THE IMPORTANCE OF THE VISION THING

During the recent “Uganda Entrepreneurship Congress 2023” at Makerere University in an interaction with the students the question came up, “How do we ensure the durability of our businesses?”

The statistics have been parroted over and over again that 90 percent of businesses do not get to their fifth birthdays. I suggested to the students that this is not as bad as it sounds, because the business people who run those failed businesses, did not lie down and die but went out and started new businesses. And the lessons of their failure helped make their next business better, hopefully.

But yes the question, “How do we prevent from failure?” Business lady Sharon Tumusime, co-founder of carpentry shop Palit, advised first off the that budding business people should not fear failure because failure is part of success.

Easier said than done and I could have sworn I saw a few kids rolling their eyes. You cannot blame them. In school we are taught the lesson and then we seat for the tests, in the business world you seat for the test first and then you learn the lesson. A mental adjustment is important, for all of us who want to go into business.

“Rich Dad, Poor Dad’ author Robert Kiyosaki advises that you need to fail faster, so you can learn quicker. That failure will happen is a given.

In my mind I was thinking that one way to ensure these failures are not final is to cover your downside, factor in the risks. I learnt this the hard way in my forex trading days. However sure the trading set up is it minimized your losses by determining before hand how much you are willing to lose if the “sure deal” did not go as planned.

In the real world of business this may take the form of starting small. We now enjoy the hospitality of Café Javas multiple restaurants, but who remembers that it started out as a small, cramped operation on Bombo Road in 2005? That was probably the business owner testing his concept, checking whether it works or not and once he was convinced, he rolled out seven other outlets and four others in Nairobi.

Also you can minimize the cost of failure by spreading the risk, bringing in partners to shoulder the burden. That is the basis of the limited liability company. No matter how sure the deal is, it can fail and to prevent it from wiping you out entirely, making it difficult for you to heroically pick yourself up, dust yourself up and start all over again, spread the risk so if it fails you only hurt a little.

"We, who went to school, have the mistaken idea that money will solve all problems. So when we get a windfall and go into business big are wiped out and start complaining about the economy...

Though over the years reporting business and dabbling in this or that, I have become convinced that the founder’s vision is a critical ingredient to whether a business succeeds or not over the long haul. I saw a few more eyerolls in the room when I suggested this.

It is part of the human condition that we think you just tell us what to do, we do it and voila! Success will follow. I think it also comes from our classroom upbringing.

We don’t pay attention to the intangibles. To our detriment. Because before anything happens there is first a thought. If you want to make a chair, build a house or plant a tree, first a thought.

While its romantic to go out and start your business, a pause to think about your vision for whatever it is you want to build may make the difference between collapsing after year one or enduring for years.

The trick with the Vision is to won it. You should be able to see it with your mind’s eye and feel the emotion that will come with achieving it. This last part emotionalizing it, is important because it will provide the grit needed to hang in there through the debilitating lows and temporary highs that come with doing business....

Just as important is that with a vision you will be forced to be strategic, where strategy is the series of actions you will need to take to achieve the vision.

Many of us are not strategic, we are hardworkers, ready to roll up our sleeves, jump in and start making money. Inevitably when we are hit, we crumble like a pack of cards because our actions are not driven by a vision and guided by strategy.

"Strategy is important more for what it prevents you from doing than what it dictates you do...

Many years ago, when we founded the New Vision Staff SACCO, we closed the first year with sh33m in the bank. we were jumping around with glee, success had come quickly. The question then became how to utilize the surplus and also sorts of ideas saw the light of day – car washes, tent and chair hire.

But our vision was to be a financial institution that creates financial freedom for our members. Rather than divert from this and go into all sorts of general trade, we stayed true to the Vision and invested the money in treasury bills and bonds. The net effect of this was that 16 years later at the height of the Covid pandemic in 2020, we closed the year with sh900m in the bank. That figure would have never happened had we run around like headless chicken, spreading our energies all over the place.

Things like having a vision and mission statement that drive strategy sounds like text book stuff, “too much English” but when you appreciate that whatever is manifested in physical form is only as good as where it came from the intangibles, you will not be quick to dismiss the Vision thing.

And finally, your business or even you, as a human being can only grow as big as your vision. Small vision small company. Big vision, big company. There are no miracles.

In the 1980s Bill Gates dreamt of putting a PC on every table and became the richest man in the world in pursuit of this vision. But someone had a bigger dream, to put a computer in every hand and today Apple is a bigger company than Gates’ Microsoft.

 

IN BUSINESS DON’T LOOK FOR A CUSTOMER …

Last week during the “Uganda Entrepreneurship congress 2023” at Makerere University business coach Robert Semkula counselled the young, eager students that when they go into business, “Don’t look for a customer look for a friend”.

That was interesting because we all know nothing happens until you sell, sell to a customer.

It was a clever way of saying you need to focus on building relationships with your customers, because again we all know if they like you, you are half way to selling.

We have argued severally in this column that businessmen before they claim the economy is doing badly, should first do an audit of their customer care processes...

As customers we are tired of the bored sales executive whose body language suggests she would rather be elsewhere than be selling to you or the gum chewing, rolling of the eyes, front desk officer who would rather you did not come in their door or the technician who returns your TV or car in such a state that you will be calling him no sooner has he turned the corner.

Our businessmen, we call them that because they are selling something but, in all honesty, have as much luck at success as the sighting of nsenene this season; our businessmen, seem intent on chasing us away from their shops so they can watch Tiktok.

So, imagine if we have some sort of universal epiphany – as I did listening to Semakula, that why when the customer walks in our door, don’t we try to make him our friend by looking beyond the current sale to building a long term relationship? After all the business theorists tell us it is cheaper to sell more to an existing customer than cultivate a new one.

We may suffer a culture shock, but what would this brave new world look like?

It would be that when my car breaks down and I call the mechanic to come check it out, he would be focused on getting to me or one of his people, identifying the problem and taking it off my hands. Once that happens he would give me regular updates – in writing, on what was needed and the progress on the job. To stretch the fantasy, they may have even have loaned me a car to use as they work. The beauty of the loaned car is that they would have skin in the game, they would not forget to work on my car and at the bare minimum would look to get the job done quickly so they can get their car back – before I damage it.

This could work for appliances out of order, the plumbing that needs repairing (in this case they would stay onsite until it was fixed) or even a bad hair job.

Our businessmen see this tender loving care as an added expense they can not afford or worse, that it would be keeping them from serving other customers. But if you think about it, I will remember the service especially if it is replicated routinely and would not hesitate to recommend him to my friends and family. They say people never forget how you made them feel...

As it is now many times we are scared to recommend our handymen because we know their ways of not quite finishing the job and overcharging for it (if you don’t finish the job, whatever you charge will be overcharging). It maybe the difference between when we are asked who is our mechanic, our response not being a sigh and waive of the hand but an eager sharing of his contact over WhatsApp.

Unfortunately, there are enough of us who are bad mannered and ingrates, dissuading our businessmen from being nice and hence the vicious cycle and hence the complaints about the economy being bad.

Talking about a bad economy, it amazes me every day to realise how many people are doing well are quiet about it. The noisy ones are the complainers, while the guys getting paid everyday are seated quietly in the corner smiling inwardly to themselves.

How would you serve your friend if they came to your shop, may be the way to start thinking to reengineer your business.

I remember many years ago when I was looking for a size 14 dress on Johnstone Street. The shop I went into only had size 12. I made as if to leave the shop and go to the next shop, but the shop attendant beat me to the door, urged me to take a seat he would bring the same dress. After a few minutes, which seemed like forever – we didn’t have smart phones, he came back with not one but two dresses a size 14 and a size 16, just in case.

I was getting ready to fork out a little bit more for his effort but he insisted the price was as quoted before. He became my go to guy for clothing and referred him far and wide.

Now his more tech savvy son is the one I meet, since I no longer can be bothered to go to town anymore. They now have several “shop windows” online and the son and his friends seemingly drop whatever they are doing to deliver.

And whenever I ask how business is going the son is quick with a thumbs up, “Mzuri.” Surprise! Surprise!

 

 

LETTING AGOA SLIP OUT OF OUR HANDS

Liechtenstein is a small country in the middle of Europe. It covers an area of 160 square km or smaller than the size of greater Kampala; has population of about 40,000 a tenth of Kampala’s population.

Nothing to write home about, that is until you discover it has the highest per capita GDP in the world of $180,000 by some accounts. The World Bank places it behind only Monaco at $234,317.

For the purposes of this article, we will use Liechtenstein. The net sum of the Liechtenstein economy is to service the bigger EU $17trillion market. They are a tax haven, offering low tax rates for individuals and companies and are a tourism destination. Their central location means people can live in Liechtenstein and commute to work all over the EU. Or better still register their companies in Liechtenstein and operate all over the EU.

The moral issues of providing tax haven services aside, Liechtenstein’s people would not be as affluent as they were if they were situated where the Central African Republic (CAR) is.

The point is you need to attach yourself to big markets like Liechtenstein or Mexico or Hong Kong if you want progress.

A few weeks ago the US announced it was suspending Uganda from the Africa Growth Opportunities Act (AGOA), which allowed free access of our goods to the largest economy in the world duty free. They said they were kicking us out along with Central Africa republic, Gabon and Niger over human rights issues. In our case the passing of the Anti-Homosexuality bill earlier in the year.

The irony of it is that the law was passed through a democratic process, which they are always encouraging us to do, and therefore by their action they want us to subvert the will of the people.

We are damned if we do, and we are damned if we don’t.

The bigger story though is that while we do not neighbour the US, this access to the biggest economy in the world, has been open to us since 2000 and in that time period we have grossed exports of about $200m or about $9m, with the biggest export receipts coming in last year.

Kenya on the other hand grew exports under AGOA to $525m in 2020 from $29m in 2001. If they suspended Kenya there would be a greater impact on their economy than us.

"The bigger story is then is how we failed to take advantage of this giant market when we could and probably explains why we struggle to take advantage of other markets in the region and beyond...

A friend of mine thought he could supply coffee to South Africa. When he got in touch with a major supermarket chain after looking over his business, they offered him space on the shelves of the 14 stores in Cape Town. They wanted him to supply 45 tons of his coffee every two weeks, but in addition have 45 tons constantly on hand in their stores, to maintain continuity of supply.

The logistical and financial demands were such that he had to go tail between legs back to them and give up the offer. To just meet those basic requirements would require he scale up his operations at least fourfold, something he did not have the capacity to do on his own. You can argue that with a bit more sophistication he would have got partners to come in with him on the deal and who knows.

To exploit AGOA we needed to do much more than we saw happening around us. But maybe we are not to blame for criminally squandering the AGOA opportunity when we had it?

Let us not deceive ourselves that we will develop, that is manage a reasonable standard of living for all Ugandans on our own steam. We will have to trade. The formula has worked for the east Asians, Europeans and even the US, so who are we to think we can be any different.

Our technocrats and politicians need to be burning the midnight oil, plotting and scheming on how to break into rich markets. We have to look up and down the value chain to see how we can produce multiples of whatever we are producing now; investments in research will be critical, how we can improve our communications and transport infrastructure –the development of rail and water transport must be treated with greater urgency and all the supporting services in trade negotiations, finance, marketing we will need.

We have worked very hard to get our East African Community up and running. There is still a lot to do, but it can give us a taste of the work we have to do.

The Kenyans, Tanzanians and Rwandans refusing us to prosper by putting non-tariff barriers in our way is standard for any markets and require a certain kind of skill in government we seem to be missing.

So beyond just producing stuff we need to be able to process, distribute, grow and protect those markets...

If we can only take a break from trying to steal public resources we might be able to get this done.

 

A WELCOME ANALYSIS OF UGANDA’S CHANGING ECONOMIC FORTUNES

BOOK REVIEW: TRANSFORMATIVE ECONOMICS; UNDERSTANDING THE PATHWAY TO ECONOMIC TRANSFORMATION

AUTHOR: PROF AUGUSTUS NUWAGABA

PP: 356 pages

 

The challenge for Uganda is to lift the economy from a pre-industrial to a modern one. To lift the majority of citizens out of poverty, though increasing their productivity and therefore earning power.  A modern state would be characterized by higher productivity in every sector, better living standards for all, trade in processed/manufactured goods, industrialization towards a more ICT driven economy among others.

To do this one has to understand where you are in the continuum of development and how you got there before you can fashion a route to development.

Professor August Nuwagaba does this simply enough for anyone to understand.

He identifies that land tenure system as designed in the Buganda Land agreement as a major impediment to our economic advancement, shows that the expulsion of the Asians in 1972 was a disaster and that by liberalizing markets, privatization of state enterprises and introduction of tax reforms the current government did the right things to resuscitate the economy.

The neo-liberal policies that have got us to this point, with its emphasis on fixing the macroeconomic environment and hope for a trickle down of the benefits, has taken us as far as it can, with a small elite benefitting disproportionately to the larger public.

So in his book—as the title suggests, he tries to chart a way for lifting the Uganda economy from its current state to an industrial and post-industrial economy.

Nuwagaba has strong opinions on how the drivers of the economic recovery of the last four decades can be retooled to drive transformation. Economic policy, monetary policy, debt management and aid among other things but he is clear that it first begins with the individual. 

"Each individual has a responsibility to raise their income, save and invest more and remain healthy and it is on this that all other drivers can be built....

We will not be reinventing the wheel and Nuwagaba has some interest case studies from the Asian tigers and Europe that light the path for us. The retooling of education away from producing learned graduates to churning out individuals with the relevant skills for the various stages of their development path is key and plays on the notion that all progress starts with the individual.

It is clear through the book that while we deserve a pat on the back for resuscitating the economy over the last 40 or so, this has only served to create a foundation for the real heavy lifting that is to come. Another mind shift is required and disciplined execution of a well thought out strategy is imperative.

A major omission that is hard to ignore however, is the role of corruption in slowing or subverting progress. While no country is corruption free, for a developing country like ours corruption concentrates resources in a few hands, denies the majority the services required for them to lift themselves out of poverty, distorts markets and threatens social and national security.

While it is a whole subject on its own, ignoring it misses a major piece of our context and why the best laid plans can still go awry.

"Development is not a natural progression. It can be subverted by human beings ignorance, ideological disorientation and putting their wants above those of the greater public. Our history is littered with how damaging a lack of strategic focus can lead to misguided actions however popular that can derail progress for generations.

As mentioned earlier, the book does not require any high appreciation of economics to follow the logical thread Nuwagaba has woven through space and time, where we came from and what we need to do to deliver a better future for our country. The book would do with a lot more contemporary case studies especially of how policies like liberalization and privatization have got us to where we are.

This book is a useful reference for anyone wanting to understand why we are where we are as an economy and what needs to be done for us to get to the next level. This book should be required reading for Ugandan economists and planners. It is a useful addition to the study of the economic history of this country.

 

THE FOREIGN INVESTOR BOGEY MAN

If you look down a list of the top tax payers in this country, nine out of ten of them are foreign owned companies.

The Asian community may take exception to their classification as foreigners, but for purposes of this commentary, why that is so will become apparent.

There are people who are not happy with this state of affairs, if they had their wish, most tax payers would be local businessmen. Which is not a bad aspiration in itself. These people however get it a bit twisted when it comes to explaining how we can go about overturning the current state of affairs.

The prescriptions go from the knee jerk recommendation that government nationalize all the companies. People who think like this, believe that if government takes over the companies local Ugandans will somehow be better for it. They dream of lower prices, more jobs and more uptake of local supplies.

Then there are those who think foreign companies should sell shares to government and then along the same lines of the above, we locals will be better off.

And finally, there is the group that thinks government should slant policy towards local investors – lower taxes, cheap credit and a waiver on governance restrictions as a way to allow our local businessmen to catch up with their foreign rivals....

I never know whether to laugh or cry. With age and wisdom, I now resort to silence.

Let us start from the beginning. Why is foreign capital here? It is here because there is opportunity, opportunity not least of all because our local businessmen can not take that opportunity up. Foreign capital can take advantage of the opportunity for number of reasons among which are quality management, advanced technology and access to capital. And also, because they come from more developed economies, they can see some opportunities we cannot.

I will never forget in the 1990s when a water bottling company set up shop in Uganda and I was guilty of thinking “Under what circumstances would I buy water?” But the investor knew people would need water that was certifiably good to drink, packaged conveniently and widely available. He had seen it elsewhere and knew it would work here.

A few years ago, I was in France. In my room there was no sign of the complimentary water. The next morning, I mentioned this to the receptionist and without blinking an eye he told me to drink the tap water. My initial reaction was shock. But when he kept a straight face and I thought about it, I nodded and walked off. Bottled water is successful in France where you can drink out of the tap, what would happen in Uganda, where a former boss at National Water & Sewerage Corporation (NWSC) could not vouch for the quality of the water from his taps.

And if you think about it that opportunity had been lying there begging to be taken advantage of, for at least 20 years prior to our first bottled water.

Everywhere I look, people complain that our businessmen don’t have access to capital. But the mobile telephone companies have shown us that, that too is a fallacy. Last year more than sh190trillion flowed though all mobile money apps in Uganda. That is the GDP of the country. Meanwhile transactions on mobile money are growing at more than 20 percent a year. That means that in four years double the money or about sh400trillion will be coursing through the mobile money networks.

Where has all that money come from? Most of it came from our pockets, under our mattresses, in our socks and bras. The money can now not only be useful to those who need it, but also to the owners of the money who now earn an interest, which they were not before.

The point is, all the capital we need is among us, we just need to build mechanisms that will liberate it from its current dark, dank abode...

One can argue that we would eventually come around to it by our own devices, but that is to ignore the time wasted reinventing the wheel when we can just cut and paste or better still get those with the relevant experience to bring it here.

But then again ask why we have to wait for someone else to show us the way.

In 1972 president Idi Amin had a brain wave, that if he expelled the Asian community, the back bone of commercial class, Ugandans would take over the businesses and the economy would be truly in local hands. His thinking process did not go further than distributing shops on Kampala Road to his cronies. We are still paying for that moment of madness.

Across the border from us Kenya with a bigger Asian community did not follow suit.  The result is there for all to see.  While the Asian community continue to be major players in Kenya’s economy, the indigenous Kenyans are much better businessmen from the mentorship that has come with this interaction, unlike our own who were given businesses on a silver platter and have nothing to show for it 50 years later.

"If we really want to dislodge foreign capital, in a sustainable way, we need to mobilise our resources – capital, labour and land, manipulate and manage them in a way that will ensure continued value creation and voila! We will “take” back our economy. Has anyone tried to do this in any meaningful way? Yes.

A drive through the Kampala’s city center a few weeks ago, for the first time in months, and I was surprised to see how many high rise buildings have gone up where there were once smaller buildings.

While you can question the business sense of building high rise commercial space, when higher floors are gathering dust, going unoccupied, it is a demonstration that we can mobilise resources locally.

We are still in the rudimentary stages of capital mobilization, we either pay for our developments in cash (believe it or not) or we borrow from the bank. But it is a start.

"Our attitude towards foreign capital should be what can we learn from them so we can go off and do the same or even better. However seductive Amin’s method was, going by the results, it should be furthest from our mind.

 

CHICKEN COMING HOME TO ROOST ON CORRUPTION

My jaw hit the floor last week when it was revealed that the Uganda National Oil Company (UNOC) was “sold” to a Chinese businessman.

While the “buyer” had documents to prove he had paid for UNOC, he did not or declined to reveal, who he dealt with and how much he had paid. He was blissfully unaware the company was a government entity, or so he said.

This came hot on the heals of another con perpetuated in the energy ministry where some Serbian ”Investors” were relieved of more than a billion shillings and the con artists had set them up for another $50m payout.

"If this is your only country; if this is where you intend to while away your years; if this is the country you hope to raise your children and your children’s children in, you should not laugh off these incidents in between sips of your beer...

Both scams show a level of preparation and sophistication that can not be learnt from a text book, but have come from practice and long experience. The scammers have been honing their skills on us, getting away with fleecing Ugandans because they have cover from higher officials, who can command the justice and law system to look the other way.

How did we get to this point?

There is a backhanded complement in there somewhere. In years gone by the big scams were of reams of paper going missing or bicycle procured, which never landed or other instances of pilferage.

But as the economy has grown and the budget with it --- in 2013 the national budget was sh12trillion compared to this years sh52trillion budget, the corrupt and their schemes have grown as well.

"As a result Uganda’s reputation now rivals a certain west African nation, which is the buzz word for everything corrupt....

Attracted by our growing reputation for corruption, unsavory types (the kind who carry $20m in bags around Kampala) have flocked to our shores.

While it is understandable that the Fortune 500 are not falling over themselves to come to Uganda – our market is too small, we are clearly not getting the next best thing, as the cost of doing business, with corruption added on is too prohibitive for them.

It cannot be emphasized enough that corruption is a terrible thing. The theories about allowing our elite to crudely accumulate wealth as a way to build an indigenous capital base is a fallacy and does not hold up to the most cursory study....

If this held true, in the three decades since 1986 we would see some of these crude accumulators, legitimize their business and turn up as some of the biggest tax payers or employers or would have developed a national presence. It has not happened and it will not happen.

 They have squandered hundreds of billions of shillings on questionable initiatives, hairbrained projects, white elephants – all private, and have nothing meaningful to show for their access to the state coffers. So let us bury that idea once and for all.

Beyond concentrating public resources in a few hands, it also denies us quality public goods in education, health, infrastructure and even security, the ingredients needed to climb the social ladder for  the least of our brothers.

As a result of their dubious ways, thousands if not millions of citizens are not getting a fair chance at improving their standard of living.

Corruption is a terrible monster that feeds off itself, growing, squeezing out honest endeavour, leading to frustration and despondency of the general population.

Our corrupt do not stay in their cocoon for long, especially if they are not caught. They soon link up with regional and international networks to extract more and more.  They are not very discriminating about the networks they fraternize with and very soon we will have organized criminals not only roaming our streets but getting photo opportunities with and bending the ear of the high and mighty.

The problem with these criminals is that when you give them an inch, they will want a mile.

They will not stop at just emptying state coffers but will want to protect their enterprise by compromising politicians and security. So very soon, if it is not already happening, they will be smuggling drugs, guns, wild life trophies and vulnerable people right in front of our eyes, with full cover of the law....

They will turn the country in to a hub of illicit trade, benefitting a few elites while impoverishing the rest of us. These actions will see us ostracized from the international community.

It has happened before.

In Montenegro, a country in eastern Europe, in attempt to circumvent sanctions imposed on the former Yugoslavia, the leased their ports and airports to cigarette smugglers. With afoot in the door these gangs stayed on long after sanctions had been lifted on Yugoslavia and Montenegro had broken away.

The gangs so entwined themselves in the country’s running that the Italy once had w arrant out on the head of former Prime Minister Milo Djukanovic for his role in smuggling cigarettes.

Essentially the corrupt and their cronies can hold the state hostage, to a point where it becomes impossible to move on them—except for few sacrificial lambs. Inevitably this leads to major dysfunction....

Believe it or not we are not the most corrupt country in the world or even in our region, but that is a competition we should not be aiming to win.