THE LESSON OF ALIBABA FOR OUR BUSINESSMEN

Last week Chinese E-commerce site Alibaba sold its shares on the New York Stock Exchange raising more than $20b or equivalent of the size of the Ugandan economy, in a sign of things to come.

In the same week I sat in a meeting where the point was made that, how is it possible that National 

Social Security Fund (NSSF), with its sh4 trillion war chest is investing abroad when local businessmen are crying for a source of cheap capital.

On the one hand the Chinese businessmen in moves to get wider international acceptance are selling their shares abroad, while here our biggest financial institution is investing abroad.

For Jack Ma – the founder of Alibaba, which in market capitalisation is bigger than more established e-commerce sites Amazon and ebay combined, to be able to sell his shares in US he had to organise his company to be acceptable to investors there.

Could he have raised the $20b in China? Most probably. But with wider international acceptance he can tap into a bigger pool of finance, human resource and innovation. Remember that name, Jack Ma, because with the Chinese market tied down, expect him and his company to be jostling for space on the front covers of the leading business publications for years to come. He is 50.

NSSF argues that it has to invest abroad because they are few investment opportunities at home. Before you drop your mouth and slap your head at the apparent absurdity of this claim lets examine look at it again.

Using a rough calculation if NSSF paid its savers last year 11% on their money, they need to make more than that in profit on their sh4.2trillion hoard. They would need investments that would give them double digit returns on their money at least.

"NSSF is not a charitable organisation and as a saving member I would expect them to be very exacting in how they choose their investments and partners...

Imagine if NSSF stood on their street corner and announced they had a trillion shillings to lend out or invest and can people present their proposals. Say they just want to deal with just 100 investors so they would be willing to invest at least sh10b or $4m with each investor. Whereas the line may stretch around the corner onto Kampala road, the short list of promoters may not fill the Fund’s reception area.

This is why?

NSSF’s mind set is(or should be) locked on the Return on Investment or how quickly will it get its initial capital back. In making this judgement he will evaluate the quality of the management, the potential for growth in the company’s market, the competitiveness of the applying company in that market and whether they are getting the investment at a fair value.

These parameters are important in determining what to invest in, especially since NSSF is dealing with people’s pensions or retirement funds. It is unlikely and shouldn’t be, looking for the riskiest propositions, no matter how high a return they promise. So straight off NSSF is not going to be lending to startups it will be looking for solid, established companies that can absorb sh10b and show a return in relatively short order.

In our example, to be of interest to NSSF a company needs to be able to absorb a sh10b injection. With that you knock off 95 percent of our companies.

But even for those remaining five percent they may still have a few more hurdles to jump.

NSSF is not a bank so does not lend to the general public. So interested parties would have to sell shares to the Fund or issue a bond, a form of borrowing. To do either they would have to get their books in order and their books and processes audited by a reputable firm.

In saying there are few projects to invest in what NSSF is saying is, it has looked and not found enough businesses in Uganda that are willing or can jump through all those hoops to interest them.

 Whose fault is that?

Back To Jack Ma and his Alibaba. By listing in New York, Ma’s message to the world is that my company meets the highest known standards of business practice. He has entered an exclusive club of businessmen and businesses that can tap resources from around the world. He did this because he wants to play on a wider stage than China and that is the cost of entry.

NSSF is not a charitable organisation and as a saving member I would expect them to be very exacting in how they choose their investments and partners.

You are a Ugandan businessman, thank you very much. But you need more than proof of citizenship to make you interesting. If you do not live up to best business practice I really don’t want to see my money thrown down your black hole.

Get your house in order. Show some ambition, at least grow out of Kampala for God’s sake. Then you can begin to lay claim to NSSF’s billions.

THE SHE CRANES THE LIGHT AT THE END OF THE TUNNEL?

A fortnight ago our national netball team won all six-matches in a tournament in Botswana, to qualify for the sports’ World Cup set for Australia next year.

The achievement was noteworthy on several levels. To begin with, qualifying for the World Cup in any sport is not something to thumb your nose at. Secondly, this team was cash strapped to the point that in some instances they did not have drinking water to slake their thirst during matches. And finally they have done it without complaining, they have only begged for a chance to show their stuff.

Casual observers of sport look back with nostalgia to the glory days of sport in Uganda – The Idi Amin era. It is safe to say that the achievements of our sports men and women in the 1970s have not been equalled since.

This shouldn’t come as surprise in for a number of reasons but more importantly that these group of athletes came of age in the 1970s after a solid grounding in their formative years in the 1960s. In a sense the success of the Amin era was built in the 1960s when things were more stable and there was a vibrant grassroots network to recruit and develop their talent.

Ofcourse from the 1970s this foundation was decimated and received little to no help in the subsequent decades and continues to benefit little even today.

So how do you explain this seeming resurgence in our national teams?

 The She Cranes aside our long distance athletes are making people seat up and take notice, our boxers managed two medals in the recently concluded Commonwealth Games for the first time since 2002.

Anyone who has ever attempted mastery of a sport knows it takes time and perseverance. These will count for nothing if you do not have the facilities. And facilities will count for nothing if the environment does not allow you to use them effectively.

As a nation we have added little to the stock of sporting facilities since the 1970s, apart maybe from Namboole Stadium.  A white elephant.  No athlete can point to the Chinese built facility as the source of their success since it was opened in 1997.

"So it is kind of surprising that we should be celebrating any kind of sporting success at all. And it is not surprising therefore that the sports that are seemingly breaking out are sports, which require little or no equipment...

If anything we are losing our facilities to land grabbing developers and general indifference.

In addition not only are our sports getting no funding to speak of from government,  their respective managements have been unable to rally the kind of corporate support that  can not only ferry them from tournament to tournament, but that can also sponsor a robust grassroot effort that would guarantee a pipeline of talent into the future.

So it is kind of surprising that we should be celebrating any kind of sporting success at all. And it is not surprising therefore that the sports that are seemingly breaking out are sports, which require little or no equipment.

But it also means that these successful athletes are outliers of the outliers. Exceptionally talented individuals the type of which come around once in a life time. In times of extreme stress it is only the hardiest that come out the other side. So in this environment of extreme deprivation it’s only the Kiprotichs and Kipsiros that will thrive.

These are not the circumstances from which generations of world beating athletes are nurtured.

One can expect these athletes may trigger some enthusiasm for their respective sports, but unless they keep stoking the fire year after year by winning, the initial bursts of excitement will die out and be relegated to the history books.

So what to do?

Forget about government to begin with.

Secondly our sports organisations need to move away from voluntary associations to more professionally manned institutions. What comes first, the money or the management?

It’s not a chicken and egg situation. Money follows good management. In this case good management would show itself through structured administrations, able to raise funds – through sponsors or events, to promote and develop the sport.

My favourite example is the US, which while it does not have a sports ministry is the greatest sporting nation in the world. The various sports governing bodies, while they may be overseen by elected officials, the day to day running is in the hands of professionals.

Of course governments can play a critical role in sports.

In continental Europe the central and local governments feel obliged to finance community sports facilities and the development of sporting talent. As a result their sports stars tend to be less elitist compared to those that come out of the US. This system has worked in Germany, France and Scandanavia.

These are all functioning governments which carry out their other responsibilities like providing education and health services with a high degree of efficiency.

Back to the She Cranes. They are an aberration. Given the above description the probability of one world class athlete emerging is infinitely small and the chance of a whole team of champions even slighter.

Enjoy the She Cranes while you can. They are that once in a life time team you will tell your grandchildren about.