Category Archives: Business

I do blog on Business with a special emphasis on Small Business. How to set up the businesses, idea generation, and diverse topics focused on that niche area.

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

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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

Additional information got from:

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

Other Articles of Interest:

Good African Coffee Closure. Is Uganda’s economy on Auto Pilot?

Andrew Rugasira is no saint, however one thing I can authoritatively say about him is that he is a resilient entrepreneur who always turns ashes into beauty. Many years back, I recall him running a prominent promotions company called VR Promotions which bit the dust. He was humble enough to go into hibernation only to re-emerge a couple of years later with Good African Coffee.

When I bought the newspapers of the 25th of April 2017, I was taken back upon reading a story about how the tax man had closed down his business for tax arrears of UGX 1.2 Billion.

On the 23rd of April 2017, Ian Ortega posted a mind opening article on Facebook in which among others he stated, “… We pride in building mansions in our villages in a sea of mud and wattle houses. And in the end we pay for it with insecurity, with deaths. It makes no sense to have majority poor and few rich. It always backfires… Start doing something to make sure the economy works for everyone regardless of their field. Let it work for a musician, for an artist, for an engineer, for the teacher etc. That is how you build sustainable societies.

Having interacted one on one with Mr Rugasira a year back, I got to know quite abit about his ethos. While he is a hard nosed businessman, his passion for equitable growth and development is worth admiring.

Businesses close for various reasons and their closure has varying impacts on the economy. There are businesses whose closure will largely cause ripples among a few selected elites (who tend to be the noise makers) while others have the Fall Army Worm effect of distorting the bottom of the pyramid poor.

According to the New Vision, Good African Coffee has a network of more than 14,000 coffee farmers and has facilitated the set up of 17 (Seventeen savings and credit organisations) for these farming communities. The average household in Uganda has 5 members. This implies that if each coffee farmer is equivalent to one household, then the direct impact of his investment at this micro level has a reach of at least 70,000 people. Considering that in Uganda, it’s part of our culture for a household head to help various extended family members especially economically, we can safely assume that each farmer has an impact on 10 (ten) people in the extended family bracket. This implies that upto 140,000 people indirectly benefit from Good African as a result. On average we can safely state that at least 200,000 people from the coffee growing region are beneficiaries.

The New Vision further stated that the Good African products are available in over 700 UK Supermarkets as well as 500 stores in Africa. As a supermarket patron, I have come to learn that products on those shelves serve not only the purpose of consumer consumption but also national branding. How many people today in the UK swear by Good African Coffee? Judging by the inquisitive nature of today’s shopper, chances are high many have got to learn more about Uganda in the process. What better marketing for our nation?

While I am inclined to believe that management issues have definitely contributed to the status-quo, it’s quite sad that the tax man would be left to execute such a closure without proper appreciation of its wider implications. The Uganda Revenue Authority is not to blame since it is merely an execution agency tasked with collecting revenue for the Government. However, with all the tax breaks we keep hearing being directed to questionable foreign investors, why would a legitimately Ugandan owned and home grown business fail to be extended help? We just heard about the planned UGX 77 Billion tax relief that a number of companies whose list is led by the Sudanese owned AYA Group of Companies are likely to get. In my view, the footprint Good African Coffee has is much wider than AYA and any of those companies on the bail out list yet above all it impacts the lowly farmer whose sole hope for survival is farming.

We always hear of decisions being made in National Interest and this is what Hon. David Bahati, the State Minister of Finance for Planning emphasised while meeting Parliamentarians over the AYA bail out. Why was Good African overlooked?

  • Is it because the latter promotes the well being of peasants and there is this general fear among the political elite of genuinely empowering them?

  • Could it be that Rugasira doesn’t have the right brokers to argue out his case before the high and mighty in the Ministry of Finance?

We have been led to believe that overnight business moguls who set up with Shopping malls out of the blue are the ones that deserve respect and propping in order to keep our economy afloat but if we do not babysit the Rugasiras of Uganda and ensure that their businesses succeed at all costs, we shall continue in the cyclic rat race characterised by chronic poverty. Government should sit down Andrew Rugasira, make it clear to him that the success of his business is a national priority and could even have security implications considering that a large section of the farmers are from the already troubled Rwenzori region who might perceive matters differently. The riot act should be read out to him before working out bail out terms and conditions.

PS: In case you are comfortably employed with a regular salary and high flying MBA, you might have a problem appreciating the challenges genuine entrepreneurs go through in this Ugandan economy of ours. One day though, I hope you will be around long enough to appreciate what goes on the other side of the bridge.

I say, Bail Out the Brother !!!!!!

[UPDATE: Two days after publishing this aricle, Good African Coffee was reopened. I thank the authorities for having exercised a sense of sobriety. Now the ball is in Rugasira’s court to ensure he complies as required. ]

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

Follow @wirejames on Twitter.

Email lunghabo [at] gmail [dot] com

Other Articles of Interest:

HOW TO – Start a Mobile Money Business

Mobile Money (MM) is a form of electronic money service that enables phone owners send, receive and store money. The relative safety, ease of mobility and convenient nature of this service has endeared it to all sections of the society from the rich to the poor.

Before we proceed, it is important that we familiarise ourselves with some terminologies.

Agent: A person or business that is contracted to facilitate transactions for users. The most important of these are cash-in and cash-out (i.e loading and withdrawing money onto/from the MM system). They sometimes register new users, a service that earns them extra commission. As front line personnel, they also teach users how to best use the service.

mobile_money_agent

A Mobile Money agent in Kyebando, Kampala, Uganda

Aggregator: A person or business that is responsible for recruiting new MM agents. This role is sometimes combined with that of a Master Agent.

E-Money: Known as Electronic money in full. It is stored value held in the accounts of users, agents and the provider of the MM service.

Cash In: The process by which a customer credits their account with cash. This is done usually via an Agent who receives the cash and proceeds to credit the customer’s MM account.

Cash Out: The process by which a customer withdraws cash from their MM account. It is done usually by an Agent who gives the customer cash equivalent to a transfer the customer makes to the Agent’s MM line.

Float: The balance of e-money or physical cash that an agent can immediately access to meet customer demands to purchase or sell e-money.

Liquidity: The ability of an agent to meet customers’ demands to purchase (cash-in) or sell (cash-out) e-money.

MasterAgent: A person or business that purchases e-money from a Mobile Network Operator wholesale and then resells it to agents who in turn resell it to users. They usually manage the cash and e-money liquidity of their agents.

Mobile Money Transfer: A movement of value that is made from a mobile money account to another through the use of a mobile phone.

Platform: The hardware and software that enables the provision of a mobile money service.

In Uganda, the Mobile Money system works as follows;

The Mobile Network Operator (MNO) like MTN, Africell and Airtel sets up a platform that offers a service for phone owners to be able to “store and transfer” e-money using their phones.

A phone owner registers for the mobile money service with the telecommunications provider who creates the mobile money account associated with that particular registered phone number.

The customer then proceeds to cach-in onto their mobile money account by using a Mobile Money agent whom they give cash in exchange for e-money on the Mobile Money account.

This customer can through the execution of some commands send e-money to another mobile money account holder anytime they so wish. The recipient is at liberty to cash-out as and when they desire.

Just to show you how Mobile Money services have permeated our economy and become an integral part of our operations, picture the following scenarios;

  • Oloya works in Kampala and is constructing a house in the village. Every two days he is expected to pay for the services of the builders. By using MM, he is able to pay each builder directly onto their phone hence being assured of their commitment.

  • Nankabirwa is a produce dealer who has a network of buyers traversing numerous villages in Rakai, Masaka and other outlying districts. Their role is to identify produce for purchase and acquire it. By using MM, she is able to send money to these buyers of hers in the nick of time. She makes at least eight transfers daily during the peak harvesting season.

  • Pabire a rice farmer in Doho rice scheme by virtue of his mobility utilises MM transfers to pay for his workers’ services. These workers engage in activities like planting and weeding rice, land preparation, harvesting among others. This allows work to flow smoothly even in his absence.

  • Bakka leaves home for work fully knowing that there is no money for food that day. When he reaches his workplace (a washing bay), he transfers his income from washing the first three cars of the day to his wife at home using MM. Come evening, he is assured of finding food at home.

  • Sangalo is organising a wedding and she has reached out to relatives and friends to fundraise. The mode of pledge fulfillment being used is MM. Those contributing are sending their cash pledges directly onto her Mobile Money account.

  • Mugerwa, a parent at one of the boarding secondary schools is called by his son who reminds him about the study tour they are supposed to go for requiring a contribution of UGX 50,000/= per student. Instead of driving there to make payment, he simply sends th money via MM to the concerned teacher who then registers his son for the trip.

  • One can also pay for electricity, water, television and other services using Mobile Money.

So, how does one start this business as an Agent?

You need to have the following basics:

  • Two sim cards (Airtel and MTN). They are the biggest networks and handle at least 98% of the transactions. Others like Africell are still insignificant players.

  • Display Table. You need to have a display table that will not only store the tools of your trade but it can be stocked with other complementary products like mobile phones, accessories like phone jackets, screen protectors among others.

  • A dual sim card phone

  • A chair

  • Transaction books

  • Location

There are three approaches one can use to kick off. They are;

  1. Hiring a Transaction Line: This one involves hiring an already registered Mobile Money transaction line from someone or a company. With this line, you simply start off business without going through any registration hurdles. The things to note about this option include among others:

    • Paying a monthly rental fee of at least UGX 50,000/= for the MM line.

    • Income is in the form of a percentage commission earned on each transaction and is paid at the end of the month.

  1. Acquiring a Transaction Line through an Aggregator or Master Agent: Aggregators or Master Agents are companies that control specific territory on behalf of the Mobile Network Operators. Territories could include places like Kyebando, Kanyanya, Nakawa, Seeta, Bweyogerere e.t.c. These Master Agents get agency tenders through some bidding process and thereafter become responsible for licensing MM agents in their territories. For one to be licensed as an agent, you need to:

    • Present an Identity Card

    • Present a letter of introduction/recommendation from the Local Council

    • Have a deposit of UGX 80,000/= (Eighty Thousand Shillings) to purchase the kit

    • Fill in an application form

    • Have starting Float of UGX 2,000,000/= (Two Million shillings)

Income earned here is in form of commission on transactions. An additional surcharge of upto 10% (depending on the Master Agent) of your income is deducted for tax to the Uganda Revenue Authority.

  1. Direct Registration with a Mobile Network Operator (MNO): One is at liberty to register as an agent directly with an MNO like MTN or Airtel. Its requirements are more than the previous two options and they include:

    • Business Registration

    • Introduction/Recommendation letter from the Local Council

    • Functional bank account (for at least three months)

    • Filled application forms

    • An 80,000/= (Eighty Thousand Shillings) charge for the kit

    • Initial Float of UGX 2,000,000/= (Two Million Shillings) only.

Like the rest, income earned is in form of commission made on the transactions carried out. Unlike option 2 (two) above, with this form of registration, you are only charged the tax levy for Uganda Revenue Authority when your commission earnings exceed the UGX 1 Million Shillings threshold. The MNO then proceeds to deduct 4% which it channels to the tax man as opposed to the 10% deduction by Master Agents. This is definitely a better deal.

Option 1 is as instant as they get. If you want to hit the ground running, you may opt for this one. However, the margins are greatly reduced by the fact that you hire a Transaction line at a fixed monthly sum and because you are operating under another Agent, your margins are lower.

In the case of Options 2 and 3, After application and paying the UGX 80,000/= for the kit, you have to wait for two to three months prior to being approved as an agent. Once that is done, an Agent kit is availed and it consists of; three (3) phone lines, a phone handset, transaction books and other branding material like an apron.

Upon collection of this kit, you’re expected to deposit a float of UGX 2,000,000/= (two million shillings) on your Mobile Money line. Do I see you getting disheartened? True, raising this two million shillings lumpsome is a daunting task to many but there is always a way out. One trick is to borrow that money for a day, place it onto the MM line as float subject to approval and collection of your business material from the Master Agent or MNO. Once you have all that you need, proceed to cash out the borrowed money and return it to the lender.

How do you earn commission?

There is a well established commission structure clearly outlined by each MNO.

Airtel Agent’s Commission Guide (Extract)

Transaction Tiers

Cash In

Cash Out

Min

Max

500

2,500

150

100

2,501

5,000

150

125

5,001

15,000

285

450

125,001

250,000

520

1,300

1,000,001

2,000,000

4500

7,500

When a customer walks in and requests to deposit e-money onto their MM account, depending on the amount, you earn the commensurate Cash-In amount. If it is UGX 10,000/= they are depositing, then the agent will receive a cash-in of UGX 285/= on that transaction. Similarly, the Cash-Out commission applies to money withdrawals from the MM account.

Airtel does allow agents to check their commission status on a daily basis via the phone. However, the same does not seem to be true with MTN Uganda.

Success Factors for the Moble Money Agent business

  1. Trustworthiness: If you have to employ someone to operate this business on your behalf, you need to be able to trust them Anything short of that, you’re setting yourself up for failure. There are very many opportunities that these workers get to collude with crooks.

  2. Location: It is crucial to choose a location that is good. Since the commission on individual transactions looks small, the trick lies in volumes. How many transactions can you notch up a day? Ideal locations are corners of buildings or roads, boda-boda stages, busy trading centres, low cost residential suburbs, shopping arcades, taxi parks/stages among others.

    mm_corner

    A corner location like this one is very conducive for the Mobile Money business

  3. Customer Care: Many customers are ignorant about the operation of the Mobile Money services. They tend to ask questions one may consider dumb hence the need for any agent to have very good customer care skills. While researching for this article, I found agents being swamped by customers who wanted help with Sim Card verification. Imagine!!! Do not compromise on this particular issue when recruiting someone for your business.

    mm_operator

    Good customer care is dependent on the Mobile Money operator

  4. Mathematical Knowledge: The operator needs to have good mental maths skills. Customers come with all manner of requests and you need to be quick to mentally calculate and determine how much to transfer as requested. I witnessed a case where a lady came and requested the operator to cash out money from her account which has UGX 15,000/= (fifteen thousand) and ensure that it remains with only UGX 6,000/= (six thousand). He had to ensure that the transaction fees were factored in too. The operator had to first engage in some quick mental math before eventually fulfilling her request.

  5. Float Availability: How much do you have as e-money or cash? Customers keep walking in and out either cashing in or cashing out. You need to be in position to meet their needs most of the times otherwise they are likely to resort to the competition. I once had a need to cash-out UGX 300,000/=. I walked to three different MM agents in Wandegeya and none could meet my need. Out of frustration, I settled for partial cash-outs based on the float each agent had and this saw me use four different agents to meet my need. Since then, I never go to Wandegeya for MM cash-outs. Remember, if you set a reputation of always having adequate float, more customers patronise your services thereby enriching you commission-wise.

What are some of the notable challenges of this lucrative business?

  • Conmen: There are many conmen on the loose who target MM agents. Any form of sloppiness can lead to severe punishment. There was a case of a man who pulled up his sleek car infront of the agent’s display table, requested her to transfer UGX 450,000/=. She faithfully yielded as he pretended to count some money. The minute he confirmed reception of the money, he simply drove off leaving her stranded.

Most sophisticated conmen have been observed to operate from the city centre locations. So, in case you’re starting out, as you gain the experience, try to operate from the suburbs first.

  • Theft: Due to the carelessness of some agents, there cases of customers whose sole intention of patronising your service is to get to know the PIN number used to access the MM line. Most times agents type in the PIN number in full view of the customers. What the crooks then do is to later return and find a way of stealing the phone handset. Within minutes, they have withdrawn all the money and discarded the phone.

  • Cash Robbery: There are cases where an Agent has to bank the money earned. Sometimes due to late business closure, they might have to go home with the earned cash. Depending on how secretively one handles their operations, thugs tend to get wind of your earnings and simply way lay you.

  • Attention to detail: A customer once walked to an agent and requested to cash-in UGX 99,000/= (Ninety Nine thousand shillings). The agent instead punched UGX 990,000/= (Nine hundred and ninety thousand shillings). The customer paid up and left. During the evening reconciliation, she realised there was a massive shortfall and upon close scrutiny, the anomaly was discovered. It took a week of negotiations and a 100km journey to Masaka from Kampala for the money to be recovered.

  • Collusion: Some staff running the MM outlets have a tendency of conniving with other people to defraud their employer. They then feign ignorance or put the blame on mistakes.

Just to give you an idea, earnings can start from as low as UGX 50,000/= (fifty thousand shillings) per line per month with start-up Float of UGX 500,000/= (Five hundred thousand shillings) reaching an average of UGX 1,000,000/= (one million shillings) with a float of UGX 3,000,000/= (Three Million shillings).

The monthly pay for Mobile Money Operators ranges between UGX 100,000/= and UGX 150,000/=.

While offering the MM services, always consider selling complimentary products like Airtime, Flash disks, Memory cards among others. Airtime commissions can very easily supplement your income too. The current commission structure on airtime of UGX 10,000/= (ten thousand shillings) is as follows:

MNO

% Commission

MTN Uganda

4%

Airtel

5%

Africell

7%

Welcome to the Mobile Money Business.

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

Follow @wirejames on Twitter.

Email lunghabo [at] gmail [dot] com

Other Articles of Interest:

Additional information from GSMA – Mobile Money for the unbanked.

HOW TO – Start a Chapati Business

Rolex, one of the CNN recognised world famous foods is basically a Ugandan Chapati wrapped around a fried egg. Chapati is one of the most sought after snack like foods by all categories of consumers.

chapati

Chapati as it is known in Uganda

Making and selling Chapatis is one of the businesses that many find easy to set up due to the low start-up investment costs as well as high demand for the product(s). It is however important to note that while you can run it as a standalone business, it is always wise to have two or three other complementary products alongside it in order to reap maximum benefits. Some of these products are Samosas (sumbusa) and Mandazi that have similar requirements for inputs. What is shared here can be similarly applied to other products like doughnuts.

What infrastructure do you need to effectively run a Chapati business?

  • Operating Table. Notice the concealed compartment. It is a pre-requisite when selling food products by the roadside in Kampala.

    OperatingTable

    Operating Table for a Chapati business

  • Charcoal Stove

    CharcoalStove

  • Saucepans (At least two big ones)

Saucepan

  • Frying pan (For preparing the chapati)

FryingPan

  • Bench (for customers to sit on while eating)

  • Plastic plates (for customers to use when eating)

  • Jerrycans (keeping a water reservoir for customers to clean their hands or even wash your utensils)

  • Basin (for mixing dough)

Key considerations when setting up the business

This is a basic, easy to set up business. However, one need consider the following issues:

  1. Business Plan: A basic plan can suffice. It ought to answer a few questions like target market, desired sales targets, long term outlook, product mix (are you dealing in chapati alone or a mixture of products), planned operation approach among others. If you feel encumbered writing it down, at least have some of these issues answered mentally.

  2. Recipe: For those that know all about Chapati, you definitely can tell the difference between a good and bad one. This usually boils down to recipe and of course workmanship. Considering that there are many chapati sellers especially in the key trading or residential areas, having an attractive recipe will guarantee you return clients.

  3. Location: In this business, location is paramount. It is essentially a roadside business whose ultimate goal is to prey on the gullibility of people going about their usual routines. You need to make it as convenient as possible for someone to part with that loose change in order to satisfy their hunger pangs. Common locations for chapati stalls are trading places with shops, restaurants and supermarkets; residential neighbourhoods; public transport stages as well as environs of bars.

    location

    Notice the strategic roadside corner location of this chapati business

  4. Raw Materials: Other than the earlier mentioned equipment, recurrent costs go to cooking oil, Wheat flour, baking powder and any other ingredients of your choice. Most of these are readily available in supermarkets and shops. Just make sure you purchase quality and unadulterated products.

  5. Products: Chapati can be packaged in different ways to form different products. You can offer a plain chapati, Rolex or even a Kikomando (Chapati mixture with beans)

    kikomando

    Kikomando, one of the best selling products

  6. Human Resources: If you do not plan to directly run the business, then you need to hire decent people or a person that will ensure you offer a very tasty product as well as manage customers well. Do not underestimate the kind of person you choose to play this role. They are the face of your business. Structure out a motivating payment structure. As opposed to a fixed salary, a sales oriented approach towards payment is likely to be more enticing.

hr

Some of the factors that attract customers to your chapati stall are;

  • A nice recipe

  • Good public relations / sales language. The way your staff talk to the customers especially ladies who happen to be the biggest customers is key.

  • Smartness. Ensure that you or your staff manning the stall is smart at all times.

  • Endeavour to keep the operating area as clean and free of insects like flies.

How can one invest in the Chapati business

One can venture into this business in different ways. Some of those that I have been able to identify are:

  1. Renting Space. You might be having a shop or premises that are in a strategic location by the roadside. You can simply rent out space to anyone who is interested in setting up a chapati stall and they are in position to pay something commensurate monthly.

  2. Hiring a Location and erecting key infrastructure. As seen earlier, the operating table can take on different designs as well as abilities. Some people have specialised in identifying customer friendly locations, erecting a shelter as well as the required operating table then renting out the facilities to actual chapati sellers for a daily rate. One of those locations I know of earns the landlord UGX 50,000/= daily!!!!!

  3. Acquire all the requisite infrastructure and set up a chapati stall. This would imply running the business in its entirety. It might involve you manning the stall directly or hiring an individual that you pay.

What is the sales outlook like?

The location in which I did the research from was in a Kampala suburb called Kyebando. It is not as busy as many of the suburbs I know. However, the sales figures were quite interesting.

One packet of Wheat Flour weighs 2 Kilogammes and on average produces 20 chapatis. The highest selling stall in that area consumes not less than 24 packets daily. The arrangement used is option two where the actual chapati seller hires infrastructure from someone else. He pays a daily rate of UGX 50,000/=. Considering that each plain chapati costs UGX 500/=, this guy should be earning gross revenues of at least UGX 240,000/=. This is exclusive of extra income that comes from Rolex and Kikomando sales.

Something definitely looks quite appealing. Don’t you think so? If I were to go into this business, I would focus on eventually setting up a chain of outlets using investment model II above.

Welcome to the Chapati business. I wish you the best in your endeavours.

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

Follow @wirejames on Twitter.

Email lunghabo [at] gmail [dot] com

Other Articles of Interest:

HOW TO – Start a Snacks Business

A Snack is defined as a small portion of food or drink or a light meal, especially one eaten between regular meals (Dictionary.com). Snacks are one of the top selling items in any shop or supermarket in Uganda. Everyone everywhere somehow eats a snack or two daily.

In Uganda, the common snacks are ground nuts (pea nuts), Soya, Mandazi, Chapati, Simsim, Crisps, Chips (french fries), Sumbusa, pan cakes, doughnut, popcorn, gweke (fried maize), cookies among others.

The snack business is characterised by the following;

  • Low entry barriers (can easily be started with few resources)

  • Easily run as a home business

  • Low margins

  • Requires high volume sales

  • Price sensitivity

If you have any remote interest in cooking, then this is one of the most obvious businesses to pursue. Before you start worrying about how to sell the product made, let us scan through the various issues that need to be addressed.

Key Considerations

To set up a snacks business it is crucial that one addresses the listed issues:

  1. Business Plan: Have one, however basic. This plan should be able to guide you on what you plan to produce, how you plan to sell it, anticipated trading volumes, an overview of your operating expenses, targeted sales price among others.

  2. Recipe: Come up with a recipe for the snacks you want to produce. This is very important since you are entering a market that is likely already flooded with similar snacks. It helps if you find a key differentiator. An example, if you chose to go into the Fried Mukene Snacks business today, the edge would be in adding some spices to your recipe that will attract customers to your product.

  3. Raw Materials: You definitely need to acquire raw material which will be processed to form the snacks. This raw material is key in your value chain. Ensure that you set up a steady supply of the raw material to avoid breakdowns in your production cycle. Nothing hurts customers like getting accustomed to your product and then they all of a sudden have to bear with its absence from the market for a week or so. No amount of excuses will win all of them back. You will essentially have gifted them to the competition. If you can stock the raw material to avert such instances, do so.

  4. Production Equipment: You’re going to have to acquire equipment necessary for the production of these snacks. Depending on the snacks in question, the equipment can be as basic as they get. Look around in your local market, talk to people already in similar business to find out where they source their equipment from or at worst, visit the upscale supermarkets and shops that deal in the high end equipment. Your pocket and planned target market is key in determining what kind of equipment you settle for.

    IMG_9700

    Plastic packaging can be sealed with either the electric sealer, flat iron or candle.

  5. Production Location: Where do you plan to make the snacks from? This is dependent on multiple factors among which is your target market, resource availability, production expectations, type of snacks etc. There are snacks that need to be consumed within a short timeframe after production for the best customer experience like chips, rolex (chapati & egg), sumbusa or fried fish. You also have snacks that can be kept for a while and even packed like mandazi, cookies, roasted groundnuts and gweke. The longer lasting snacks can always be processed from any location, packed well and sold in entirely different locations while for the quick to eat snacks, you need to position your production facility near the customer.

  6. Packaging: This has to do with the way you present your product to the customer. You could choose to go it anyway you want but first assess and see how others are doing it. If you’re going to use supermarkets and shops to retail your products, you need to have decent attractive packaging in place.

    IMG_9697

    Compare the two packagings. Which one gives better appeal?

    If you plan to sell by the roadside, then all you need might be old newspapers in which to wrap the snacks. Align your packaging with the target market so that you avoid over or under investing in it. This has a direct impact on your sales performance.

  7. Branding: This is the practice of creating a unique name and image for a product in the consumer’s mind. As you set out to sell your snacks, you need to create an identity for them or else they will get lost in the multitudes of products out there. A customer should be able to know that they are buying your product and not any other. Near my home, there is a Chapati seller who branded his stall as Budaka Boys. As a result, it is very convenient for me to send my 8 year old to buy his chapati. Do not undermine your days of small beginnings. Most big name product brands started small. Work on the branding as you go along with the business since it is likely to significantly complement your other efforts. I have developed three household product brands from first principles today and hence know what it means.

  8. Sales Strategy: By now you should be having an idea about how you plan to sell your product. There are numerous ways snacks are sold and some of them include; roadside sales, door to door hawking, office to office hawking, supplying shops or supermarkets, online (whatsapp, facebook etc) among others. Your choice should be determined by the target market you have in mind, cost of product, packaging and capital investment at your disposal.

  9. Human Resources: Do you need to hire workers? Can you do this work on your own (at least for starters)? Are you able to pay the workers? Do you need workers in the production or sales and marketing areas? Ask yourself leading questions before you make a decision. Alternatively, even when you need workers, maybe starting with family labour could be a better strategy. It’s worth learning from the Indians here.

  10. Money: The snack business in its most basic form does not require lots of money to start. With UGShs 100,000/= (Approx US$ 30) one can kickstart this business. However, as stated earlier, being a low margin business, you will need to target volume sales before making sensible returns. This implies re-investing your proceeds religiously at least for the first six months in order to grow the business operations.

This may not be an exhaustive guide but should give you a good idea of the landscape you should expect to find going into the snacks business. Feel free to contact me for more detailed input.

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

Follow @wirejames on Twitter.

Email lunghabo [at] gmail [dot] com

Other Articles of Interest:

HOW TO – Start a Supermarket

A Supermarket is a large self-service shop selling foods and household goods, according to the English Oxford Living Dictionary. In Uganda, you might want to avoid sticking to that definition by erasing the term large.

We have supermarkets that cover over 5000 Sq. Metres while those in most residential neighborhoods are as small as 20 Sq. Metres. It’s important that we have a similar appreciation of what a supermarket means in the Ugandan context before going ahead with this article.

One of the businesses Ugandans have given attention in the last ten years is the Supermarket business. As a supplier of products to supermarkets, I have an eye for locating the new ones considering that the wider I cast my net, the more sales I make.

img_9623

A typical neighborhood supermarket in Kampala, Uganda

From my observation, this is one of the easiest businesses to set up and yet potentially challenging to run. You could choose to directly manage its operations or hire a team to do so. The former option is likely to reduce on the operational headaches by far.

What do you have to consider when setting one up?

  1. Location: The biggest success factor for this business is location. Where you put your supermarket will clearly determine not only the category of clients you attract but also their numbers and frequency of shopping. A supermarket located by the roadside with little or no parking slots for cars had better be near a busy public transport stage. You could also locate it in an affluent suburb or on the road leading to such a suburb from a busy work area of the town. However, in this case, having good parking is a big advantage considering the likely transport mode for most of the middle class families. One of the best locations also is residential areas. Setting up one within an estate or its environs offers a much bigger market guarantee especially if the estate is big in size.

  2. Ground Floor: Wherever the location you settle for, always insist on having the supermarket on the ground floor. Anything short of that will lead you to failure right from the word go. Most Ugandans are not into the habit of climbing stairs just to get stuff done. It is the reason you find most of the storeyed buildings in the city having tenants occupying only the first three floors with the rest being empty. Suppliers also have an easy time when delivering products since having to lift them to higher levels might involve much more labour and time.

  3. Parking: Availability of parking for cars is crucial if you want to reach out to an affluent or mixed client base. Depending on your location, you might want to insist on having parking space near or at the front of the supermarket.

  4. Branding: This can be a complex matter but in the most basic way, simply ensure that you come up with an appealing name and graphics for the business. This process needs to put into consideration your likely target customers and long term plan for the business.

  5. Fittings: Get your internal fittings right. The shelves, cold storage facilities, tables, security among others. The extent of these fittings is determined by the spread of services and products you intend to provide. A basic no frills supermarket intent on merely retailing basic household goods would focus on shelves, a cashier’s table and one or two fridges.

  6. Supply Chain: Supermarkets need suppliers in order to serve their customers. Supplier X brings her baked Cakes, the supermarket displays them on the shelves and customers buy. After sale, the supermarket notifies the supplier to restock as well as receive payment for the previous consignment. The beauty with this is that as you set up the supermarket, suppliers start flocking the venue asking to be registered. So, it is among the easiest to handle.

  7. Human Resource: You need people to run the supermarket. Even when you choose to manage it directly, depending on your scale of operation, there is always that need for a few extra hands to help in:

    • Attending to customers

    • Receiving products from suppliers

    • Security

    • Cleaning the supermarket

    • Managing books of accounts, e.t.c.

  1. License: Get a trading license from the local authorities. This trading license is paid for annually and has to be factored in as one of the recurrent costs.

  2. Business Registration: With things getting tighter in Uganda today, you can hardly open up such a business without having some form of registration. Identify whether you want to register a Private Limited Company, Sole Proprietorship, Partnership or any other mode. This is a pre-requisite in order to get a Tax Identification Number from the Uganda Revenue Authority.

  3. Business Plan: Try to have some form of written business plan. I know, when I talk about this, you’re probably imagining a one hundred page document filled with all sorts of academic brouhaha!!! No. A business plan can be as simple as a three page document listing the key issues and how you plan to deal with or achieve them. In the case of a supermarket, one of the issues you need to address is the products and their pricing.

    • What mark-up do you place on your products and how does the eventual price affect the ability of your target market to purchase?

    • What type of products do you stock? You have no need stocking electronics like Televisions in a supermarket located in a housing estate. That shelf space is better used stocking washing detergents.

    • What product sizes or packaging do you opt for? Detergents like Ariel or Omo are on high demand and purchased by most households. However, the purchase quantities vary from one market segment to another. The affluent moneyed class prefers to buy the One Kilogram or even Five Kilogram packs while the low income households prefer to buy the smaller 100 gram packs. Study your market and stock the right product sizes.

  1. Return Policy: Set a clear policy on product returns. Often times supplied products get expired, damaged or might be defective right from the factory. As a supermarket, you do not have to bear that as a loss, it should be clear to the suppliers that they replace any products that cannot be sold to customers for one reason or another.

  2. Supplier Payments: Most suppliers offer credit to supermarkets save for a very few like Milk and bread suppliers who tend to collect their money upon delivery. However, for those that extend credit, it’s crucial that you have a very organised system of managing them. Some supermarkets settle outstanding invoices every two weeks, thirty days or even forty five days. Others clear each pending invoice upon product depletion on the shelf. Setting up a predictable payment system for the suppliers not only endears you to them but also ensures that you manage your cashflow better. This particular point is the reason Uchumi Supermarket closed operations in Uganda and Nakumatt Supermarket too is currently struggling to remain in business.

  3. Point of Sale System: This is an electronic system used to record transactions at the point of payment in a shop or supermarket. It could be crucial or not depending on your scale of operation. If it’s a small Mom & Pop neighbourhood supermarket that you directly manage, you may start without it. However, for a business you aren’t actively managing, this system will help you so much as it allows you to make daily audits of sales by recording all transactions.

  4. Theft: For as long as you get into this business, expect this to be a sticking issue. Globally, supermarkets put a 3% mark-up on their product pricing to cater for just this. While you can employ technology and other means to reduce its prevalence, theft will always occur. How does it happen?

    • Walk-in customers. There is always an army of people who have made it their livelihood to steal products from supermarket shelves and find their way out without paying. This is one of the reasons you need an extra hand to run the supermarket. They can keep watch over such activities. However, what happens if they collude?

    • Crooked Suppliers. There are cases of suppliers who deliver less than what has been indicated on the invoice. It implies that you pay them for goods that were never supplied in the first case. Matters are made worse when they collude with your staff to make these false declarations.

    • Staff. Internal supermarket staff could also be a source of illicit product loss. They tend to take advantage of the trust bestowed upon them to engage in theft. In bigger supermarkets, they are known to form networks that ensure the untraceability of their illegal activities. The closed Uchumi Supermarket was a glaring example that suffered from internal staff theft.

  1. Money: Finally, have money. While I cannot give you financial estimates, by perusing through the list of issues presented so far, you can get a good idea of what to prioritise and hence determine how much you need to set up the business. The best thing about it all is the fact that product stocking which tends to cost a lot is largely on credit hence reducing the overall initial financial burden.

I hope you are now ready to start that supermarket business. Do not waste any more time. Get at it right away.

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

Follow @wirejames on Twitter

Other Articles of Interest:

HOW TO – Start a Home Business

The signs of a struggling economy are allover us. Everywhere you turn, businesses are closing and the new ones that open can hardly last six months. The spending power of Ugandans has greatly reduced thereby affecting many an entrepreneur.

When you take a walk through most of the shopping centres and office buildings in Kampala today, you’re likely to find many closed shops and business premises. The spiralling rent charges under a climate of reduced business are leading many to abandon city operations or if not business altogether.

Despite these grim signs, we Ugandans are known for our entrepreneurial spirit. We always want to have something on the side. Recently, while having lunch with a friend that had just been registered by the Architects body, the first thing he told me was, “I want to register my own Architectural firm now.”

I however want to share with you the idea of doing business from your home. This is a concept many are not aware about or feel inclined not to embrace due to various perceptions. However, if you really want to continue being an entrepreneur under these tough economic times, you need to seriously consider starting a Home Business.

As I understand it, a home business is one that you operate from the confines of your residence. It involves producing your products or offering your services from the confines of your residence only going out to either prospect for customers, deliver a service or make deliveries in the case of products. As someone that has dabbled in home business for eight years now, I can say that it’s worth the inconvenience.

Some of the benefits of a home business include;

  • Lower Business Start-up costs: By operating from your residence, there are a number of shared costs that you can share with the pre-existing dispensation. Electricity, Rent, Water can all be initially utilised from the home bills.

  • Ease of working: For those that are trying to earn an extra buck outside their official jobs, working from home during the evenings and weekends can help them grow their dreams in business.

  • Flexibility: Home business saves you the daily routine morning and evening traffic jams that you mandatorily go through in order to head to a remote work place. This implies that you can start work at convenient times without a hussle. Working mothers would appreciate this more than the men because they usually have to divide their attention between work and the children.

  • Business Validation: By operating from home and avoiding certain overheads, you are able to get time to not only understand the business better but also verify its potential for success. I covered more on this in this article.

How do you go about starting a Home Business?

Passion: First and foremost, identify where your passion lies. Due to the kind of inconvenience a home business is likely to have on your personal life and space, it had better be something you are so passionate about and do not mind doing any time of the day. Short of that, you might back off before maturity due to flimsy reasons not worth noting here.

Skills: Now that you know what you want to do, ensure that you have the requisite skills to see it through. These skills could be acquired by you or hired. I do all my home business with my family. We do not hire external labour at all. However, there might be cases where you need to hire external skills sets. Ensure that you plan well on how to embrace external people in your residence.

Minimum Viable Product/Service: Assess the opportunity you want to pursue and establish what is required at a bare minimum for you to offer a service or product on the market. Even when the product/service is not what you eventually envisage it to be, focus more on getting into the market and letting the market shape your eventual decisions on the product or service. I do package products for supply to supermarkets. Initially we started by packing only 100 gram products, however, due to customers’ demands, we now added packs of 250 and 500 grams.

Market Access: Getting to the market is another crucial consideration while working from home. You need to study your target market and establish the most convenient and cost effective modes of accessing them. Supermarkets are one good avenue for products. I also know of a young man who sells second hand clothes from home. He reaches out to most of his clients on phone and through hawking visits to recreation centres in the evening hours as well as over the weekends. This guarantees him regular sales.

Working Space: Remember you’re operating from your home. For some, you might be having an empty room somewhere that you can put to use. In other cases, this free space is not there and you just have to create the space. I begun the home business while renting a house, so, space was an issue. What I opted for was to have a portion of the sitting room turn into a production area for a limited time and upon completion, it reverted to its original setting. If you came home while we were producing our products, you would think it was a 24 hour factory.

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My then 5 year old son helping with the product display at a tradeshow

Cooperation: For the married or if you’re sharing a residence, you need to win the cooperation of your family members. Do not force some of these activities upon them as they are likely to get very negative about the entire project, eventually working against you to its detriment.

Do I hear you asking, what kind of business you can do from home?

In a series of articles titled Business You can start with less than 100,000/=, I covered a number of possible business opportunities. Reading through will give you a good idea of what to try out.

However, Snacks, Mushroom growing, Decoration, Online Work like Transcription, Software Development among others are some of the easy to start home businesses.

Off you go. Get started and feel free to share your experiences.

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

Follow @wirejames on Twitter

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He Died!! Where did his Mobile Money go?

On his way home from work, he hired a bodaboda to help him swiftly navigate the traffic jam only to get involved in a nasty accident that saw him lose his life. Charlie (name not real), was an ambitious young man who was out to curve a better world for himself. In his business, he used a lot of Mobile Money (MM) transactions since they offered a lot of flexibility and security. When he died, no one knew about the financial status of his MM account nor his pin code. Not even his wife!!!

Such scenarios are common in Uganda. People die, lose phones with their simcards or travel out of the country only to return years later and the Mobile Money is no longer available.

Where does this Mobile Money go? This is the key question.

It is typical of the telecom companies in Uganda to reassign phone numbers that have not been in use for a while. This re-assignment is done in such a manner that any Mobile Money that was on that account gets erased too. I have a sim card from Airtel and once, due to a long period of inactivity, it was deactivated. Before the deactivation, I had deposited UGX 20,000/= on the Moble Money. Upon reactivation, when I inquired about the MM, all I was told was that I had to register afresh. No explanation was given for the absence of my MM previously deposited.

Imagine a telecom deactivating at least 300 sim cards per day. Of those, let’s say 50% have Mobile Money leftovers that average out to UGX 20,000/= on their individual accounts. This gives a total of UGX 3,000,000/= (Three Million) daily being taken over by the Telecoms company. In a month, this works out to UGX 90,000,000/= (Ninety Million) and a year, that adds up to a conservative estimate of UGX 1,080,000,000/= (One billion, eighty million).

This may not look like much money to the telecom company but a quick analysis reveals that it can pay the annual salaries of at least ten middle level managers with each earning in the region of Eight to Nine Million shillings. This same amount can be used to pay up for the lease on the cars used by the telecom.

While appearing as a small loss on the part of the customer, this money when aggregated becomes massive and this is where the telecom companies benefit unscrupulously.

In another scenario, someone deposits UGX 1,000,000/= (One Million) onto the MM account and does not use it for a period of two weeks. The telecom company earns interest off that money but the customer is only entitled to the principal amount deposited. This is another ugly scar rearing its head in the MM field. Every day, you have Billions of Shillings deposited onto the Mobile Money systems and they earn a hefty sum for the Telecoms companies even if they remain unused for a mere few days. Is it fair that the status-quo continues? Isn’t it time the consumer was given their due?

Well, some telecoms have come up with a spinoff savings scheme using MM but that is like dragging wool over our eyes as clients. Whether I enroll for the savings scheme or not, for as long as I have my Mobile Money on the phone, it is prudent that any interest earned by the telco be passed on to me too (at least a fraction).

Currently there is no serious modality when it comes to regulation of Mobile Money. Like loan sharks, the players set their rules and determine how the game is played. Apart from the requirement by the Central Bank for the Telcos to have bank accounts that backup the electronic money with actual cash reserves, there is nothing more. When MTN suffered an internal MM fraud setback some years back, it was a result of system manipulation that led to issuing of more electronic money than the actual bank reserves had.

In this era as we transition from paper to digital money, it is prudent that the Bank of Uganda wakes up to its responsibility. They need to move swiftly with the times, work with the Uganda Communications Commission and any other parties to ensure that we have a fair and forward looking environment that will see a greater adoption of MM.

Digital Money is a reality we are faced with and have to ready ourselves to embrace it fully.

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

Follow @wirejames on Twitter