IF UGANDA GOVT MUST GO INTO BUSINESS IT MUST THINK LIKE A CUSTOMER

Last week I happened upon a commentary by Kenyan economist David Ndii in which he, in not so many words criticized planners for thinking and acting like simply processing commodities was the way to add value to them.

Using the experience of coffee he demonstrated that roasting coffee is not necessarily where the value is created in the coffees you buy off the shelf.

He complained that the problem with planners is that they operated from the supply chain side and not from the value chain side, dooming many of their well-intentioned plans to death on arrival...

Ndii made the distinction between the two by explaining that supply chain analysis would involve thinking from the input side – availability of raw materials, the production process and getting it out to market, while value chain analysis would involve thinking from the final consumer’s angle and working backwards.

There is a world of difference between the two ways of thinking and their eventual outcomes.

I have abbreviated his commentary – and very badly I suspect, but with this information one probably can see why governments are bad at business.

The key motivation of governments is to stay in power, everything else has to define itself by how it meets that requirement. Given the short political cycles, governments are often keen for quick wins which don’t have to necessarily translate into service delivery – service delivery, believe It or not, may not be key to them staying in power.

Hence their preference for supply chain thinking. Just build the classrooms, clinics or whatever as tangible, physical evidence that we are working.

The businessman on the other hand is thinking, or should be, about the end consumer of his product or service. The theory that if you build it they will come, is a myth as any businessman will tell you.

Last week a report run that the lauded Soroti Fruit Factory was not operating. This was weeks after the management said they needed sh35b from government to pay off farmers and for use as working capital.

So all the fanfare of the opening was clearly to impress President Yoweri Museveni.

Even more bizarre in 2016, MPs visited an ice plant in Buyende near the Bukungu landing site in eastern Uganda. Government had splurged sh2.4b on an ice plant to fishermen preserve their catch.

The plant had been completed in 2011 and had not produced so much as an ice cube because it was not connected to the grid. I wonder whether it is working now.

When we joke about uncoordinated troop movements in government isn’t it that they are stuck in this supply chain thinking? Can you blame them given how governments think?

You see it too in the relaunch of Uganda Airlines. We are celebrating because we have got two planes – again supply chain thinking. If its promoters thought from the end consumers’ perspective they would do things very differently.

You see it with the Kiira Motors Corporation, whose stated aim is to commercialize a venture that started as university students’ assignment. Setting up an assembly line, never mind the viability of the enterprise as a standalone project, if we thought from the value chain side of things we would do the project very differently.

"All the people manning these projects are not stupid people, far from it, but clearly they have been caught up in government thinking...

It is not rocket science and makes the difference between success and failure for these projects. Governments out of some false pride may try to sustain these projects but the laws of economics eventually prevail and they have to throw up their arms in surrender and let them go.

The problem with this is by the time they give up they will have sent billions of much needed cash down the drain. Monies that would have shown a much better return if funneled into education, health, infrastructure and even security. (Already government has reneged on a agreement to boost teachers salaries)

The promoters of these projects tend to couch the rationale for these projects in nationalistic rhetoric and pay little to no attention to the value chain.

Let us assume that the planners are pushing these projects out of some honest omission, that they carry out no value chain analysis, what would we like to see so that these projects --- if the government really must do them, can have a decent chance of success?

"They should focus on the output they want to achieve and work backwards...

So in the case of the fruit factory in Soroti what do they want to achieve? Processed juices that can be marketable locally and abroad. Do they have to be the ones who build it? No.

In the case of the ice plant in Buyende what do they want to achieve? Higher incomes for fisher men in the open market. Do they have to be the ones to build it? No.

The Kiira Motor Corporation? Where is the market for the expected vehicles? Can we service those markets competitively and sustainably? How can we do it more cost effectively, because it’s not as if we have money flowing out our ears?

Uganda Airlines? We want to have more visitors to our borders (support tourism)? Do tourists come because we have a plane or because there is something to see in this country? Is the airline the best use of our money to achieve the stated aim?

Of course this is thinking from a business perspective, but we know, governments have weightier issues to deal with than business!