FOR EVERYONE'S GOOD, KAMPALA BOSSES SHOULD RESOLVE THEIR ISSUES

The tarmacking of the Kitala-Komambogo road has been in the works for a few months now. So it was with much relief that the contractors set to work a few weeks ago and we can now drive on a smooth road.

And now horror of horrors, we even have street lighting now.

This is the latest in the tarmarking of three roads – Bukoto-Kisasi, Bahai road, Komabogo-Bahai-Kyadondo road, Kyebando Ring road, in the area that have come since the Kampala Capital City Authority (KCCA) came into force in 2011.

"As residents of the area we are ecstatic and half under our breaths we think that anything else KCCA does for the area will be a bonus. We are fine....

Interestingly we are not the only ones. All the divisions of Kampala can report an improvement in the road network and general cleanliness over the last six years or so.

It doesn’t take a genius to map these sorely needed development to KCCA executive director Jenniffer Musisi’s tenure at White Hall.

We can therefore not be the only one disturbed by  reports such the recent one where KCCA councillors want President Yoweri Museveni to terminate executive director Jennifer Musisi’s contract for defying a directive by minister Beti Kamya to raise their salaries.

Never mind that the finance ministry rejected a request for a supplementary budget from Musisi of sh3.6b to give the councillors a 30 percent bump in their pay.

And now the minister has threatened to institute a probe against the executive of KCCA following stories she has heard of their being a lack of transparency and professionalism in how KCCA goes about its work.

Just when we thought we had put the days of malaise in Kampala City behind us then this. One cannot help but feel there is a malevolent spirit hovering over Uganda’s capital city, determined to keep it in chaos, disrepair and confusion.

The idea between the creation of the KCCA was broadly to extract the running of the city away from the vagaries of politics. Politics was getting in the way of implementation of much needed development projects in the city which was fast deteriorating into a filthy, congested and insecure hovel, not befitting of the country’s centrepiece.

KCCA has got off to good start and the residents of Kampala were holding their breath that it may last a little bit longer.

"Musisi and her lieutenants have faced down many challenges, all of which had the cynics rolling out the silver and gloating that competence can never be allowed to thrive...

In the last term a knotty contest between Mayor Erias Lukwago and Musisi, while it did not bring progress to a standstill, hung like a dark cloud over the city’s affairs. An obliteration of the ruling party in the city, as has become tradition, had local politicians pointing fingers at KCCA, the argument being that the Authority’s good work in cleaning up the streets, putting UTODA in its place and generally improving our collective wellbeing cost them votes!

KCCA is living testament to that saying that, “No good deed goes unpunished!”

KCCA’s corridors are not populated by angels. The people of kampala would care less how the most recent impasse is resolved as long as the authority can be allowed to keep doing and better, what it has been doing.

We cannot be blamed for looking upon anyone who seems to be in the way of this development with a jaundiced eye.

Never the less blood need not flow in the streets over this. Let Kampala’s top bosses, who incidentally are ladies – Thank God! Resolve what seem sto be a breakdown in communication and get on with the job of making Kampala great again!

BE PROFITABLE BUT DON’T FORGET NET WORTH

I am deep into Brad Stone’s, “The Everything Store: Jeff Bezos and the age of Amazon” a fast paced narrative of how Amazon, which started as a bookseller and now sells almost everything, was built.

The company which survived the dotcom meltdown of earlier this century has grown over the last 23 years to the point that last week, for about half a day, founder Bezos was the richest man in the world last week.

But just before that I also read “Alibaba: The House that Jack Ma Built” which as kind of prescient because the richest man in China visited Nairobi and Kigali only days later.  Alibaba is a giant website which brings vendors and customers together to facilitate trade in almost anything. What makes the Alibaba story so interesting is that it was founded in China on five years after Amazon and it’s not inconceivable that in less than a decade it may be the biggest internet company in the world.

There are quite a few similarities in the growth of these two companies and just as any dissimilarities.

"But the common denominator between the two is the way they have been managed to gain market share, with profitability coming years later. The loss making was not caused by the wastefulness of the founders...

Related and also of interest is how both founders extended the personal frugality in their lives to the company, which allowed them to focus resources on building the company rather than themselves with the eventual outcome that they became exceedingly wealthy from their shareholding in their respective companies.

For Amazon more than for Alibaba, their very existence was threatened when the markets in the west went sour on the dotcom companies, for which Amazon, was a poster boy. Were it not for the company’s focus on customer satisfaction it might have gone the way of the thousands of dotcom companies that burnt through billions of dollars, flaming out before they showed a profit for their investors.

In Uganda we don’t need a dotcom boom and burst cycle to know about business failure. Only one in 10 companies make it to their fifth birthday. Beyond the issue of the questionable products or getting into crowded markets, the failure of the Uganda company can be seen in the financial statements.

The key difference between Amazon and Alibaba and our local floundering businessman is that while the former shift revenues increasingly towards building their assets bases – hardware and distribution networks, with the expectation that these will not only lead to the capturing of more and more market share and an eventual rise in revenues, our local businessman however tends to keep these much needed funds, needed for expansion, for himself. They pay themselves first, rather than the business they should be trying to build.

"So for instance our local shop keeper who while he makes a profit, given the margin on every good he sales, fritters off this profit by dipping his hands into the till every so often to finance his personal needs. Unfortunately these needs grow with his growing sales and rarely fall back if sales begin to falter...

Given a similar scenario Bezos or Ma, would restrict their raiding of the shop till, while pushing more funds into growing his stock, the size of his shop or the area that he dominates. In very real terms this means that he will put off to a later date the move to a more expensive neighbourhood or the VX he has been dreaming of or the visit to Old Trafford to see Manchester United play.

But we don’t have to look to the US or China for lessons how to improve the durability of our companies.

The Asian community were dispossessed of everything nearly half a century ago. They returned in the 1980s and 1990s, rebuilt their businesses and now account for almost seven in every ten shillings of revenue paid to the taxman today.

Interestingly many of our more successful businessmen have apprenticed at the feet of one Asian businessman or another.

It should be clear by now that a basic understanding of how financial statements work is imperative for any businessman.

How do I pay salaries? How do I replenish stock? What happens when I withdraw money? What happens when I bring money into the business (as many of our corporate types do)?  How do I pay taxes? How can I minimise my tax liability (without evading it all together)? Should I take a salary? How should my books look like to make them attractive to bankers, investors?

It is not rocket science. But it is the one thing that is dooming our businesses to short life spans.

"Even the businessmen with the best of intentions, who are not extravagant or even allocate assets properly, run into trouble because they are not thinking from a financial statements perspective. If they are doing badly, they can do well. And if they are doing well, they can do better....

And the beauty of it is that unlike a two decades or so ago there are a lot of young accountants around who can help make sense of any business’ numbers.

It bears repeating. While profit is good building a business’ book value is better. That is where company durability comes from.

POOR POLICING TO BLAME FOR MULTIPLE UGANDA MURDERS

In the last three months or so 11 women have died gruesome deaths at the hands of, what seems to be, a criminal gang in the Kampala-Wakiso area.

The latest on Monday this week was Rosette Nakimuli, a salon operator who was waylaid in the dead of the night, raped and murdered, her body dumped in a banana plantation in Kitala zone, Katabi town council.

"The fact that the criminals are seemingly going about their business unmolested points to a failure of security, beyond the narrow confines of the police force’s mandate...

In terms of fighting crime the police serve three broad purposes – they act as a deterrent, their presence dissuading any criminal activity. Secondly they are meant to foil crimes as they are being committed, which would be a function of their intelligence gathering capabilities and finally once a crime is committed they should be able to catch the perpetrators, a function of their ability to investigate crime.

It would be safe to say that where there is a police presence they serve as enough of deterrent to criminal activity. Witness how very little thuggery happens in broad daylight. This could also be a function of the fact that the Ugandan public tends to mete out swift and brutal justice if criminals are caught in the act. I suspect it’s more because of the latter than the former.

Criminal activity increases during the night for the obvious reason that the cover of darkness is convenient for the perpetrators.

Beyond that is the fact that once a criminal gets away with the act it is more likely than not that they will not be apprehended.

We never cease to hear stories of how the police are undermanned, underfunded and under resourced and a sequencing of how to distribute the merger resources to bridge these deficits gives headache to its top brass. But evidently there needs to be greater investment in intelligence and investigation.

"As it is now when a major crime is committed and the police are in danger of being embarrassed they swoop on the affected area and detain dozens of people to help them with investigations. Talk about using a sledge hammer to kill a fly. This hit-or-miss style suggests a failure in intelligence and investigation with the police trying to eke, or beat out, out confessions than use available evidence to pin the crooks...

Such action arguably causes disgruntlement with the police and establishment, which would make police work more difficult in future.

But beyond the police, such frequent and clearly not random acts of violence points to a failure of community policing. The breakdown of the LC system could be blamed for this, as local authorities used to provide some leadership in keeping neighbourhoods safe.

Reports indicate that residents of the affected areas have reported the presence of some unknown men in the areas around the time of the perpetration of these crimes but their seems to be a slow response to the reports or, even worse, no follow through after the crimes have been committed. And this goes for other crimes as well.

In the absence of civilian organisation, the responsibility to mobilise local populations for popular vigilance would still fall to the police.

In some areas around the Kampala the use of social media among residents, led by the respective police posts in their areas, even with the slow response times of the police, has proved useful. It does not cost much to mobilise people for their own security what is clearly lacking is the leadership.

While we have individual responsibility for our own security, the building of the police’s capacity to stop crime from happening or apprehending the perpetrators when it has happened needs to be looked into urgently.

"As an aside a revisiting of the issue of payment of graduated tax too needs to be looked into. As it is now we have a lot of youth hanging around doing nothing except honing their Ludo skills in our trading centres...

One wonders how they make a living in the day?

DATA IS THE NEW SLICED BREAD

In his first press interview in 2010 after taking over the helm of Kenyan telecommunications firm Safaricom, CEO Bob Collymore said that in the future voice services will be an add-on – will be given away free. That data services is where the money would be.

He has been proven right several times over. While revenues from mobile data have not yet outstripped revenues from voice services it is just a matter of time.

Last year data revenues grew by 46 percent compared to voice revenues which grew by just over one percent. And you are not even talking about revenues from mobile money, considered data services, which on their own grew 34 percent last year. Data and mobile money revenues came in at Kshs39b (sh1.2 trillion) and one can expect they will soon outrun voice service receipts, which stood at Ksh46b last year. The company’s total revenues came in at just under Kshs100b last year.

Compare this with the Kshs3 billion data, M-Pesa and SMS revenues brought in 2010, against a company revenue of Kshs84b then.

It is no wonder then that in our own market discussion over data services has been kicking up dust in recent weeks.

Earlier this month telecom company MTN announced a new data offer that while raising the cost expanded what subscribers could do with the service.

The regulator, The Uganda Communications Commission (UCC) took issue with the rate changes arguing that all such changes must be past by them first before being offered to the public.

MTN argued however unlike a tariff – a cost of service that all mobile users are affected by, an offer is optional with subscribers taking it up if it suits their needs and therefore they had no legal obligation to inform UCC in any change it may choose to make.

As with most of such spats it is often that each has a point and a seat down around a table would bring the discussion to a happy middle ground.

"It does not take a rocket scientist to see with more and more people hooking up to the net via their mobile phones, tablets and laptops that Collymore’s prophecy will come through in our market.The fact that some telecom companies have decided to curve out a niche for themselves in data provision and not voice is another pointer....

The point too can be made, that you don’t hear the regulator complaining about similar offers on voice services which are being launched at every turn.

The context for the regulator’s concern is not misplaced, if data services are to get wider adoption.

Clarity in the sector is needed sooner than later seeing as data services are going to be a major driver of growth in coming years.

At the beginning of the month a law allowing for agency banking came into force. Under the law banks will be able to contract retailers, petrol stations and other businessmen to help the collect deposits and pay out monies from their clients’ accounts. Advancements in communication technology, more specifically data services, means this service is more easily available now than even five years ago.

The various uses to which data services can be employed are already being seen --- transport and logistics management, financial services, health and educational services.

For a society that likes to talk a lot, it may be hard to wrap our minds around the revolution that data services herald, but they will come with or without our understanding of the subject.

Think of it like the paradigm shift that came with the invention of the printing press, which took the written word out of the exclusive enclaves of royalty and the monastery to the everyday man. What this meant is that information’s storage and distribution was no longer the preserve of a select few. It actually diffused their power, led to the downfall of kings and queens and the rise of democracy and also other kinds of despots.

Data services will ensure the storage of information within easy reach of every one with access to the net, as well as the rapid transmission of that same information.

Think of it.

Small businessmen, like consultants had to saddle themselves with getting physical offices to not least of all house their telephone, fax machines, the petulant receptionist and generally look serious. 

"Data means that when you really boil it down to the bare essentials, a physical office is fast becoming redundant for certain sections of the economy...

This is important because down history wealth has accrued to people and societies that had knowledge --- distribute it and employ it for their benefit. Now with the democratization of communication things are set to change, hopefully for the better. More and more people will have a shot at social climbing than ever before.

Already The Economist magazine has already announced that data is the new oil, coupled with Collymore’s prophecy and one can see why the battle lines are already been drawn around data.

Whereas it was the UCC seeking clarification on the matter, one can expect market leader MTN, which for its own very survival needs to dominate the data space will be the target of a lot of competitive action from its market rivals above and below the table.

We can expect more of these kind of spats in coming times as competitors, both existing and yet to come jostle for position in this new market of the future.

Watch this space.

ANOTHER DEATH, ANOTHER BUSINESS IN JEOPARDY?

Last week veteran politician and businessman John Sebana Kizito died and immediately attention went to concerns about what would happen to his business holdings, a hodge-podge of real estate, insurance and everything else in between.

The same worries followed in the wake of the deaths of school proprietors Ivan Semwanga and Lawrence Mukiibi and any number of our lesser, neighborhood tycoons when they move on.

Is it possible to bullet proof our businesses against mortality? And if so why do our businessmen fail to do this?

Given the frequency of this occurrence, clearly the more natural thing is to live everything tethering on the brink of chaos, given how our businesses are more likely than not to self-destruct on the passing of the founder.

When we fail to do something that is good for us, in effect dooming us to a less than desirable future fate, it’s more often than not because it is too much work to do the right thing.

For business it’s easier to set up your stall, make sales and dip into the till whenever the need arises.

 It’s too hard to keep books! It’s too hard to think ahead! It’s too hard to delay gratification in order to build an enduring company! It’s just too hard to do the right thing.

"There are four reasons to start a business –  to maintain a lifestyle, to pass on to future generations, to sell in the future or for philosophical reasons...

These are not written in stone but the record shows that your business has a higher chance of longevity if its driven by the motives that tend towards the more philosophical than subsistence.

It’s not difficult to see why.

 If you build a business to only create subsistence for you and your family it cannot grow very big, because once you have sated your needs, which are not very much – how many meals can you eat or beds can you sleep in or cars can you own or children can you father before you reach the outer limit of your appetites. The logical conclusion to this is why should I bother being systematic in business, after all I will eat it all before I die.

If you build a business for legacy purposes, you want to leave it to your children, then you have to be a bit more systematic. You have to think more about keeping books, for instance,  because getting finance or attracting quality partnerships or beating off the competition will depend on an objective measure of your business that outsiders can understand and also one to which you can refer you to grow the business.

Think about it if you are going to leave the business to the children may have to be around for a few decades before you can pass it on. And in business if you are not growing you are dying and the way to grow consistently is to be able to measure the process in your business so you can replicate the good and do away with the bad.

The next level of being systematic will come with if your end game is to sell the business somewhere down the line. 

"The level of complexity of the business has to rise so that one, it can operate without the founder, keeping alive, growing and beating off the competition, also that that outsiders looking in can make a fair assessment of its value....

Last week it was reported that Kenyan based coffee shop chain, Java House was being sold to Dubai based private equity firm Abraaj Group for about $100m. Kevin Ashley who founded the  company in 1999, had earlier on sold a controlling interest – 90 percent of the firm to private equity player Emerging Capital Partners in 2012.

Not only has selling the company – twice, made Ashley a very rich man but it also ensures the companies longevity and possible expansion into the rest of Africa and beyond. Talk about a legacy.

A philosophical reason to build a business may be one like Bill Gates goal to put a computer on every desk in the US. While this would have made Gates a very rich man, which it did, it oriented his company to reach for a higher goal that made being systematic and thinking beyond the founder’s ego necessary of not critical.

But think about it, even if you wanted your business to just guarantee you and your family and generations after you a good life wouldn’t it make sense to build a company with the intention of sell it eventually or to chase after an outlandish goal that would not only drive its growth but yours as well – as a person and business person?

Interestingly when you set your vision and commit to it, that high it is not a pain to keep books, to think strategically or delay your purchase of your dream car, home or wife in service of a greater goal.

What it takes to reconfigure your business is a change of mindset - easier said than done, but once the mental shift is done it is not hard to execute the necessary steps to build an enduring company.

"At last checking Uganda was second only to Chile as the most entrepreneurial country in the world. We have no fear of starting companies, that is one hurdle out of the way. Now we just need to grow durable companies – less than five in a hundred companies started in Uganda make it past their fifth birthday....

Part of the reason our economy is in such a shambles is because we do not have the size, quantity or quality of businessmen to create the jobs that we so desperately need.

OF THE CBR AND THE UGANDA ECONOMY

Last week the Bank of Uganda announced it had lowered its regulatory Central Bank Rate (CBR) to ten percent from the previous 11 percent.

Bank lending rates have followed the CBR since it was launched in 2011, as the figure has real implications on at rate banks can borrow from the central bank. Banking lending rates then are a few percentage points above the CBR.

Since the beginning of the year lending rates have followed the CBR down with base lending rates threatening to be break below 20 percent for the first time in six years.

This should be welcome news all around as lower rates would mean more borrowing and therefore more cash sloshing around.

"The banks are unlikely to run out and send the credit taps gushing seeing as there are just coming out of a period when bad loans are at their highest levels in almost a decade. Fear is still ruling the credit market. Once beaten twice shy...

Relatedly the Treasury bill and bond yields remain determinedly in double digit territory.

In the budget the government pledged to half its borrowing from the public, which would put downward pressure on the government paper yields, but we heard that last year, so we really can’t take that promise to the bank.

Borrowers are coming back steadily into the market.

According to the Bank of Uganda growth in personal loans  came in at 20 percent in October last year – the latest available figures, agricultural loans also grew by 13.7 percent but lending to real estate and the manufacturing contracted by 4.9 percent and about 15 percent respectively.

The figures suggest that consumption is rising but production is not keeping pace. It’s a chicken and egg situation kind of. Which comes first an improvement in general purchasing power or increased production? But there can’t be increased demand without a jump in production to create the jobs that will drive the demand.

Of course the lending rates are such that it would take serious discipline to contract a loan and show a return in the current economic environment. For medium to long term optimism we need to see growth in credit to the productive sectors in order to hope for a sustained turn around in our current economic situation.

The growth or lack of growth in credit serves as a useful proxy for a sector’s health.

Since there is no visible growth in lending to manufacturing we can assume they are struggling to expand capacity, if at all. Anecdotal evidence suggests there has been no real growth in this sector over the last few years, judging by how many are shutting down or workers laid off.

"But is lack of credit the problem or a symptom of a larger problem?..

As a business one has the option to finance their business via an injection of resources by the shareholders, retained earnings held over from previous profitable years or borrowing from individuals or institutions.

When starting a business it maybe enough to rely on ones on resources as well as that of family and friends. You often don’t need much sophistication to get money at this phase. But as the business gets more sophisticated sourcing money becomes correspondingly complex be it borrowing from the banks, the public or raising funds on the stock exchange.

The more orderly you are as a business not only do you have more options for raising money but you can get it cheaper than a less organised company.

Unfortunately for our many of our businessmen our businesses have remained subsistence businesses, intended to support the founders lifestyle and not much else. How much can one man eat or drink? How many beds can he sleep in at the same time?

With such limited objectives there is no need for the business to become more sophisticated, to be better able to weather the economic storms that inevitably come around every so often.

As an example during the bailout outcry last year, it was reported that one business man had taken out an overdraft to build a factory. The mismatch of assets and liabilities seem obvious at a glance, but when you have come from a time feast, when cashflows were good you think you would be able to beat the system. Arguably if you were more organised not only wouldn’t you gamble like that but you would also have many options to raise financing that you wouldn’t box yourself into a corner.

The proof of this is that there are companies that while they have been distressed during this down turn continue to operate and collapse is not eminent. And we are not only talking about international companies.

"The reduction in the CBR is welcome news for all of us but if we have structural issues in the economy or in our businesses or personal finances it will not necessary lead to an improvement in our lot...

UGANDA MUST ASPIRE TOWARDS A RULE BASED SOCIETY

Overshadowed by juicer news events the land inquiry commission continues to plod through hundreds of cases that are being brought before it.

Justice Catherine Bamugemereire who heads the commission recently reported that since they started their inquiries in the middle of may about 1,600 land cases have been brought to their attention.

The cases have ranged from land encroachment to “straightforward” land grabbing to grave snatching to grabbing whole forests, swamps, lakes and everything in between. The consistent thread running through these cases is of individuals trying to keep for themselves land which seems unattended to or occupied by helpless people who can easily be disposed of – literally or figuratively.

These cases examined in broad daylight seem incredible but point to a creeping – no, entrenched culture of impunity in our society.

"We have seen it before be it in the Office of the prime minister or the public service pensions scam or the jaw dropping smash and grabbing that characterised the Uganda National Road Authority (UNRA) or the shenanigans going on in many government offices....

That public officials willing to help themselves to public goods do so and do not even try to cover their tracks, flaunting their ill gained wealth under our very noses, safe in the knowledge that they will not be caught.

As a result even “good” men and women have joined the hogs at the trough arguing that if everybody is doing why not them, while continuing to assume pride of place at their local churches every Sunday.

Pope Benedict called it moral relativism, when the divide between good and bad begins to blur and eventually disappear. When the question stops being whether an action is bad but how bad compared to other actions it is.

A few years ago when a former minister discovered that his proceeds from a influence peddling deal was about to come to light he complained that he was being witch hunted after all, as he pleaded at the time, others had “eaten” more. Notice he did not deny that he had taken a bribe but was protesting his “relative” innocence.

"In a country committed to electoral democracy it was only a matter of time before the rapaciousness of the public official got in the way of service delivery, to the point that it is hard to explain it away with the wave of an autocratic hand...

But also as societies grow and become more complex, relying on the good manners of people or familial or tribal standards to enforce good behaviour becomes less possible hence the need for generally agreed rules and institutions to ensure  law and order.

The 1970s and 1980s – our dark ages, broke down a growing appreciation for the rule of law and institutions. Government’s inability to get things done means it cannot be business as usual.

We will hear increasing grumbling of the Moral relativism type in coming months and years as attempts are made to get things in order.

Even if the effort is half hearted, if it gathers some steam it will begin to take on a life of its own, an irreversible momentum that will force us all to conform to the rules.

Wishful thinking?

In order to meet our development ambitions a rule based society is imperative. See for example the billions of dollars we can now borrow from the open market. We couldn’t do this a decade ago. The lenders can now look at your society and discern some order which gives them a better chance of getting paid back.

Contrast this with our neighbours the Democratic Republic of Congo (DRC) whose natural resources have been estimated at about $12trillion but it cannot exploit them for the population’s benefit because the chaos at every level that prevails there.

"Whether we progress towards a more rule based society will depend on our elite both political and economic, which gives little solace....

On the one hand whether the politicians can see that a more prosperous, rule based society will be correspondingly good for them and on the other whether the business community can shed off those in their ranks, who have benefitted and worked to maintain a status quo that benefitted them to the exclusion of the rest of us.