Business & Social Progress

Business Daily @ Social progress

There is a great deal of discussion around money in today’s paper. It appears that financial discussion revolving around bad debt, COVID costs for employees and poor bank performance seem to be the biggest concern. However, apart from a corner headline on politics, it is refreshing to read Jeremy Awori discuss the need for companies to reconnect businesses success with social progress. However, “reconnect” may not be entirely the right word. Many companies, business schools and entrepreneurs have never “connected” and so to say that we need to re-connect is unlikely to turn any heads for attention or action. The nature of competition, tax and multiple statutory demands made on companies do not give a quarter to social progress. Indeed, the word that companies are familiar with is “exploit” the market. “Social progress” does not appear in any of the end year balance sheets of companies listed anywhere. Be that as it may, this response does not in any way downplay the role of advancing business success through social progress. We just have to find a way to ground the relationship between business profits and social progress into our cut throat enterprise ethos. Right now, business profits are made at the expense of society. The “connection” that needs to be made will take some reflection, innovation and creativity in the design, production, packaging and distribution of company products and services in society. We need more companies to take up the challenge.  

Allan Bukusi

Sources- Business Daily

Enterprise Kenya @ Kituyi

 Enterprise Kenya@Kituyi

 “Enterprise Kenya” as a descriptor of Dr. Kituyi’s understanding of the Kenyan condition provides us with powerful imagery of what we should actually be doing with our company. What profit is enterprise Kenya generating that would make me buy shares in the business. Three statements made by the UNTAD Secretary-General provide us with qualitative data to analyze this claim. First, “But much of that money actually comes back through VAT because of everything that they spent the money on”. This statement signals that tax alone may provide relief, but does not inspire the acceleration of entrepreneurial initiatives. Second, “The government has to know that recovering enterprise Kenya is the most important thing apart from saving people from Covid”, tells us that the fixation on COVID-19 pandemic, as a source of borrowing funds, is unsustainable and that Kenya should get back to the business of productivity as quickly as possible before it is mortgaged to the highest bidder in the global money market. A 63% debt portfolio does not inspire shareholder investments. Third, “The government should help create the ecosystem for this country to be a competitor in that area”. The reference to an “ecosystem” is an acknowledgement that profits can only be realized by a symbiotic balance in the economy. This means that enterprise Kenya needs to look at creating a sustainable balance of wealth generating initiatives across the economic landscape if it wants to pull out of the current impasse beginning with local production.

Allan Bukusi

Sources – Business Daily

Business Recovery @ KEPSA

 

Business Recovery @KEPSA

The current KEPSA data on business performance indicates an interesting trend that is still very much tied to the woes of the COVID-19 pandemic. The report that 51 % of businesses are operating at less than 50% levels is very similar to the concept of Radioactive material “half-life” in physics. To give this a business interpretation, it has taken seven months for half the companies to recover 50% of their operations. It should therefore take another seven months for 50% of the remaining companies to arrive at 50% operations. Following this logic, it should take another 14 months for 80% of the companies to recover 50% of their operations. That is assuming there are no major shocks in the economic environment. However, that timeline is just past the planned BBI referendum and into the 2022 General elections.  

While I am not surprised by the 12% that have yet to open, I am more intrigued by the 7% that are doing better business than before the pandemic. While it is indeed possible that COVID-19 posted a boom for them and that they are in the internet, online or service sector businesses, I am more inclined to believe that they have taken advantage of the environment the pandemic has facilitated and become more efficient and focused in their business development strategies by rationalizing their need for idle infrastructure, bloated staffing, offloading prestige oriented capital investments and redefining productivity by shedding fat and ensuring that production remains lean and fit!

Allan Bukusi

Reference: Business Daily

40-Year Low @ Bank interest rates

 40-year low @ Bank lending rates

Business Daily reports that Bank lending rates have hit a 40-year low, but there is no scramble for loans. Indeed, those that are obtaining loans have to provide securities and a guarantee before they are granted these affordable loans. However, looking back at the rate cap that was recently revoked, I wonder if this was the intended effect of rate capping – to make loans affordable. Ironically there are no takers. But what does this mean for an economy which still needs money to operate and yet is stuck “operating below potential”? While we tend to keep watch on the numbers as a guide to economic performance, banks have signaled that the data speaks of the COVID-19 pandemic effects being around for the next three years. With the government still big on spending with the BBI referendum and the General Elections scheduled within that time, that means tax collection is going to be squeezed out of every corner – no relief for Mwananchi. Loan rescheduling has bought time for the big players and the withdrawal of unsecured loans has dealt a big blow to cash flow, mortgage payment and wealth creation. It is no wonder that even with a 40-year low in cash flows, no one really wants to borrow. The focus for survival appears to be on cushioning unemployment. However, the real question might be how to get everyone, and I mean everyone, back into production? That is probably where the rubber meets the road.   

Allan Bukusi,

Reference - Business Daily

Moreforless@economyKe

 Moreforless@economyKe

Money matters, COVID-19 and Agriculture are the big three making the rounds in the economy. Despite the search for cheap sources of funds for development, the concern for rising debt is causing institutions to look for ways to make more money from less production. While this is of course unsustainable, COVID-19 has not helped by introducing social distancing, travel bans and disrupting supply chains. While analysts are eager to create a “Post-COVID” picture, the data shows that the financial effects of the crisis will be around for a long time as entrepreneurs and employees seek to establish other means of production and income generation.  The struggle to earn more with less income is a driver of creativity and innovation. But, more for less also means the development of new business models and operating paradigms that take time to be accepted, leave alone becoming profitable. This is a sacrifice entrepreneurs and now employees must make. However, Farming is a primary business that is pragmatically dealing with the present reality. While secondary goods companies face operational challenges and tertiary institutions such as universities face major declines in incomes and loss of customers, farmers, with a little skill at creating a localized customer base, are able to sell their products. This is not surprising as farmers provide full value products and are not making more for less effort. The secret of farming, if there is one, is that it “creates” value, all the secondary and tertiary businesses attempt to “add” value.   

Allan Bukusi

References - Business Daily  

Surviving not thriving @Banks don't make money

 

Surviving not thriving @Banks don’t make money

 

The weeks opening discussion of the role of banks during the COVID-19 crisis has its critics and cheer leaders. Mondays Business Daily is certainly an interesting read. But the truth is Banks do not make money, productive people who do. Banks move money around, gather it together and make it available at a fee. The suspension of defaulter listing on the CRB made banks unable to collect on digital cash loans, because people were not making money. The people were using loans on consumer goods – not good business sense. But then, there is a pandemic and production is at standstill. However, the World Bank and IMF have already indicated they want their money back! Six months later Banks confirmed that people were not making money, naming 2020 a year of “surviving not thriving” with 30-40% drop in profits. Other reports indicate that banks displayed heroism by rescheduling loans of those caught up in trade distress and this is laudable indeed, but I can guarantee that banks will want their money back!  Giving out money is certainly helpful to get over a crisis, but it is certainly not an incentive to be productive. Treasury’s Post COVID recovery strategy is to recover more money from anyone who might still have it. How do we move forward?  – Get the people working to make the money so they can put the money in the banks, who will give the money to the Treasury to pay the debt.

Dead Stock @ Kenya Power

 

DEAD STOCK @ KENYA POWER

The fact that Kenya Power has raised the alarm over its clients switch to solar (Business Daily 20, Nov. 2020) is not as much a problem for Kenya Power as it is a sign of the times. The data in the weekend article indicates that the shift to solar energy has been on since 2014. That would suggest that Kenya Power has been sleeping on the job. One might say it is a little too late for the “monopoly” not to have noticed the leakage on its income and where the income is leaking to. Kenya Power might benefit from NOT complaining to its customers and move quickly to get a piece of the pie in the sky. COVID-19 has only accentuated a derailed situation. My advice to Kenya Power is - act quickly! Because there are many more customers on that train that has already left the station. It is just that they don’t have big names like Moi International Airport or Kenyatta University to get published in the newspaper. If the big customers are dissatisfied with the pricing of power, how about the small customers who have no choice? It only makes sense that they will consume less electricity. That will simply magnify Kenya Power liquidity problems and add to the company’s “dead stock” power that it still has to pay for.  But, Kenya Power is not the only tree in the forest operating on old business algorithms. As I said, it is a sign of the times.