate that continued instability in South Sudan will account for up to a percentage point of economic growth this year.

Suddenly the importance of south Sudanese is enough to make us ignore their occasional uncouth behavior.

Suddenly it doesn't matter too whether our businessmen affected are Baganda, Banyankole, Japadhola or Lugbara, they are our business people and can we evacuate them and we sympathize with the losses they have incurred.

A national interest can only be forged it seems, when we think of ourselves in relation to other nations.

You want to tread carefully on the issue of commercial interest dictating foreign policy but when you think about it, economic interests do not respect tribe or creed and are more durable than other transient differences.

It is interesting too that while happenings in south Sudan dominate our front pages they do not exercise the Kenyan popular thinking as much. The difference maybe in the way our respective commercial agents have operated in south Sudan.

While in Uganda's case it has been individual businessmen striking out on their own, trying to make speculative gains from trade. In the Kenyan case it has been more the case that huge corporate entities, banks for example, which have pitched tent in Juba. Probably explains the difference in reactions to the crisis by our respective governments.

Our businessmen may learn a thing or two from going the Kenyan way though.

In operating as companies rather than individuals they can scale up their operation to take advantage of bigger opportunities, their size would be impossible for politicians to ignore in Kampala and therefore take safe guarding commercial interests more seriously but more importantly, spread the risk of doing business among more shareholders ensuring that in the case of business failure the loss is not as disastrous to the individual businessmen.

Our businessmen can not get away from it. To take on the new competition for the region's opportunities, they need to get more organized. At very basic level they need to stop operating as individuals and go corporate.

The Vasco da Gamas and Christopher Colombus when they set out to explore for alternative routes to Asia, created corporations to support the endeavor spreading risk and ensuring that even if one mission failed they could finance others in the future that hopefully would recoup earlier losses.

Of course the challenge of operating with other partners is that it will take more intelligence, patience and sacrifice to manage shareholder expectations. There is bound to be a steep learning curve for our businesses but lessons they have no choice but to learn.

Its unlikely that south Sudan will remain unstable for long, but for a long time before proper structures are in place it will always be a high risk environment to operate in. 

Once beaten twice shy, we cannot ignore the market but our businessmen need to think more about covering he downside in future forays north.

THE FORGOTTEN CONNECTION BETWEEN AIDS AND CORRUPTION

The causes of corruption are many and affected by the peculiarities of the place and moment but a combination of stagnating university enrolment in the 1970s and 80s and the AIDS pandemic may have conspired to accelerate the theft of public funds.

In 1965 about 900 students were enrolled at Makerere University, this jumped to 2,581 in 1970 and then to 4,045 by 1980 before doubling again to about 8,000 students at the beginning of the 1990s.  Over the next decade enrolment more than tripled to just under 27,000 in all universities and before ballooning to more than 200,000 in the more than 30 universities nationwide. 

The eight year reign of Idi Amin and the contracting economy easily accounts for the slow  expansion of university enrolment in the 1970s. This continues into the 1980s when there were greater priorities than pandering to pampered students at the Makerere.

"The Amin years reduced the aspirations of the average Ugandan to that of bare survival, higher values were sacrificed at the altar of expediency and a consistent assault on the moral fibre of society was opened...

The insecurity drove many of the elite into exile, if it did not kill them first.

In the 1980s in addition to the general insecurity, the AIDS epidemic reared its head decimating more of the middle class. The young and virile students at Makerere University, which was one of the most liquid communities in Kampala at the time, was easy prey for the AIDS pandemic.

Apart from the low enrolment figures, with graduating classes of less than a 1000 students at a time upto the end of the 1980s, in hindsight a few students from the era report a difficulty in accounting for all their classmates many of whom are dead – casualties of the insecurity of the time, felled by AIDS or marooned abroad.

It is no secret that some of our wealthiest citizens today benefitted from the chaos and lack of formality that begun in the Amin era and went on into the 1980s. But many of these forwent a formal education for the streets and to their credit, were able to come out the other side better off than they went in. Some who failed to adopt to an increasingly formal economy have fallen on their swords and remain in the realm of legend.

For the young graduates coming out of Makerere in the 1990s this posed a dilemma. On one hand they admired and marvelled at the fortunes of some of these mafuta mingi, but were unable to join them in the unpredictable world of business, out of some mistaken sense of superiority or inadequacy at their ability to operate in an area that did not operate according to the text books.

On the other hand the ranks of their predecessors at the university were terribly thin and they were few people who through long and diligent service had grown sustainably wealthy, to look up to.

It did not help that the new rich in town provided no honest, credible or sustainable template for wealth accumulation. If anything they made being “sharp” and leveraging position to accumulate wealth, an acceptable endeavour.

With these three contradictions, 1990s graduates aspirations to wealth lacked proper bearing and is it any surprise that they are the ones that fill the docks of the anti-corruption court today.

Some people have written off the current generation of middle level managers as lost to the corruption bug and look forward to the next generation of university graduates – the class of the 2000s to restore some sanity to the situation, but who are their role models?

Fortunately jobs are better paying than they were in the past, allowing people a living from one job.   

This only reduces the incentives to mass prodigious amounts of wealth but it is a start.

Seeing as we can’t quarantine all our corrupt – actual and potential, some other compulsion has to come into play to stop this problem dead in its tracks.

I have my thoughts on what those maybe but we will keep that for another day.

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!!!!

RETIREMENT IS KNOCKING LOUDER AND LOUDER

Last week I celebrated my 42^nd 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 30^th 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...