I HAVE A BUSINESS…WHAT DO I DO AFTER LOCK DOWN?

In the last seven weeks or so economic activity has come to a standstill as a result of the lockdown.

The restrictions and movement and congregation has meant businesses have been forced to shut down and the more vulnerable businesses, those in dying industries or carrying too much debt will not survive.

It will be brutal.

Tips gleaned from several businessmen and all over the place suggest this need not be the death knell for our businesses.

Here are some tips for businessmen to survive an even thrive when the lock down is lifted.

1. Call in the goodwill you have built, if any

The biggest problem for all businesses to begin with is working capital, in simple terms are you making enough money to pay off your day to day bills.

Revenues collapsed to zero or near zero in recent weeks, while liabilities – rent, salaries,  utilities continue to accumulate.

"No doubt you are going to have to take a panga to your costs to match this new reality. But that might not be practical all the time. 

Say for example you have a workforce of 10 people to run your shop, factory or whatever business you have and to service existing contracts you need all hands on deck, laying off people may not be wise, may even be detrimental to the long term health of your business.

This when the goodwill you built up over the years with your landlord, bankers, suppliers and even workers is going to come in handy.

The hard conversations have already begun. Can the bank allow you not only a restructuring of your debt but also a facility to improve your working capital? Can your landlord allow you to pay your rent arrears over a longer period of time? Can your suppliers give you goods on credit for longer periods than previoulsly? Can your workers take a pay cut, allow daily allowances rather than a pay check, unpaid leave or work longer hours for less pay?

What about your shareholders, can you go back to them and ask for more money. Based on the returns you have been giving them will this be like detoothing a leopard?

All these negotiations will depend on what your relationships have been like in the past. If you have accumulated enough good will, people will give you the benefit of doubt, trusting that you will make good somewhere down the line.

2. Cashflow is not everything, its the only thing

The say profit is an opinion, cash is fact. Given the challenegs outlined above you have to hit the ground running. Sales have to start happening on day one.

"The key to increasing sales is communication. Do people know you are even open for business? Do they know what you are selling? Do they know why they should buy for you?

Invest in improving the communication around your good and service. If no one knows about you, who will buy from you.

Good customer service before the lock down will ensure word of mouth endorsments. But that is not enough.

When things were good you did not need a marketing and advertising budget, now your survival may very well depend on it. This will what will drive revenues, bring in the cash that will improve your working capital position. 

3. Your people are your business

When things are good it i strue you may have become overstaffed. A lot of dead wood hanging around. So the temptation to look at payroll as the first way to start cutting costs is a tempting one.

But this should not be done in isolation of an understanding of your core business. The lady at the till may look like an easy target but her customer service (her smile?) maybe what brings in the paying customers. Removing low margin goods from the shelf may backfire because they are what draw the customers in to buy the high margin stuff. The administrative assistant may seem useless (we all type our own letters these days) but he maybe the one who holds everything together, allowing the rest on you to focus on the “important” stuff.

"Your people are the frontline of your business, you treat them shabbily they treat your customers shabbily  and that will be the end of your business...

4. Back to basics, the business gets paid first

When you are starting a business everybody – the supplier, the banker, the workers, gets paid before you, the owner gets paid.

As things got better you started earning more from the business. These are not normal times we are  literally back to square one. A mindset adjustment will be needed.

Chinese billionaire Jack Ma said in this year the purpose of every business will be to survive. Grandiose schemes of growth and expansion are secondary, at worst, will have to wait.

"Its back to basics facilitate sales through marketing, watch your costs  like a hawk, build up reserves by taking less out of the business, all the while maintaining a long term perspective. ..

5. If all else fails ....

In respect to that last observation this lockdown  has thrown up some painful home truths. 

Maybe you may have to consider a complete reorientation of the business, your business model doesn’t work anymore. 

You may have to attract new investors into the business, never mind its a business that has been  in the family for generations.

You may have to forgo that prime location for a cheaper  one to stay alive.

And if all else fails you may have to shut down the business, take your losses and look to other things....

This list is by no means exhaustive or in order of priority but it should offer some food for thought.

Clearly survival of the your business will depend on how well run it was before the lockdown. 

Secondly, how quickly you can face up to the new reality and respond effectively and efficiently.

OF NSSF AND BEING THE ELEPHANT IN THE ROOM

As the lockdown has dragged on and cash become increasingly short it was inevitable that National Social Security Fund (NSSF) would come under attack.

NSSF is the single largest financial institution in the country, its muscle drawn from the savings of its two million members.

At last count the Fund has sh12trillion in assets.

According to the current law that governs NSSF, the Fund can only pass out money to its members under five circumstances, when they hit retirement age -- 55 years  old, if they hit 50 and are out of work for at least a year, if they are incapacitated and can’t work any more, leave the country or join public service, which has its own pension scheme and finally if they die, god forbid, their next of keen can claim their savings.

So under the current law there is no place for NSSF to dish out money to members as a result of the current crisis.

"That is not NSSF being mean with our money, that’s the law...

In August last year when an Amendment to the law that governs NSSF was tabled, the public was  more fixated on the proposal that benefits will be taxed at collection, at retirement or whenever, than at the point of contribution.

As it is now URA taxes your gross pay and then NSSF carves off its five percent, which in effect means your contribution has been taxed and hence you suffer no tax when you are collecting your savings.

In the amendment it was proposed that mid term access be allowed for members but under certain prescribed circumstances. The mid term access would be allowed to cater for medical, education, mortgage or unemployment.

"This amendment will better reflect NSSF’s role as provider of social security to its members....

Debate  on this bill has been going in parliament since September.

NSSF management were among the first to present to the relevant committee and were reported as being in support of the bill and the mid-term access provision in particular.

 What really got people’s knickers in a twist recently, is a leaked letter in which NSSF boss Richard Byarugaba was responding to a querry from the finance ministry about the feasibility of releasing 20 percent of member savings to help them get over this corona crisis.

The lockdown that started at the end of March restricted movement and congregation of people and has led to a collapse in economic activity. As a result jobs have been lost and it is expected there will be a lot of business collapse.

So the argument for relief for your everyday man is impossible to deny.

In his letter to the ministry Byarugaba pointed out that this release would cause an out flow of at least sh2.6trillion and an additional sh800b, which are the budgtted payouts to retirees and other claimants.

He argued that this would force NSSF to liquidate its assets at forced sale value, disrupt and even jeopardise the business irreparably.

"NSSF has assets of just under sh12trillion, but, this is not cash stashed away in the basement of Workers’ House...

Most of this money is held in treasury bills and bonds, company shares in and outside Uganda and real estate. To cash these out will take time and lead to a loss to the Fund and members. 

Byarugaba also argued that because they are biggest holders of government paper, issued to stabilise prices, the shilling and support the budget, the ripple effect of such an action may have a detrimental  effect on the wider economy.

In response to this analysis several people have come to refute the Fund’s advice to the minister. 

They argue among other things, that there are instruments available that can spare the Fund losses, that the Fund is abdicating its role to provide its members’ social security and that the Fund should stop investing abroad because it is developing other countries and not Uganda.

"There really is no contradiction between NSSF’s support for mid-term access as proposed in the amendment bill and it’s technical opposition to release within the next few weeks of a third of its assets to consume....

The key issue really is what can NSSF do within the law that governs it. Byarugaba may wish this, that or the other but is it legal or put another way what can he get away with, without doing a illegality, to help his members?

The finance minister has the right to cause a statutory instrument to effect some changes in the way NSSF works, but for him to make such a far reaching change he would need to consult widely. This is not Idi Amin’s1970s’ Uganda.

The people who feel so strongly about inserting such a clause can have their MPs make the proposals in parliament. Thankfully government is in the middle of amending the NSSF law.

Byarugaba’s experience has been in banking and it probably turns his stomach to hear the clamour to use long term savings to cover short term needs. That is the surest way to poverty.

No doubt that in coming weeks and months we are going to experience financial stress as only the generation that was here pre-1986 can relate to. Those who can appreciate this are less than 20% of the population.

But raiding the Fund is not the way to resolve the issue. What happens when they release the monies and they run out, will we blackmail NSSF to release more?

IMPROVE YOUR CUSTOMER CARE OR DIE

The other day I ordered a delivery. I ordered it early in enough in the moring and thought by midmorning I should have taken delivery. Hours came and went and nothing happened. Calls to the supplier were met with deafening silence.

Eventually they turned up, after 5pm. Long stories about failing phone battery and having to walk all the way from Nansana ensued.

The icing on the cake? Could I pay him extra because he would have to take a boda boda to beat the curfew?

 

The reality of the corona crisis is that nothing is going to be the same again.

 

For eons us poor customers have suffered terrible customer service from our suppliers.

Forget about going the extra mile, just the basics of courtesy, cleanliness and timeliness are alien to our businesses, and then they complain that the economy is doing badly!

After the lockdown with cash at a premium, we will not tolerate just anything for our kamoney, which has survived corona. Here below are a fast and ready list on customer service that may alleviate the plight of us the long suffering clients, while keeping your till ringing.

1.Mean what you say, say what you mean

Nothing is as annoying as buying a good or service and it doesnt work as advertised. There are a few of us who will give you an earful for doing us wrong, but there is also a big a number who will not say anything and you will never see them again -- nor their friends or relatives.

It is a cliche in business that it is cheaper, and therefore more profitable, hanging on to existing clients than getting new ones. Believe it.

Competition is real if you have a client he is yours until he finds a better provider, why allolw him to have his head turned?

2. We dont owe you anythinig

So you opened your shop at 6 in the morning after being open till 11 pm the previous night. You have a flooding problem, anti the rain so we should bare with you wading through the aisles, you will mop later. That we should have waited for you  to come, since you were held up somewhere and couldnt open shop at the usual time.

Because what? Because you are the only one doing what you do? Because you have been a round a long time we should only buy from you? Because .... Sorry it doesn't work like that.

 In a world of infinite choices, things to do and places to be, we want convenience not have to do mathematical probabilities.

We dont owe you anything, after all we are paying.

3.You are not alone

The beautiful ones are not yet born. You may be the flavour of the month now but that may not be for very long. You need to invest in you and your business. My favourite  businessman, I have said before is Charlie Lubega. When he took over Ange Noire Discotheque he was literally the only game in town. But regardless he made a concious and visible effort to regularly upgrade his venue, be it improve the music, the deco, the cleanliness. And all this he did when there wasnt any real competition on the horizon.

 

He effectivley raised the barrier to entry, 

sending many a discotheque to their graves before they had gained traction. Ange Noire was the gold standard. Is it any surprise it is the last man standing?

 

Thats how you need to be thinking about your business. Essentially take the long view, invest in improving the customer experience and we will repay your with our loyalty and our kamoney left over from corvid.

4.Around noon doesnt cut it

The story of the money who turns up for a meeting at noon. When reminded that it was scheduled for 11 am he retorted. "It is around that time!"

 

Keeping time is not a mzungu thing. Keeping time, is the courtesy you extend to your partner. It says you value their time and you will not waste it. It says you are grateful and grateful to be given the opportunity to meet . Keeping time says you are reliable and can be trusted with lesser things like money and responsibility.

And if you can't make the appointment call ahead, preferably before the alloted hour to say you are running late.

5. Talk to us

Related to the last point we understand things don't always go accordning to plan and you cannot deliver as expected. We will be chaffed but give you the benefit of doubt if you keep us abreast of progress. We would rather you underpromise and overdeliver than the reverse.

I dont know anyone who likes excuses. Just get the job done. But if you can't, let us know in good time, because we too are managing the expectations of our clients and significant others. 

6. The extra mile

Those are the basics and when you have ticked them off, you can't rest on your laurels. You dont want contented customers, you want customers  who will champion your cause. And the truth is it doesnt take very much to keep your customers singing your praises. Technology can help.

Now with more and more people using debit cards and mobile money, your customers need not be nameless individuals who stream in and out of your shop. You have their name, their phone numbers and record of how regular they are to your shop and what they tend to buy.All this data can create an intimacy that can be capitalised on. 

It bogles the mind that not more supermarkets have loyalty cards. Which offer bonunses or discounts for repeat customers. Eben the shops that have them are too mechanical, leaving the task to the machine adn not introducing a human touch to the process.

Imagine theplesant suprise it would be if a call to regualr customer who is in the habit of buying curry powder oncec amonth is made around the time they normally do. I know a regular client of a supermarket who now swears by them because they offeredt o deliver her shopping during the lock down. A service they do not normally do, but because she had accumulated a ton of bonus points they would go the extra mile for her.

THE LOCK DOWN WILL END, WHAT TO DO?

It was an initiation ceremony. A rite of passage. Call it what you may.

It involved getting all the S1 boys to jump from the diving board into the pool about seven meters below.

For swimmers this would not be a problem, but for the senior boys lying in wait in the water, whose intention was to “dunk” the new entrants to the school when they hit the water.

I can not forget the feeling of running out of breath as they kept my head under water and the relief when I was tossed to the side of the pool sputtering, coughing and spitting.

Watching a video recently of covid-19 patient struggling for breath, reminded me of that time more than 30 years ago when I was fighting for breath underwater and yet there was none to be had.

Of course,

people with respiratory challenges know this reality all too well. I left mine behind in the school swimming pool.

I have no intention of repeating that experience in my life time, nor would I wish it on anyone else, except for … but that is a story for another day.

As we approach the lifting of the lock down that  memory is what keeps me in check. Social distancing will be key. Shaking hands, out. Hugs? How do you spell that? 

Knowing what we know now after more than two months of bombardment with corona virus messaging, we should not need anyone to tell us how to behave.

"President Yoweri Museveni when he does eventually lift the lockdown, most probably in phases for months to come, will be making a general prescription but we have an individual responsibility we can not abdicate to him....

While as a country we have been spared the health effects of contracting the disease – we have had 126 covid-19 cases at time of writing this, we have not been spared the economic downside.

A report released last week by the organisation Financial Sector Deepening, Uganda (fsd Uganda) showed that four in five of us could not maintain their normal lifestyle after just 15 days of lockdown.

I almost laughed the other day when someone said lifting the lockdown will mean we have survived the virus. As long as there are cases around the world a reopening of our borders and airports mean we will risk infection sometime in the future.

With the best estimates for the development of a viable vaccine seen late next year, it is clear we will live in fear of the disease for at least one more year.

A sharp spike in the infection rates may see the imposition of other lock downs in future.

"Unlike the other viral infection that sends chills down our spine, HIV/AIDS, if you contract Covid-19 you can spread it to your loved ones with not so much as a sneeze in their direction. Which makes personal responsibility even more urgent.

I fear that our low infection rate during this first wave has bred a complacency, which is setting us up for a higher infection rate during the second wave.

The Spanish flu of the early 20th century, which laid waste to western Europe, had a more fatal second wave because people came out jubilating in the streets after the lock down was lifted then.

We will have to restrain our relief and jubilation.

 

From a health perspective it is safe to say we have passed the first test, but that will count for nothing if infections increase rapidly and wipe out the gains of this first struggle.

The critics of the lockdown are loud but not overwhelming. As a society we have had to measure the risk of opening up versus the health risks.

Which brings me to another point. Madagascar has been helping all and sundry with their home made remedy for the disease, I hear they are going to start charging for it.

"The conventional health industry have threatened to laugh them out of town, as snake oil salesmen and worse. But the portion is in high demand on the continent, with countries as far afield as Guinea and  Mali signing up...

Given the circumstances a more appropriate reaction would be to study the drug’s efficacy in Madagscar and if found to have some promise, research its component parts to see what works or not.

But we know the huge investments made by the pharmaceutical companies can not allow for some home remedy to steal their thunder, unless it is promoted by themselves, of course.

I say give Madagascar’s concoction the benefit of doubt. This as I reach for my own concoction of honey, ginger, garlic, lemon and Mululusa all mixed in hot water.

EXISTING AT THE MERCY OF GOD

Last week President Yoweri Museveni extended the lock down for an additional two weeks. We had laready endured five weeks indoors.

The lockdown was intended to break the chain of infection. It seems to have suceeded in reducing the rate of infection in Uganda. 

At the time of writing we had just crossed the hundred positive test mark, more than a month after we registered our first positive test. Going by the curve of infections in other parts we should have hit the thousand-infection mark by now.

Already the government is being feted for its handling of the crisis.

That being said the damage to the economy has been severe. Production has shut down and demand has collapsed. It is unlike any other crisis in known history in the way it is affecting the whole world. No economy has been spared.

Last week the Financial Sector Deepening Uganda (FSD) released a report, "Assessing the economic resilience of Uganda househoulds before COVID" . 

The report compiled with the finance ministry, is the first to try and understand the capacity has the everyday man to cope in times of extreme economc stress. It also has some useful recommendations for mitigating against the worst effects of the lockdown and economic collapse for your man on the street.

Part 1 of the report that was released last week was based on a study done before the lockdown.

It was shocking to learn that

three quarters of Ugandan adults befor the lock down could not meet their living expenses, essentially most of us are living beyond our means...

It therefore came as little surprise then that 57% of us would not be able to sustain our lifestyle after one day in a lock down and 81% of us would fail the test after 15 days.

FSD also reported that the median amount of saving in cash was sh4,800. If we line up all our savings in order of quantity those with sh4,800 would be at the half way mark, basically that most of us have very little saved up.

So going into the lockdown at the beginning of April, most of the population was extremely vulnerable, so much so that it is estimated that at least three million people are going to regress, swelling the ranks of the eight million already living below the poverty line.

  

These disturbing figures are self explanatory, that for the majority of us life is not going to be the same again, at least in the short term, 23% of us are in danger of losing 100% of our income.

Beyond the dire numbers the report was useful in suggesting ways in which the everyday man's plight can be alleviated through governmnet intervention.

FSD suggests that

since a large proportion of the poor and middle class bank and borrow from savings groups, SACCOs and deposit taking financial institutions, that are a lower tier frrom the commercial banks, helping these stay liquid and viable is critical...

 
Fiscal policy, such as tax relief and grants, should be targetted at companies with strong employment retention and job expansion plans. In addition small retail and wholesale shops should be helped bounce back.

   
They recommended that online platforms, that have proved useful in distribution and linking small producers should be encouraged and fintech companies eg mobile money companies, which have proved useful in promoting financial deepening should be supported to grow and widen their reach.  Related to these efforts to increase telephone and internet deepening should be encouraged.

Older people who have been benefitting from the Social Assistance Grant for Empowerment (SAGE) have been left high and dry during the lock down and digitization of this process, would help maintain sustainability of this effort.

Finally they recommended unconditional cash grants for the most vulnerable, as a way to support them during the lock down and subsequent downturn and as a way to lift them out of poverty. Experience has shown that contrary to some opinions actually help the poor accumulate assets leading to self sufficiency.

Production has been shut down, as a result people have lost their jobs and livelihoods, as result they can't spend and therfore production will remain suppressed, a vicious cycle that has to be broken in order for the economy to recover.

It has been argued that inflationary fears are unwarranted as fiscal stimulus work in conditions of production overcapcity and joblessness.

During the last financial crisis western economies focused their bailout efforts on the big corporations, fearing that if they collapsed they would take the whole economy along with them. The critics warned that bailing out the big corproations would not ensure the trickle down effect that would help the poorest in the societies, but would instead save the few at the top of the pyramid....

Since then wealth and income inequalities have widened, forcing a rethink in the economic stimulus packages governments are resorting to today.
While the big companies will need some relief, for a more sustainable recovery the most vulnerable need to be direct beneficiaries through the finanacial institutions they patronise, improved internet access and in the most dire case cash handouts.

Finance ministry officials look on handouts with a jaundiced eye, fearing that they can not only be abused by implementing officers but can also create a dependency among the population that is not sustainable.

This crisis may very well be the opportunity the government needs to streamline their social protection mechanisms and put in place mechanisms to support ailing companies recover in ensuing economic shocks.

UGANDA DAIRY FARMERS CAUGHT IN KENYA, UGANDA CROSSFIRE

Since the end of last year dairy farmers in western Uganda have lost a major market of their produce as Kenyan authorities have locked out Ugandan milk.

The closure of the Pearl Dairy plant in Biharwe, along the Masaka-Mbarara road, in February has seen demand for milk collapse in Masindi in the west, Kabale in the south west and Isingiro in the south.

"In our area alone at least 1000 liters go to waste daily which has a downward effect on the pricec of milk in the Mbarara and Kiruhura areas, the price has fallen to sh200 from sh800 per liter last year," David Mwine the chairman of the Rukaka Savings & Credit Cooperative Society and a  dairy farmer in his own right.

"The whoe of this region is experiencing losses because farners can not meet their operational costs and are demoralised by the prices of milk. We dont have someone to buy the milk and we are giving it away free."

This is sad state of affairs for the region and the country.
Pearl Dairy's business model is to export up to 90 percent of its production, mostly to Kenya and sell the remainder locally. Its other markets are Rwanda, before the border closure a year ago and the Democratic Republic of Congo.

This has come about because in Uganda, due to lax regulation only about a quarter of all milk produced is processed. In Kenya not only is milk consumptrion more than triple that in Uganda -- 140 liters versus 40 liters per person annually, there is a higher demand for processed milk, more than two thirds of the market is processed milk.

Overt the last three years Pearl Dairy has made significant in roads into the Kenyan market and as of last year, accounted for about a quarter of the milk market in Kenya.

Trouble begun at the end of last year when Kenyan authorities impounded Pearl Dairy's milk claiming it was counterfeit and turned back several of their consignments.

The Uganda government complained to their Kenyan counterparts and a 19-person Kenya team visited the country to ascertain that Uganda producecs all it exports, but the impasse has not been broken.

Hence the Biharwe factory's closure in February.
The ripple effect in the communities that supply the Pearl Dairy has been devastating.

Over the last two years of Pearl Dairy's operaion in the area, through their own extension services, some farmers increase more their yields to 11 liters a day per cow frrom the previous five liters. All this through better managment of their existing herds.

"We have been able to learn best dairy practices. I used to be pastoral farmer, grazing my cows over large areas, i no longer do that and my farm is now a commercial enterprise, my income frrom milk has gone up a lot," Raymond Kaweesi, a pioneer beneficiary of this initiative said.

He has been able to share the learnings and many farmers in his area have seen their fortunes improve as a result.
Pearl Dairy extension services reach more than 600 farms.

"This ecosystem of farmers, traders and transporters built to support the 800,000 liter a day plant, is in danger of being broken up....

"Some farmers have already slaughtered their herds and sold them for beef. Imagine what it will take to get the back into production? Not only in terms of money but also lost trust," a regional leader wondered on condition of anonymity.

It is not clear what the  problem is in Kenya.
Reports last year were that dairy darmers in Kenya had seen their farm gate pricecs falling signficantly as a result of the aggressive Ugandan entrants.

Existing big interests in the Kenyan market then decided to use underhanded methods to frustrate Uganda processors. They are clearly very powerful interests as no official communication has been forthcoming about Uganda dairy exports.

This is a blatant breach of East Africa Community protocals that allow for the frfee movement of goods and services around the five countries, that Nairobi is unwilling or unable to enforce in the case of dairy exports.

The dairty of western Uganda find themselves caught in the middle crossfire that is none of their making, that threatens to derail Uganda's emergence of a continental dairy producing nation.

Exports from dairy products roped in $150m  in 2019, bettered only by gold and coffee in export receipts.