RETIREMENT AND THE CHALLENGE OF BUILDING VALUE

In a previous time it was just enough to survive another day. This uncertainty meant there was little incentive to think long term as one never knew from day to day whether they would be around the next day. Living hand-to-mouth made sense.

The relative security of the last two decades means we have had to shift the way with think about money, wealth and financial legacy.

Stability tends to do that. It orders society. Allows the creation of wealth by a bigger pool not just by the eternal optimists or hardcore hustlers.

In addition the first generation that got employment after independence have gone into retirement, many with less than good results. Another generation, the one that has lived all its adult life in the NRM era hears the retirement knocking incessantly.

These pressures have triggered the construction boom of the last decade and provides fuel for any number businesses being set up by the day around the country. 

The challenge is one of building an asset base that can, on retirement, throw off enough income to sustain us through our evening years.

If you think about it if you are making one million a year, ideally you need an asset or assets throwing off a net income  equivalent to that every year to sustain your current lifestyle.

Using the benchmark 91-day treasury bill yield of about a ten percent you would need an income generating asset of at least sh10 million to keep you happy or at least as happy as you are now. Of course if your annual income is greater than one million the challenge is that much greater.

The say that time is money comes into sharp focus. The sooner you set upon the journey of building this asset the better the chance that you will retire with it in place. 

"It’s unlikely that one can save enough money in their working life to guarantee a comfortable retirement, so inevitably the question of investment comes into play. ..

Investment is about committing resources to an endeavor with a hope of future return. The key word is hope, because even with the best investments success is not guaranteed. So investment success needs to account for failures.

There has been a time old practice in office for a group to form around the idea that they each contribute a monthly sum to a common pool and every month one person takes the collections to meet every day needs or push personal projects.

A friend is involved in one and after months of operation is wondering why there seems to be no positive progress in his life or the group’s generally.

There are two ways to spend money either you consume it or you invest it. The reason my friend is seeing no progress because its likely that when individual members get their windfall they tend to eat the money rather than invest it.

However this “merry go round” arrangement comes from an important realization that collaboration is required, the execution is where it falls short. 

The members will be best served if they convert themselves into an investment club, which while continuing to save monthly will be much better able to invest meaningful sums at a go.

The critical thing with these groups is the reach of their vision. If the group has  a long term vision it will be better able to weather the inevitable speed bumps that come along, avoid the temptation to descend into an orgy of consumption when meaningful sums have been accumulated and hold the faith of delayed gratification.

The size of the vision will determine the eventual size of the enterprise.

A group I know that started operations eight years ago have been able to grow their investment fifty one fold or showing an average annual return of 63% after tax. They did this while doing nothing spectacular other than lending to themselves and investing surpluses in treasury bills and bonds.

The group which now has savings of about sh2.5b today has properly harnessed the power of compound interest, what Albert Einstein called “the eighth wonder of the world”.

It’s about creating value. During our schooling years we accumulated value in the way of information, which information we have been paid to employ in creating value for the companies we work for.

"Learning how to invest and investing means capturing some of this value for ourselves and may be the most useful use to oneself of all the knowledge that has co me with our schooling and working experience.

UGANDA WAITS WITH BATED BREATHE FOR KENYAN POLLS

 

Uganda waits with bated breath as Kenya goes to the polls tomorrow (Monday). And with good reason.

The last time the Kenyans voted in 2007 they caught us all by surprise with an orgy of bloodletting that official figures show, saw more than 1000 killed and tens of thousands more displaced.

"Some gunboat diplomacy by the George Bush administration brought sanity to east Africa’s largest economy and forced a political settlement, which has managed to keep up appearances thus far...

But just as is the case with most political contests once the leaders shared the spoils there was nary a crumb leftover for the rest. The relatives of the dead have not found justice, thousands continue to be displaced and millions of Kenyans remain traumatised by an event whose explanation continues to elude the chattering classes.

What was clear after the event is that below the veneer of calm and advancement lies deep seated tribal and ethnic grudges that fester and can be taken advantage of by opportunistic politicians.

So no one should be surprised that we look east with apprehension as the Kenyans line up to cast their votes.

Unlike Uganda which fell on the wrong side of the cold war divide and paid for it, Kenya pandered to western capitals, did not disrupt the cozy arrangement colonial capital had set up – in fact the local elite jumped into the trough with both feet, and for most of the 70s and 80s was the one eyed man among the blind.

"The prototypical big men who held sway since independence in 1963 first Jomo Kenyatta and then Daniel arap Moi, who surprised everyone by first succeeding Kenyatta and then hanging on for two decades, made no pretensions at being democrats, dealing ruthlessly with dissent and encouraging crude capital accumulation at the expense of the small man, managed to maintain a semblance of peace, keeping ethnic tensions down to playful barroom banter....

The close of the cold war in the late eighties meant that priorities changed and the “big man” became a expendable ally with the new fad of democracy and economic liberalism. Kenya was forced to open up to multi-party democracy and it has taken some learning to operate under the new arrangement.

Once the political space was opened up the parties that led the fight have since moved on, merged or morphed. Just as at independence the independence movements found they had little ideological ground on which to stand once the colonialists had been shipped out, so too did the Kenyan parties with a regression back to tribal politics as the only way elites could see to create usable alliances for their political advancement.

Kenya’s saving grace is that there are more than a handful of tribes. While the Kikuyu and the Luo are the major tribe by numerical strength, there are enough tribes around to put the brakes on an out-and-out bloodfest like occurred in Rwanda.

However, decades of uneven economic growth means that Kenya has got huge income inequalities, which override transient tribal differences.  Kenya more than its neighbours has real class divides with the poor majority held at bay by a wealthy elite who control the instruments of power and violence.

Recent commentaries have boiled it down to two possible outcomes of this election.

One, that Kenyans still shell shocked from the events of six years ago will exercise restraint, have a peaceful election and move on with their lives. A scenario they argue is realistic given that the key antagonists of last times bloodiest clashes in the rift valley the Kikuyu and the Kalenjin are allied on one side of the contest.

This last thought is where the second group of commentators derive their biggest concern.

That with main contender

"Uhuru Kenyatta and his running mate William Ruto – alleged kingpins in the last post-election violence, with possible indictments by the International Criminal Court hanging over their heads, their desperation to get to state house will know no bounds...

If they lose the election they will have no leverage over a Raila Odinga administration and hence the real fear of being hang out to dry. The international community has already voiced unease at a Uhuru victory.

But if Uhuru and company win the election they would have much more leeway to run rings around the ICC a la Omar Bashir in Sudan.

The stakes are high.

Beyond the national consensus to have a peaceful election, look to the huge commercial interests – international and especially local, to prevail on the situation and nip any hanky panky in the bud.

At least that’s what we all hope.

UGANDA'S VISION 2040 IS HERE

The plan is that by 2040 Uganda will be an upper middle income nation with a per capita income of $9500, a ninteenfold jump from the current $500.

This is contained in the final draft of the National Vision 2040, that the National Planning Authority (NPA) has been working on since 2010.

Assuming that population growth continues at its current rate of just over 3% economic growth will have to average about 15% a year for the next 27 years to meet this ambitious target.

NPA envisages that broken down, this would mean dramatic improvements in poverty levels, a reorientation of the economy towards industry and services and away from agriculture, greater proportion of manufactured exports and a near threefold jump in national savings as a proportion of GDP.

NPA chairman Professor Kisamba Mugerwa thinks it’s doable.

Mugerwa told New Vision editors in a recent visit that opportunities in oil &gas, tourism, mineral development, industrialization and agriculture can be leveraged to deliver the result.

What needs to be done is to strengthen the physical infrastructure, human resource, science and technology and consolidate the current peace and security.

In support of all this there also has to be movement in social development and governance issues.

Of course Uganda Vision 2040 is a road map, the devil is truly in the detail, in the execution of the plan.

“There has to be a society wide mindset change not only at the central government but at every level of leadership,” Mugerwa said.

He explained that the national budget, which is government’s primary tool of execution of development, will derive its strategic direction from the Uganda Vision 2040.

Mugerwa said that there have been only three five-year development plans, with the last being the 1971 plan that was jettisoned by the Amin coup of that year. Since then the government has been undergoing restructuring, rehabilitation and poverty alleviation driven by the donor agenda.

To get anything done your human resource, operational and strategic processes have to be in place.

They say if you don’t know where you are going most likely you will get there.

Vision 2040 provides much needed direction to the country for the next few years and also proposes a framework for bridging our operational and human resource gaps.

We whine about the conditions we live in, complain about the slow pace of progress and grumble that we deserve better, but as some South African investor who plans to commit a few tens of million dollars to this economy said, we are so in the thick of things we cannot see the forest from the trees.

He had been away from Uganda for a decade and was amazed at the pace of development.

And all has happened and continues to happen without an articulated vision that a critical mass of Ugandans have bought into.

Vision 2040 may be linchpin the economy has been waiting for to push the agenda forward.

Progress would mean a greater formalization of the economies and we who are used to the informality of our lives – despite our protests, maybe the very ones who work against the whole vision.

The enterprise called corruption for instance will have to be broken down to allow for forward movement. But one can bet that its proponents will not seat around to be picked off like ducks in a row, they will fight and subvert the process at every turn. The success or failure of this anti-corruption fight will depend on how captive our systems and government are to the champions of corruption.

There is something that happens when a plan is put in place. Attention is generated, resources are focused and yes, miracles happen.

Vision 2040 should be given a chance, because I don’t know about you but for some us this is the only country we have and we daren’t give up on it.

WE NEED TO RECORD UGANDA'S HISTORY

 

The last week of January and the first week of February mark very important days in the NRM and Uganda’s history.

On 26^th January we commemorate the day in 1986 when the NRA marched on Kampala and overthrew the Tito Okello regime. On 6^th February we mark the day in 1981 when the first shot was fired in the bush war that led to the NRA’s eventual victory five years later.

The former is a public holiday while the latter is not, it would be hard to argue against commemorating either whatever your feelings are towards the regime of the day.

At both occasions President Yoweri Museveni as the main celebrant narrated key achievements in the last 27 years in the case of the NRM or in the case of Tarehe Sita outlined the progress the army has made, going back to the training camps in Mozambique, long before the attack on Kabamba 32 years ago.

The pageantry that was displayed at the Arua Tarehe Sita celebrations are a far cry from the motley crew that laid siege on Kabamaba or the rag tag army that captured Kampala.

It does not take much of an imagination to work out that the FRONASA/NRA/UPDF story is one worth telling.

"A young boy consumed with  revolutionary fervor determines that Uganda deserves better. He sets upon winning his friends to his vision of the future. On holiday from the university of Dar es Salaam he and his friends sneak over the border into Mozambican rebel camps to get a taste of how a rebel war is conceived and executed. He returns to Uganda but has to flee soon after the government for which he works is overthrown. He along with others foment rebellion against the Idi Amin regime suffering deadly set backs even before the struggle has gained any traction. He returns to Kampala. Eight years after falls out with the government and retreats to the bush as the head of a new rebellion...

The rest as they say is history.

And that is where the problem lies. We seem content to leave these events in the realm of oral history. The problem with oral history is that it falls into the same trap as the popular party game Chinese Whispers. In the game a line of guests is formed and a simple message is whispered into the ear of the person at the head of the line with the simple instruction to whisper the message to the next in line. As always happens by the time the message gets at the other end of the room it is so distorted as not to be recognized from the original whisper.

The UPDF is unique in its creation and its said mission.

Unlike many armies on the continent that are remnants of a colonial legacy and are detached from the citizens they are sworn to protect, the UPDF has grown out of our circumstances, does not see itself as a mercenary attack dog and is very much embedded in our daily circumstance.

And we are not talking about commissioning some connected quark who wants to make a buck, but real military historians who can write a detailed account for the military archives and then release an account of only the bare essentials for public consumption.

The reason why the western economies have been at the forefront of innovation in every sphere of life is because they have had the written word for centuries. This means that every generation of innovators does not have to reinvent the wheel but take off from where the last generation left off.

As Isaac Newton confessed, “If I have seen further it is by standing on the shoulders of giants”.

This applies for Ugandan history as well.

For example in school Ugandan history ends at independence, what we know about postcolonial history are the varied accounts according to one group’s or the others political bias.

Uganda’s history is such that even the most objective of accounts cannot take away from the colour of the last 50 years and will make for interesting reading by even the most jaundiced eye.

History is intellectual property that can be used by future generations for their benefit.

The point is, futile as it maybe, we need to fight the curse that the only thing we learn from history is that we do not learn from history. A first step towards that is to record it, so that future generations even if they make the mistakes of their forefathers will not feign ignorance...

IS THIS THE DEMISE OF THE UGANDA CAPITAL'S PRIVATE BUS COMPANY

Last week Pioneer Easy Bus, the company that has over the last year been providing bus services in Kampala, had 98 of its buses impounded by the Uganda Revenue Authority (URA).

URA moved in order to recover sh8b in taxes it says are due to it.

Pioneer’s orange buses hit the street last year just in time to detooth a strike by the taxi operator association UTODA. At the time UTODA was protesting moves by the new incorporated city authority to collect dues owed it by the taxi operator.

The bus company came with the promise of decongesting our roads, lower fares and sparing road users the obnoxious behavior of our taxis.

They were such a relief that the public was willing to overlook the fact the new buses had not complied with all formalities.

The honeymoon is over.

No one doubts that Kampala’s transport system is in need of an urgent overhaul and that bus transport is part of the solution.

There must be money to be made and no one was surprised when the Pioneer slipped into the sector like a duck to water and started making money hand over fist.

But problems begun to creep in, understandably so as Pioneer’s business plan did not call for such an early entrance into the sector.

At the end of last year the bus company’s management in explaining their decision to hike prices said KCCA had not lived up to its obligations of among other things providing bus lanes. Bus lanes the company argued would make it possible for their buses to make more round trips and therefore justify the low prices.

There were reports of drivers striking over pay, changes in top management and talk of negotiations with authorities to provide concessions that would make the company’s business model more viable all of which may have been brushed off as teething pains.

That being said they say that deals are not bad it is the people handling the deals.

Think about it you were going to have 100 buses, the majority of which will be plying the various routes in and out of the city almost simultaneously, there would be logistical challenges – fuelling, maintenance and even meals, human resource issues – this is a startup that was going to hit the ground with easily a 100 drivers and conductors, not to mention backroom and other support staff. Then of course there were financing issues to consider – how do you not only get the startup capital but also the operating capital to tide you over the steep early learning curve.

The record of startups the world over is very dismal with nine in ten new companies not seeing their fifth birthday. And just because you start big does not mean the risk goes away if anything these are magnified.

Business is about managing risk. Risk is a function of knowledge. The more knowledge you have the better you can mitigate against risk.

You pay no particular attention to driving to work. Through years of experience, the accumulated knowledge will allow you to cater for any risks along the way to work. So the risk of you not getting to work is minimized. But if you give your car keys to your ten year old son to drive the same car, at the same time on the same route  to work, the risk is  suddenly life threatening. 

Similarly in the wide scope of things a bus company with a fleet to 100 buses is nothing to write home about. Across the border in Kenya, KBS which has been servicing Nairobi has been doing so for decades with a fleet which dwarfs Pioneer’s.

Management knowhow and experience more than money is the key mitigant of risk.

Thankfully the travelling public will not penalize Pioneer for this hiccup in operations if they get back on the road.

One hopes that Pioneer can bounce back, -- if only so we do not return to the chaos of a taxi dominated industry, but one hopes too that whether they do or they don’t, that this experience will provide key lessons for anybody going into the business.