Monthly Archives: July 2017

Scale that Business – Learning from Global Coaches

I had spent a good number of years without using public buses to travel upcountry. My major beef with them has always been the time wasted at the bus terminal. So, when I had to embark on a journey to Mbarara recently, I decided to make inquiries around on the best form of public transport to use. Somehow, without collusion, all the people I talked to told me to use Global Coaches.

The D-Day came and I found myself at the bus terminal. While there, I found a number of Global buses parked. As I walked to the ticketing agent, a bus departed and by the time I got to the ticketing agent, another bus was already admitting passengers.

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A Global Coach bus at the Kampala terminal

My first shocker was the amount I paid for the ticket. At UGX 15,000/= for a ticket to Mbarara, I could hardly believe my ears considering that fare to Masaka (a distance that is less than half that of Mbarara from Kampala) is in the environs of UGX 13,000/= when using the mini buses (coasters). Does it mean that the extra leg of the journey costs only UGX 2000/=?

The next surprise was the time I spent at the terminal. Within twenty minutes of paying, the bus was full and we were on our way to Mbarara. This is when I posed myself a question, Bakikola Batya? (How do they do it?)

Another comparison with my travels to Butaleja left me nearly in tears. A trip by commuter taxis to Busolwe in Butaleja district makes one part with at least UGX 15,000/= yet the distance from Kampala is much less than that of Mbarara.

That is when my mental bulb lit and I realised that the issue evolved around Scale of operation.

The commuter taxis and mini buses are usually owned by individuals who hardly have more than a handful. This implies that they have overhead costs that have to be swallowed up in the operations of their small fleets.

Matters are complicated that these cars of theirs ply different routes each for various reasons top among which is to spread where they tap money from.

I then looked at Global Coaches and immediately realised that with a large fleet of buses, they can then benefit from what the economists call economies of scale (the cost advantages a business obtains due to size, output or the size of operation). Let us assume the cost of operating a bus is UGX 500,000/= daily. As one increases the fleet to five buses, the unit cost of operating a single bus might drop to say UGX 400,000/= due to some of the costs that are fixed like Office rent. An increase of the fleet to 20 buses can easily push the operational daily cost per bus down to as low as UGX 250,000/= since the staff numbers may not necessarily increase that much when compared to a fleet of 10 buses. This translates into the price that the company can charge customers, hence explaining the unbelievable price of UGX 15,000/=.

Global buses depart every 20 to 30 minutes on average. These frequent departures ensure that getting transport on the Mbarara route is as easy as finding a commuter taxi to take you from the City Square to Ntinda. This assurance solves a lot of headaches. It allows one to start the day with work in office while resting assured that anytime they go to the terminal, the buses will be available. As a result, more customers are likely to use the service hence guaranteeing market.

Their choice to stick to the Kampala – Mbarara route has made the Global Coaches much more efficient than the competition. This kind of focus is needed.

What lessons did I learn from this?

  1. Once your business has achieved a good footing, the next best thing to do is to scale it up in order to not only tap a bigger segment of the market but also benefit from the lower costs of operation presented.

  2. Operating on a larger scale tends to give a business the ability to effectively address the pain points of customers. My pain point had always been that of delays at the bus terminals as well as the need to head very early (sometimes at 5am) to the bus terminal in order to be guaranteed of transport. Once, while in Apac, I had to board the bus (Acana Diru) at 3am just to be assured of a seat to Kampala.

  3. Focusing on a market niche can pay off greatly if well done. Global Coaches has focused on Kampala – Mbarara route travellers.

I sincerely believe that this bus company has a great future if only the management can remain focused and avoid the pitfalls that have let down its predecessors in the business.

James Wire is a Small Business and Technology Consultant based in Kampala, Uganda

Follow @wirejames on Twitter.

Email lunghabo [at] gmail [dot] com

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Sudhir’s robbery must have been in connivance with Bank of Uganda Officials

As far back as 2010, word was rife on the grapevine about the unscrupulous nature of the operations at the then high flying Crane bank. Stories abound of the existence of a duplicate set of accounts, the use of unsuspecting individuals’ accounts to launder money, intimidation of key employees that opted to leave the bank etc.

So, while Mr. Sudhir Ruparelia was being glorified by the media for his feat as a billionnaire, I remained part of those who kept insisting that the end doesn’t justify the means. Money on its own isn’t worth its salt if it has a trail of tears in its wake.

The year must have been 2001 when a friend of mine set out to open up one of the first ever internet cafes in Kampala (and by extension, Uganda). He opted to take a bank loan and as security, submitted his father’s land title in the form of a prime residential property on Luzira hill overlooking the lake. To this day, I do not understand why he ended up at Crane Bank but those I have shared the story with tell me the bank was very easy when it came to lending money. Approvals for loans weren’t as laborious as other banks and not much due diligence was needed since it’s believed their interest was eventually in attaching whatever security that had been deposited.

This friend of mine, I’ll call him Akat, got a loan of UGX 15 Million Shillings and went ahead to set up the business. As fate would have it, internet use was not yet massive and only a few elites patronised it. The loan he got unfortunately attracted interest weekly on a compound rate basis. This is how it works out, imagine a Loan principal amount of UGX 15 Million attracting a 3% compounded interest rate weekly. It implies that by the end of the first week, the loan will have grown to;

UGX 15 Million (Principal Loan Amount) + UGX 450,000/= (Weekly interest of 3%)

= UGX 15,450,000/=

Come Week 2 and the total loan sum with interest for the first week becomes the new Principal sum i.e

UGX 15,450,000 (New Principal Loan Amount) + UGX 463,500/= (Weekly interest of 3%)

= UGX 15,913,500/=

You notice that within two weeks, your loan will have grown by nearly a million shillings. By the time two months are past, the original loan amount is likely to have doubled.

Akat struggled for a couple of months trying to keep up with the repayments until he realised that the business was not in position to service this loan. He tried selling off the business but the money offered wasn’t enough to pay off the now humongous loan sum. This led him to seek for work abroad and by a stroke of luck, an opportunity opened up in Europe.

In his own words, Akat told me, “The Crane Bank loans are designed to fail you. Imagine, I toiled in Europe, earning Euros 350 per day and it took me 6 months to pay up the loan. I just thank God that I retrieved my Father’s land title.

News of Crane Bank going under therefore never came as a surprise to many. We expected it. Our only concern was when. I recall talk doing rounds at one time of how the bank’s systems run amok and account holders found millions on their bank accounts that they were never aware about. Massive withdrawals were made by the crafty ones and no prosecution ever occurred. If indeed this was true, how did it go unnoticed to the Central Bank?

Section 4 (2)(j) of The Banking Act of 2000 states, “… the bank shall – supervise, regulate, control and discipline all financial institutions and pension funds institutions;”

It therefore leaves many of us wondering how a bank that was regularly getting Banker of the Year Awards could be so rotten at the core of its operations without the awareness of the Central Bank. The kind of fraud that has been unearthed so far could NOT have been carried out solely by Sudhir Ruparelia and a few cronies. No Way!!! We all know how information tends to leak from within institutions to the outside especially within industry circles. I doubt Crane Bank employees privy to some of the fishy dealings all kept mum. They definitely shared this information and that is how some of us were able to have red flags raised on this bank as far back as ten years ago. Like a puffed up balloon soaring up into the sky, we knew that all it would take was a spiky object to deflate it and bring an end to its flight.

I am no financial expert but there are some basics that can never skip my interrogative mindset. These are some of those;

  • How could a credit facility of over 3.5 Million dollars to Infinity Investments Ltd (Sudhir’s company) be written off without attracting any attention to the case? Is it that common for companies to default on loans in millions of dollars in Uganda only to be written off? In most cases the banks usually go after these businesses. That is a flag right there.

  • How could the transfer of titles for the plots where the bank branches were located to Meera Investments (Sudhir’s company) go unnoticed in an annual review of the Bank’s operations? Another Flag.

  • How can a phony purchase for banking software of US$ 10 Million not be given a nod of approval by Bank of Uganda?

  • How could Sudhir’s amateur attempt at concealing his 100% ownership of Crane bank go unnoticed all these years? Matters are worsened when Bank of Uganda labels these efforts as sophisticated. In an interview published on 2nd April 2012, when asked whether he had business partners, to which Sudhir responded, “I don’t like to engage in partnerships. I only have one business in which I am a partner with Godfrey Kirumira ….” Couldn’t such an utterance have raised a red flag?

I’m sure there is a lot more to this web of intricate theft than what has surfaced already into the public domain. It’s a shame that BoU kept a blind eye to all the rumors that have been surrounding Crane Bank all these years. This is another strong reason for us naysayers to advance as proof of collusion.

The times I have had bank transactions of substantial sums of money, I’ve always received calls from the bank with requests to furnish proof of why the transaction is being carried out. When I did ask why this was always the case, a bank official told me that transaction amounts over a certain limit need to be reported to the Central Bank and sometimes State House. There is therefore NO way Sudhir would have engaged in such financial fraud without some key people at BoU being in the know.

It is upon this premise that I believe heads have to roll at the Central Bank. The first action I would advise the Governor of BoU to do is resign from his position. This is not because he is guilty of having carried out the act, but a sign of remorse to show the public that stuff went wrong under his watch and he is taking responsibility since the buck starts and stops with him. We call this vicarious liability.

His action should be followed by the line managers stepping aside to pave way for an internal investigation to take place. It’s a matter of ethics here. No form of whitewashing can redeem their professional integrity at this stage, just like no amount of lipstick can turn a pig into a beauty queen.

All said and done, the people my heart goes out to are those that have been fooled for long into believing that crooked business personalities are the epitome of success. The thousands of youths and upcoming entrepreneurs that have attended Pakasa Forums whose panels are lined with star studded so-called business success stories that are as shallow as temporary graves will now be forced to rethink whatever knowledge they attained.

The biggest learning point from this saga and many more to come is that achievements without integrity are as useless as rains without good soils.

It’s time to rethink our basic morals, values and aspirations. Why would you build a multi-million dollar residence yet fail to remit Social Security contributions for the thousands of employees under your payroll? At this rate, Joseph Kony might appear a saint.

By the way, let us not always wait for people to fall out of political favour before doing the right thing. There are many more ‘Crane Banks’ in Uganda today that we need to get rid of.

For God and My Country !!!!

James Wire is a Small Business and Technology Consultant based in Kampala, Uganda

Follow @wirejames on Twitter.

Email lunghabo [at] gmail [dot] com

MTN’s “Unlimited” Limited Internet

I’ve been on the wrong side of various service providers as a result of my open expression of experiences while consuming services. It therefore came as a surprise when MTN Uganda called me up and requested that I try out the MTN Unlimited Internet Premium service.

Unlimited is a term that essentially means unrestricted, unconfined, boundless or infinite. So, in the real sense of the word, this service is not really unlimited. The package offers you internet access of upto 3 Gb on a daily basis. So, there is actually a limit only that it’s quite high for the average Joe to fully consume.

Being one with a mobile office, I rely a lot on mobile internet services to render my services. I must admit that I was one of those who were skeptical about this MTN offer until I tried it out.

In my days as a kid, I always demanded stuff like sweets from dad and mom whenever the opportunity presented itself. Today, my children demand data !!!! It is so serious that even when I claim not to have data, they mobilise resources among themselves and load a data package to see them through for a day or so. The kind of game apps they access can strain the regular data packages. This is another reason why I gladly wanted to test this service. How easy is it to deplete the 3Gb allotted daily?

I gave my family the challenge to deplete the daily allotted data and this meant unrestricted use of the internet. Where I used to limit them watching videos and TV shows online, this time round, they had a blank slate. They could hardly believe their ears. We all tried and worked towards this feat without success.

My initial observations show that it’s an always on service with much less downtime than my traditional data provider.

Consuming 3Gb of data is no mean feat especially if you’re not the type to always be at the computer. I tried watching all sorts of videos, encouraged my children to play online games, watch online study lessons, chose to upgrade software but alas, still failed.

This data service works well for urban connectivity, however, in rural settings, there are still challenges. I’m writing this article on a sojourn in Butaleja district and have had to do without internet while in my gardens and at home. Most urban dwellers can do with just about any service provider since their services are usually decent in such locations. It takes one a journey to rural locales to establish whether your data service is worth its salt. MTN Uganda has to find ways of improving 3G coverage nationwide.

There has always been this talk of lost data and I blogged about it before. It’s still a big problem apparently. I can authoritatively state that six (6) out of ten people I have interacted with have complaints about unexplained data loss. As a matter of fact, I personally transitioned from buying monthly data bundles to daily ones simply because of the ease of monitoring my data consumption. Imagine loading 1Gb of data for a month and by the third day it’s finished.

If you’re a power user and want to save yourself the data loss gymnastics, then I strongly believe opting for this “Unlimited” MTN Service is ideal. The cost of UGX 330,000/= monthly for the Premium option however leaves me wondering whether it is pocket friendly enough. However, there is the Basic option that goes for UGX 179,000/=. Maybe, I will consider subscribing for the latter.

Overall, my experience tells me, the MTN “Unlimited” Internet is worth having for the internet savvy.

James Wire is a Small Business and Technology Consultant based in Kampala, Uganda

Follow @wirejames on Twitter.

Email lunghabo [at] gmail [dot] com

Is D9, an Investment Fraud or not? Watch out!!!

Investment Fraud is defined by the Cambridge dictionary as the illegal activity of providing false information to someone so that they will invest in something.

You may or may not have heard of the various schemes promising heaven on earth returns to investors. One of those that has picked my attention in the recent past is D9. Rumored to be registered in Brazil and Hong Kong, it seems to have taken the gullible folks in Uganda by storm. Matters have been worsened by endorsement from men of the robes like Pastor Mark Kigozi of Real Life Church.

In this article, I will not dwell on how D9 works since I have no intention of being their salesman. However, I want to share with you the reader warning signs of an Investment Fraud. I hope by the time you’re done reading, you’ll be in a better position to tell whether D9 is a fraud or not.

Investment frauds are typified by all or some of the following characteristics;

  1. The guarantee of consistently good returns. Business investments are no fairy tale. A business opportunity may offer you wild returns in one year and total losses in another. NO legitimate business in the world will always guarantee you consistently good returns. Even drug dealers make losses occasionally when their consignments are tracked down and confiscated by the authorities.
  2. Unclear investment products or services. If you cannot point a finger at something straight and obvious that generates revenue for the business, just know there is a problem. I recall TelexFree that used to promise people money for simply logging in daily and placing adverts into a web system. The company apparently claimed it made money through the sale of calling cards. Today, the scam founders are facing litigation in the USA as millions bleed as a result of their lost savings.
  3. Unclear company information. A legitimate business usually is very straight up with information pertaining to its history, track record, business operations, tax filings among others. A decent amount of this information tends to be easily accessible on the company website. In the event that you cant readily get such information, step back and think twice.
  4. Pushy sales brokers. Anytime you are confronted by overly aggressive sales brokers who want you to make a decision instantly, let your sixth sense kick in. Why should you not be given an opportunity to go back home, consult or even think through the proposition?
  5. Unexpected phone calls or messages. You might all of a sudden be contacted by a long lost colleague who then urges you to meet up in order to discuss some hot business opportunity. Think twice. I once was sent a message by a young man I had interacted with over 6 months earlier. He insisted that I meet him in a certain office and I duly obliged. Upon reaching, I found a herd of people seated being taken through the motions of how to join a certain pyramid scheme whose name I have forgotten. My stay didn’t last more than ten minutes. Ever since then, I never respond to his calls and messages when he gets in touch.
  6. The promise of high returns in a short period. An investment offer that promises you crazy returns (usually many times above market rates) needs checking. In most cases, compare this offer of returns with the alleged product or service on offer.
  7. Low Risk, No Risk or Guarantee. Once you are presented with an opportunity that has any of these three hallmarks, it helps to open your eyes wider. Like I said earlier, there is NEVER a 100% guarantee in any legitimate business.
  8. The temptation of being part of an exclusive investment organisation. Whenever there is a promise of exclusivity, chances of a fraud scheme being engineered are rife. Even when you may make some money as an early adopter, that will not negate the fact that you are part of a scam whose pack of cards will fall sooner than later.
  9. The investment offer is based overseas. Most scams are usually offered from remote locations. There are countries that are notorious for hosting these scams and Brazil is one of those. They carefully craft their operations to ensure that they evade jurisdictions with serious financial systems to detect fraud. This also allows the founders to eventually walk away scotfree when the pack of cards crumbles (notice I used the term when and not if).
  10. They approach you in form of seminars and sales people representing schemes. Have you been called for a seminar or presentation in a hotel or large office of sorts? Have you been flooded by a team of marketers who promise you only the very best if you part with your hard earned or sometimes borrowed money? Offering guarantees? Insisting that you sign up before the seminar ends? Well …..
  11. They prey on your membership of a certain group. Winning trust is one of the key tactics of fraud promoters. This is the reason they strategically target groupings of people like church membership, sports fraternities, professional bodies etc. It is no wonder that people like Pastor Mark Kigozi are thriving with this D9 arrangement. Having a large fellowship of believers who outrightly believe in every word he mentions (fully convinced that it is the Holy Spirit at work), renders the success rate in such a congregation much higher.
  12. Diverting attention. When an investment scheme focuses more on gifts that success offers eg promoting a high life, good cars, opulence among others then only part of the story is being told.

I firmly believe that if your investment opportunity checks out with at least three of the issues I have shared here, then it’s time to rethink. Seriously!!!

I know poverty or the lack of money is making many of us gullible to the nearest offer of hope to become the next millionaire but do not forget that true wealth comes from working diligently.

King Solomon had the following to say about wealth:

Proverbs 12:11– “Whoever works his land will have plenty of bread, but he who follows worthless pursuits lacks sense.”

We all have land that God has given us. That land comes in the form of skills, talent among others. He wants us to utilise it as opposed to running around like headless chicken looking for the next big thing that someone else is introducing.

Proverbs 21:5- “The plans of the diligent lead surely to abundance, but everyone who is hasty comes only to poverty.”

A diligent person is one who works hard, is careful and thorough. Surely, does this scripture rhyme with those get rich quick 100% guarantee schemes? Youmay not be a Bible believer but one thing you cannot deny is the wisdom its scripture offers us.

Finally, DO NOT BE DECEIVED by spiritual leaders, apparently wealthy admirers of yours, family members or anyone that tries to get you into subscribing to something that has all the hallmarks of a scam. Keep that money of yours. It could be put to better use.

I hope I’ve saved someone.

James Wire is a Small Business and Technology Consultant based in Kampala, Uganda.

Follow @wirejames on Twitter

Email lunghabo [at] gmail [dot] com

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Hon Tumwebaze, Uganda should venture into Outer Space

I am one of the numerous Ugandans who expect little in terms of cutting edge knowledge and proactive initiatives from our distinguished Ministers. A good number of them are viewed as partaking of political rewards as dispensed by the Fountain of Honour.

After being entertained by pedestrian reasoning from the likes of Hon. Anite Evelyn one would be hard pressed to expect anything better from the current lot of ministers. However, I was taken back when I came across a statement that Hon Frank Tumwebaze made in the Parliament of Uganda in response to a query by Hon. Cuthbert Abigaba. I must admit that I’ve had to eat my words and change my attitude abit. I now believe there are some ministers and Members of Parliament worth their salt in Uganda.

The Minister had been tasked to share plans that the Government of Uganda has to tap into the vast opportunity provided by the Upper Air Space. In his response, he made an effort to point out a number of issues that got me and my fellow amateur astronomers excited. While it definitely fell short of many things, we agreed on one thing, it’s a good start and commendable line of thinking.

The use of the term Upper Air Space would literally restrict the kind of information the minister shared, if we are to go by some of the definitions out there. However, I would like to believe that what Hon. Abigaba wanted to know about was basically our plans as a country to tap into the opportunities offered by Outer Space.

The Minister’s full statement is available here in which he points out a number of issues that are being considered both as a nation and Africa as a whole.

According to Wikipedia, Outer space is defined as the near vacuum that exists between celestial bodies. Celestial bodies are natural bodies located outside of the earth’s atmosphere like the Sun, Moon, Jupiter, Mars, the numerous stars and planets that litter the sky etc. Scientists refer to the point of separation between the Earth’s atmosphere and Outer Space as the Karman Line. This is located 100km from the earth’s surface.

Karman-Line

Depiction of the Karman line. Image courtesy of Derekscope

Countries like the USA, Russia, China and India are already trailblazing in the space exploration arena and some people have been left asking why we mind so much about investing money in space exploration when hunger and poverty are still rife in our countries.

Uganda has largely been passive in this endeavour and this can be attributed to the overwhelming need to address survival basics for our citizens as well as a general lack of guidance in this regard. A discussion on outer space should not be restricted to satellites and communication technologies. We need to be looking beyond that. Like the explorers of yester-years who traversed the world by ship searching for distant lands and peoples, the opportunities outer space offers us today are;

  • Better monitoring and management of planet earth. We can be in position to track a lot of aspects about this planet including among others weather. This monitoring will definitely help us better manage the resources at our disposal as well as right the wrongs that have been done over the years.

  • Explore alternative planets/locations for settlement. Have you ever imagined that one day man shall be an interplanetary specie? Just like you have Ugandans living in Uganda and others in the U.K, we cannot rule out a time when we shall have humans living on Mars or dwelling in floating cities in space. Earth as we know it might eventually become hostile hence the need for us to establish alternative locations of abode in the universe where we can set up ourselves afresh in the event of a catastrophe on mother earth. You might for example not be aware that 50Km above the surface of the planet Venus, one finds an atmosphere that is very earth like. This could be one good candidate for a space colony through the use of floating cities.

  • The Solar System that we are a part of is just one of the millions of solar systems in the Milky way Galaxy. The Milky way Galaxy is just one of billions of Galaxies in the universe. Have you ever considered the possibility of other intelligent life forms existing elsewhere in the Universe? Sincerely, do you really believe that God only placed man in this universe? We may have been the only ones he made in His own image but we cannot rule out many other human like beings He created that are not necessarily in his image.

If we are to remain relevant to the future, as a nation we need to stand up and be counted. We have to join the Space agenda as fast as possible. Uganda has entry points that can be utilised to get into this arena if only we took time to educate ourselves more on this subject matter.

Located at the Equator with a big water body in the form of L. Victoria, Uganda is an ideal location for a Spaceport (used to launch rockets to space).

The earth is always continuously spinning on its axis. This spin can act as a boost when launching rockets into space. The experience is similar to someone giving you a push before you dive into the swimming pool. The strength of the push determines how fast you get into the pool. Due to the oval nature or the earth, in the 24 hours it takes for it to spin on its axis, a spot nearer to the North or South Poles moves a shorter distance than one at the equator.

earth_rotation

Earth’s rotation.

An object at the equator in Uganda already has a rotation speed of 1670 Km/h as opposed to one in Norway at about 800Km/h. Since the surface of the earth is travelling faster at the equator, a launch in the same area implies that the rocket takes off at a faster speed and reaches orbit much quicker. This has a lot of implications towards minimising the cost of launches.

The presence of Lake Victoria as a water body is ideal. These water bodies are favoured near launch sites because they tend to offer a good backup of water supply in the event that a fire erupted at the spaceport. Remember rocket launches are basically controlled explosions. Something could go wrong at the launch pad. SpaceX had a pre-launch explosion in September 2016. John Young (American Astronaut) once said, “Anyone who sits on top of the largest hydrogen-oxygen fueled system in the world, knowing they’re going to light the bottom, and doesn’t get a little worried, does not fully understand the situation.”

Uganda being on the Eastern side of the African continent is also another compelling factor. Most space launches (at least for geostationary orbit satellites) tend to take on the easterly direction during launch. With the Indian Ocean not too far, the stages that eject during flight can drop into the ocean.

Today, our Mpoma Satellite Earth Station is largely idle. It could easily be revived and used to track satellites most of which are largely cycling around the equator.

On the Human Resource front, as a country, Uganda has been acknowledged for having a large youthful population. This coupled by the high numbers of technology graduates being churned out of school is another mouth watering opportunity that awaits exploitation. These brains can be put to use in an elaborate space programme.

ISRO, the Indian Space Research Organisation has not engaged in any major inventions but simply utilised already available knowledge in the public domain to make leaps in the Space arena. They have sent probes as far as Mars at a fraction of the cost of NASA to study more about celestial bodies. This is encouraging news and implies that Uganda can easily follow suit.

For starters, Uganda’s Space Agency can count on the massive backlog of satellite launches to make money that would then fund other activities in this regard. A thorough strategic plan is required prior to taking this leap of faith.

Once again, Hon. Tumwebaze, I thank you for the insight you and your team has shown. I believe there are Ugandans out there ready to work with you to turn this Outer Space fantasy into a reality and appease visionary MPs like Hon. Cuthbert Abigaba. Please join the Uganda Astronomers’ WhatsApp group or the Facebook Page for starters so we can engage from both a civil and technical perspective.

“The probability of success is difficult to estimate; but if we never search, the chance of success is zero,” Giuseppe Cocconi and Philip Morrison’s paper ‘Searching for Interstellar Communications’ that was published in September 1959

Let us start NOW!!!

James Wire is a Small Business and Technology Consultant based in Kampala, Uganda

Follow @wirejames on Twitter.

Email lunghabo [at] gmail [dot] com

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Why Nakumatt struggles as Capital Shoppers and others thrive

While browsing the Twittersphere, I came across a thread in which the issue of Nakumatt Supermarket’s limping performance in Uganda was being discussed viz a viz local Ugandan Supermarkets.

Ms. Nancy Kacungira loudly wondered what the likes of Capital Shoppers are doing right to stay in business to which the renowned economic affairs analyst Dr. Ramathan Ggoobi duly responded by stating, “Alot. Location, good supply chain management (high fill rate), and damn, I’ll say it …. loyal ‘sectarian’ clientele.”gobbi_tweet

The last part of his submission is what I didn’t find worthwhile. So, as a supplier of supermarkets, I went ahead to respond as follows, “They pay us well and promptly. Including Quality (Supermarket). I find the assertion of “sectarian clientele” as lame reasoning by @rggoobi.”wire_response

Its eight years since I started supplying supermarkets with products and this has given me some time to appreciate the business. A supermarket is no different from a warehouse where suppliers bring their products for onward sale to customers. The only difference is that Supermarkets have to invest in a few things that make the shopping experience of a customer conducive. Their key issues of concern are usually branding, location, management systems, market identification and interior décor.

The success of a supermarket is hinged on three core factors as indicated in the illustration below.Supermarket_Success

When Uchumi joined the Ugandan supermarket space over ten years ago, they heralded a new era that saw them take supermarket branding to a new level all together. The supermarket enjoyed market leadership overnight, largely a result of the corporate buzz created whenever anything new is launched as well as the significant presence of Kenyan professionals in Kampala. Nakumatt followed suit years later and it too caught the attention of the Ugandan market by launching 24 hour shopping services. Within a short while, it had grown and surpassed Uchumi as well as other leading local supermarkets like Quality and Capital Shoppers.

During all this time, the local supermarkets must have been learning serious lessons from these foreign entrants. Nakumatt, Uchumi and Tuskys, all Kenyan supermarkets by origin had the money, systems, branding and rode on the wave of a significant presence of Kenyans in Uganda to kickstart their business. They also won over many Ugandan shoppers and a simple way to tell that is by studying various suppliers’ delivery schedules that largely rotated around these supermarkets.

So, the factors Dr. Ramathan Ggoobi attributed the success of Capital Shoppers to like Location were definitely considered by the likes of Nakumatt. Take a look at Nakumatt’s branches at Oasis Mall, Bukoto, Entebbe, Mbarara, Bugolobi (although they goofed up by placing another branch at Village Mall in the same vicinity). Consider Uchumi’s branches that existed at Garden City, Nateete, Freedom City, Kabalagala and Gulu. They were well thought out and always outcompeted neighbouring supermarkets. But somehow, they went bust. Uchumi is now spoken of in the past tense having fled with Billions of Shillings owed to local suppliers. Nakumatt is in intensive care unit, trying so hard to stay alive and relevant. How did they get to this?

I will rule out the economy because the same economy is where you find other thriving supermarkets like Capital Shoppers, Quality Supermarket, Mega Standard, Ssombe Supermarket, City Shoppers Supermarket, Senana, Cynibell among others. The customers are still existent considering that they are the very ones patronising the currently well performing supermarkets.

In my view and as a supplier, the one aspect of the business that these supermarkets did ignore and are now paying heavily for is the Supply Side (read as Stock in the diagram shared earlier). This is in tandem with Dr. Ggoobi’s point on good supply chain management.

A supermarket’s shelves are what they are because of the goods that suppliers diligently avail for sale. Without these goods being supplied, they remain empty and useless to any consumer. Most supermarket suppliers never get credit from their raw material suppliers prior to producing products for the supermarket. However, when it comes to supplying the supermarket, they are required to do so on credit. The credit terms range from a few weeks to two months. Consider that often times, the supermarket pushes the supplier to offer significant discounts which are hardly passed on to consumers. In essence, the supermarket receives an interest free loan since after sale, they can still re-use the supplier’s money on other activities of their choice.

Suppliers are usually resilient and able to patiently wait until the due dates promised for payment. Sometimes, the due date is not honored by some supermarkets and suppliers have to make multiple attempts and trips to get paid. This is where the likes of Uchumi, Nakumatt and Tuskys went wrong. They knew that being “large” and “credible” players in the market, the suppliers were at their mercy. Wrong!!! This perception might have been true for a while but as word spread through the networks of suppliers about their financial dishonesty, one by one, we begun pulling out of making supplies. Eventually, the shelves begun starving of our products and customers started noticing. This proved one thing, suppliers are as important as the consumers.

Another aspect is the shoppers’ psychology. The reason a good number of urban dwelling Ugandans abandoned the small shops in preference for Supermarkets was the ability to find everything they needed in one place and at a competitive price. This expectation can only be met when the supply chain is very fluid. So, by letting down their suppliers, these supermarkets once again exposed themselves and could hardly meet this expectation. End result? Customers begun gravitating towards alternative supermarkets that fulfilled this need. Take the case of a battered Uchumi, in its last days at Garden City mall, Capital Shoppers opened up a branch right below Uchumi’s premises and within no time, it was attracting a much bigger crowd. A relative of mine once intimated to me that he was fed up of going to that Uchumi branch due to the lack of a wide range of goods for sale. He felt so relieved when Capital Shoppers opened up. This too further cements the supply chain factor.

Now, back to the insinuation by Dr. Ggoobi that Capital Shoppers is thriving because of a “loyal ‘secterian’ clientele.If indeed this is worth noting as a reason, does it also imply that Nakumatt’s failures are attributed to the sudden absence or exit of a loyal sectarian (Kenyan) clientele? It is an open secret that Kenyans loved patronising Uchumi, Nakumatt and Tuskys. These very Kenyans are still around and their numbers have probably grown. Why is it that these three supermarkets have either closed or are limping in this market?

I do shop a lot at Capital Shoppers and Quality Supermarket but have not seen any sectarian tendencies in their clientele. I would be hard pressed to point out that the majority of shoppers “appear” to come from one region of the country.

Lets face it, the Kenyan supermarkets came in with a lot of SWAG and knew they would steamroll the local market in a bullish manner. While they appeared to be scoring early successes in this regard, their local counterparts used that time to re-invent themselves and learn a few things from the competition. The founders of Capital Shoppers and Quality Supermarket are very hardworking modest living Ugandans who started off in very humble ways. Their continued success even during this trying time of the economy can be largely attributed to the respect they accord their suppliers as well as being able to continuously learn and unlearn.

James Wire is a Small Business and Technology Consultant based in Kampala, Uganda

Follow @wirejames on Twitter.

Email lunghabo [at] gmail [dot] com

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