FOR COMPANIES, TO GIVE OR HOW TO GIVE?

The current corona virus crisis has prompted a huge outpouring of corporate giving, a recognition that many will be hit very badly byt he slow down in the economy.

Initial giving was coordinated by New Vision CEO Robert Kabushenga and now being coordinated by the prime minister's office using the National Response Fund.
Billions of shillings in cash, goods and services.

Government's own initiative to provide some food -- maize flour and beans, to urban distressed kind of set the pace. One may argue about the procurement processes and amounts offered the recipients, butit was useful stimulus for others to start giving.

It was important that corporate Uganda decided to coordinate their actions in that way they would not suffer duplication and other uncoordinated troop movements.

According to the Income tax act companies can contibute up to five percent of their income to a charitable organisation that is set up to cause social advancement -- alleviate poverty, education, health among others.

So if a company makes a billion shillings in revenues it can contribute sh50m, which will count towards its expenses and therefore tax deductible.

Any amount beyond that threshold will not be tax deductible.

"Interestingly the US with its long philanthropic tradition allow individuals lee way to contribute up to 20% of their incomes and comanies 0.5% of annual sales. In Uganda individual donations are not tax deductible, which is a loss because in the US most donations -- seven in every ten dollars, are contributed by individuals...

The question of how much one company has contributed viz-a-viz another has been burning the wires. Reasonable concerns, if to those who much is given much will be expected.

The bigger question for me is the nature of the giving and whether it achieves the intended purpose of alleviating the affected persons suffering.

So telecom giant, MTN for instance have contributed about two billion shillings to the covid-19 effort. About half of it was in hard cash, the rest was in form of media space, help to National Water & Sewerage Corporation (NWSC) to provide water stands in water stressed areas of Kampala, support to the Uganda Red Cross and to fit and put a call center at the dispoal of the health ministry.

We shouldnt forget that MTN waived all fees sent on money transfers using its mobile money service, which must have run into a few hundred million shillings todate.

It Is an intersting breakdown because who is to say that the waiving of money transfer fees or the call center they set up of for the health ministry has not had a wider benefit than the water stands or the cash handed over to the effort?
It raises an interesting question of, beyond the photo opportunities, how effectiveis corporate social responsibility for the intended recipients?

Is it better to give in kind or in actual hard cash and allow recipients make the decision what to use the aid on?
This last question is an interesting one, take for instance the governmmnet food hand out, there are ways of thinking about its effectiveness, I list two.

The argument can be made that giving people food directly ensures that they will eat. And because the government is buying in such huge volumes the unit cost is so low that the shilling can be stretched much further.

So if as was planned governmnet is going to buy a few million kilograms of maize flour, the bargaining power that comes with  this makes it obvious they will not buy retail, at worst they will be buying ex-factory and even then can push for a discount.

To take the same amount and dish out to the recipients who will buy their maize flour retail, means fewer people will be impacted or at least each beneficiary will not get as much as if the flour was centrally bought.

"The other argument can be made that if you gave the recipients the cash equivalents they may not buy food, but attend to other needs that are more pressing....

Thankfully harvests were not bad last season and are expected to come in on target this season, so food shortages may not be people's more urgent need but health care or water or even transport maybe more urgent and the money can be spent accordingly.

This last part feeds nicely into the debate of how to raise demand so that businesses can get back on their feet quickly after the lockdown has been liftfed.

To lift the economy out of the last global financial crisis in 2008, the US government spent hundreds of billions of dollars propping up  companies. Their argument was that if the companies collapsed millions would find themselves out of a job and the economy as whole would come crashing down.

Critics say this was the biggest example of capitalist croniyism in world history. Jobs were still lost as company owners cut back on costs to repay government and get out from undedr its wings. The benefits of the bailout were concentrated among a very few poeple.

The alternative they argued would have been to give individual cash handouts, which would allow the beneficiaries to go shopping and shore up the companies anyway, with the benefits spread much wider.
The second is more populist and probably bettere economics anyway.

You dont look a gift horse in the mouth, but if corporate donation or governmmnet handouts are to go beyond making managers look and feel good they are serious questions that need to be considered.

And while we are still at it who is to say that police officer Maneno Ayikoru who donated her March salary of sh200,000 to the effort, isnt the most giving of us all?

GETTING BACK IN POST THE CORONA CRISIS

Last year US billionaire investor Warren Buffet came under criticism for holding on to cash instead of investing it.

At the end of last year he was seating on a $120b stock pile of cash—fourtimes the size of the Uganda economy, many times over the target he has set for his company Berkshire Hathaway of mainitaining at least $20b in cash.

The criticism came from some of his shareholders who, pointing to the stock market which was in the middle of a bull run, said he was costing them by seating in the lower returning cash.

"The 89-year old stuck to his guns, arguing that he could not see any companies selling at a reasonable discount and not attractive enough as investments, therefore he was happy to seat tight...

Months later the Oracle of Omaha has been proven right yet again. With the equity markets in a tailspin and many businesses large and small in urgen need of bailout, he will be the go-to-man when the dust settles.
And this is not the first time.

Before the global financial crisis broke in 2008 he was $40b in cash and criticism of him was mounting. One magazine even dared to ask whether Buffett had lost his touch.

He bailed out investment bank Goldman Sachs, conglomerate, GE, Bank of America and several other companies with multi-billion dollar investments.
Buffett not only survived that criss but thrived.

Which was the key lesson in Nassim Taleb’s book, Antifragile. He started out by saying  antifragile was not the opposite of fragile – to break easily. The distinction he said was the opposite of fragile, robust, would mean surviving in times of difficuilty but antifragile means thriving in times of difficulty.

The one thing I picked out was that to become antifragile, one has to build redundancy in their lives or endeavours, which can be called upon in time of distress. To make hay while the sun shines...

So Buffett has his Himalayas of cash, making his company Antifragile. At least more than most.

Most of us are not in that happy position. We darent even go back to business, if we have any business to go back to after this corona virus.

Not only did we not build any redundancy, but also we shall find that market behaviour has changed drastically, since our doors were last open.

For instance we might find people reluctant to spend, even the little they have. We may very well find that our clients have changed preferences for how they want to be served – home delivery as opposed to coming to your shop.

So how do we survive when the lockdown is lifted and we have to get back to our businesses. Here are a few suggestions gleaned from all over the place.

1. Get your books in order

For the more corproate companies they probably do this all the time. The Small & Medium Enterprises (SME) need to pay better attention to this. To get a snap shot of the business will help every part of the recovery process, from cutting costs, to work rationalisation, to which customers to focus on, to conversations with the tax man and your bankers.

This last group, your bankers are going to be critical to your survival in coming days.

Your banker can allow you an overdraft to meet your day to day bills only if he has good sense of the money flowing in and out of your business. Apart from the activity on your account his confidence will be improved by seeing your cashflow statements.

Banks lend with ease to those who don’t need the money – show strong cashflows, rarely to those who do...

2. Not time for pride

Related to the above you will quickly realise pride has no place in the recovery process. You may have to invite new partners who will lend you money or better still, take an equity stake in your business. Your pledge to keep the business in the family regardless of circumstances may have to fly out the window.

But for investors to get a good sense of your business and for you to ge the best deal possible they need to be able to assess the quality of the business, besides your slick sales pitch.

"Poor record keeping may mean you dont get money at all or worse still, you get less than your business is actually worth...

The story is told of the  man in our town, who lost his company because he had billions owed to the tax man that were not reflected in his books. The potential buyer after due diligence pointed this out and lowered his offer substantially, in order to take the tax arrears off the founders’ hands. The founder’s  stubbornness not to sell at the much lower price cost him his business and the money the prospective owners offered him.

Pack your pride away and get on with the business of surviving. Survive first and make money later, said George Soros.

3. Cut fat, not muscle

My man Buffett says alarm bells go off when he hears a business owner or manager saying his strategy is to cut costs. Cutting costs is like breathing, you dont go around saying I am going to breath, you do it every day or you die, he said.

The robustness of one’s cost managment is tested during such times. The challenge is that if one hasn’t been disciplined in good times, when the bad times come, in the panic to cut costs more often than not, even the core of the business, the muscle, is affected....

You have to be clear what the core of the business is, and most likely that part of the business that will keep you alive the day after. Clarity on this front will cut through the politics and sentimentality, when it comes to hacking away at the fat.

4. Blow your ...uhm?  Whistle?

Why do people buy from you? Because you have a good product? Because you are good value for money? Because you are convenient?

All of the above maybe true for your business, but they will count for nothing if the market doesn’t know about you.

"Now more than ever communicating about your business to existing and potential clients is going to be critical...

Get in touch with your clients and inform them you are back in business, reach out to new clients to tell them about yourself.
This is doubly important now becausein the lock down we have become wed to convenience. Why should i come to you if you cant deliver to me, Is going to be a question many will have to answer in coming days.

It need not be the end of the world because your business is not Antifragile. But you will have to hit the ground runnig to survive.

HEALTH WILL BE THE “NEW” ASSET IN THE POST CORONA ERA

On an intellectual level we knew it all the time, the state of a nation’s health determines the productivity of the population.

The less incidents of illness, the less down time or absenteeism in the workforce. It follows therefore, looking at humans as units of production, more work will be done across a given time.

In a pre-corona era it was ok to tallk about dealing with illness after the fact. Treatment instead of prevention. In fact the global health system is geared towards treating rather than preventing illness.

That will have to change. The major line of defence against the corona virus, like almost any other virus, is a robust immune system. An emphasis on good nutrition, proper hygiene, sanitation and regular exercise are good preventative measures. And that even if the virus gets past ones best preventative measures the body will be able to fight back and, God willing, prevail.

On a global level how will this change the way government’s budget and companies view their balance sheets?

The Corona virus has exposed global health systems. The response time to the pandemic has been found wanting.

Health surveillance systems were caught flat footed and even when they woke up to the danger, they were slow to respond in  a coordinated and coherent manner.
And when the disease started tearing through the population our infrastructure – hard and soft, was found lacking.

There are video clips of Bill Gates that have gone viral, of him warning years ago that the next big challenege will be from microbes and we are not ready.

Around the world health systems response have swung from incompetence of poorly resourced public facilities to the mercenary indifference of private health care. Neither coud rise to the occassion when they were called upon and in future this will have to change.

On an individual level we have become addicted to processed, convenient foods that have pushed instances of obsessity to historically high levels, caused a pandemic of non-communicable diseases and generally made us all vulnerable to opportunistic infection.

It is clear that health has to become a bigger priority in national budgets, and not only about building health facilities but also investments in educating health workers, research and development and health cover for all have to be prioritised to fend off the next pandemic.

In companies, health will have to find a place on the balance sheets and health cover will assume greater importance. Exercise facilities will not be an expense item the bean counters scratch off the budget.

About 15 years ago I visted a bank’s headquarters and was shocked to find they had a world class health & fitness center, complete with gym, pool, indoor running track and squash cort. I asked how they justified the expense to the accountants and the human resource manager said they had enough evidence that members turned up to their desk earlier or stayed longer and could link that to higher productivity. They beat the traffic by coming in earlier or leaving later to use the gym, in the process pulling their own weight in the organisation. And that was before they showed that gym members were the least off on sick leave.
The losses to the world economy from the corona virus are going to run into trillions of dollars. That is the accounting description. In real terms it will mean lost jobs, diminished livelihoods and death.

You can place a nominal value on a person life if you count him as a unit or production of consumption. But that is not even half the picture of his economic output, not to mention his contribution to the economic out put  of the other people around him, if he keeps healthy.

How do you value the loss of a spouse who through holding up their part of running  the home allows the spouse to perform optimally at work? How do you value the contribution of  a well child to mummy’s output in the ofice? If a worker can still get work done despite illness how much more would they produce when in perfect health?
I think even on the most cosmetic of levels that accounting is, a case can be made that companies that pay attention to their staff’s health are more productive to those that don’t – even if you use the measure of profitability per staff member.

The bean counters may come around, but I think it is too soon to say.
Corona is not about to run its course, what with stories of reinfection emerging from China, it will be around for a while to come, at least until the end of next year if a vaccine is out in the next 12 months.
By that time i can guarantee you health, more than not being sick,  will occupy central position in  our consciosness.
It is not the first time in human history. The global improvements in hygeine and sanitation were a response to the  pandemics that  swept through Europe in the middle ages.

The rich thought they were insulated from the filth and squalor of the lower classes, before these  became epicenters of genocidal plagues and the rich realised they had to uplift everyone’s standards if they were to survive. And that is how public health budgets took on greater importance in western Europe.

Will corona do the same for us? Let us wait and see.

Wash your hands!

CORONA WILL REVEAL THE NAKED LEADERS

Billionaire investor Warren Buffett says that, “You will know who was swimming naked when the tide goes out.”

Buffett is usually referring to companies, which look solid in good times and when a crisis hits they are exposed as shells, riven with debt, no reserves and bloated with unnecessary costs.

But at the heart of it is a caution to “leaders’ of any sort at every level.

"As long as there is no crisis you can look good, but when all hell breaks loose the boys will be seperated from the men....

The corona epidemic is helping to sieve the grain from the chaff.

At the time of writing this, the US was fast reaching the 200,000 corona infections and had crossed the 5,000 death mark.

The US shouldn’t have been here but for lack of leadership.

Initially US President Donald Trump dismissed the impeding crisis as fear mongering by his political rivals, then he announced that chloroquin, the anti-malarial drug,  would sort it out and just last week promised that the pandemic will be handled in time for Easter.

The only reason he, unlike UK Premier Boris Johnson doesn’t have the Covid-19, the disease caused by the corona virus,  is that he has a particular aversion to shaking hands.

All the while his political base and the myriads who like to stick their heads in the sand, took him at face value and continued with life as usual, including throwing coming out spring parties on crowded beaches, just as the full extent of the pandemic was hitting western Europe.
Now the US’ infection rate is rising as if on steroids.

The challenge with the Corona virus is that full blow symptoms show after two weeks but a victim can have been spreading the virus for at least a week.

So the numbers we are seeing today are a the result of the past sins.

But back to the issue of leadership.
The district chairman of Bunyangabo this week showed us what our typical understanding of power is.

"Power, the ability to influence people and events, is a useful ingredient of leadership. But its most manifest sign in Uganda is in the people who have power’s ability to break the rules, to be above the law...

Forget the mealy mouthed self-help gurus who counsel “servant leadership”, our leaders measure their place on the ladder by how much they can get away with.

This includes powerful people breaking their loved ones out of quarantine, ignoring isolation procedures and the winner – seating in a hall with hundred others as parliament did last week, to complain that the governmnet is not taking their safety very seriously!

The Bunyagabu chairman would very well have got away with his crime, were it  not that he was recorded on video slapping the Resident District Commissioner (RDC) who was trying to enforce a presidential directive.

By the way the RDCis the president’s direct representative in the district, so to slap the RDC means …?

Country’s around the world are having to respond to the  pandemic, their ability to do so depends on how they have managed their affairs, how leadership has been exercised.

Western Europe’s economies are committing billions of dollars to keep people in work, offer some relief to those who are out of work and the most vulnerable members of their society.

They can afford to do this because they have built up credible reserves, kept their debt levels under co ntrol and built local resource mobilisation mechanisms to finance their ambitions.

"For a poor country like Uganda hopefully this pandemic will finally drive home the wisdom of a more determined drive to build tax revenues and mobilise savings....

Believe it or not we are not the worst. Some of our neighbours apart from being poor are burdened with huge open market debt, that apart frrom the grandstanding they will be hard pressed to live up to the pledges to their people.

The danger with the corona pandemic is that its not clear when it will come under control. As long as there is a corner of the globe that still has infected people, we will always be in danger of a re-emergence.
A vaccine may provide hope but realistic estimates are that this will not happen before the middle of next year.

"Stories of reinfection in China offers no solace. It was hoped that once contracted the virus some immunity may built up against a re-occurence but that does not seem to be true...

What this means is that the leaders who fall short will continue to be exposed, because to battle the corona pandemic will require consistent, unflinching and resolute leadership not flashes of brilliant grandstanding.