Skip to main content

A STITCH IN TIME


Last week the Bank of Uganda raised its key Central Bank Rate (CBR) a percentage point to ten percent from nine percent.

This was the first increase in more than a year, a move prompted by BOU’s projection that price increases coming around the corner. Increasing oil prices, a weaker shilling and new taxes on mobile money services were cited as reason for this anticipated increase.

We know that in the last year or so there has been a cash squeeze, money has been hard to come by.
While the economy has been growing this has not been spread around evenly. It was hoped that if the economy can keep growing we can all begin to feel the joy.

The Bank of Uganda has helped on this front by lowering its CBR from a high of 21 percent about seven years ago when inflation hit record levels. This allowed more borrowing by the private sector which has helped keep our economy ticking.

But just when the economy was beginning to gain traction BOU has slammed on the brakes. We may not be happy about this but Inflation is a terrible beast, which if not reined in quickly can gallop out of control and ruin all the hard work of the last few decades. See what happened in Zimbabwe, what is happening now in Venezuela.

We have already seen several banks announce increases in their lending rates, this will inevitably lead to reluctance to borrow by businessmen, which will mean expansion plans will be put on ice and new job creation will be slowed.

For you and me this development should make us seat up and pay attention.

On a personal level and in our businesses it’s going to call for continued belt tightening.

Everyone will need to take a hard look at their budgets. Spend less and save more. Cut out non-essential expenditure. Make every shilling count.

In our businesses we need to be more disciplined with our costs. We have to cut them to the bone. But in so doing we need to guard against cutting the muscle in our desire to get at the fat. The muscle in your business are those activities that bring in revenues – sales, marketing and the fat are those that take away money, often time they were feel good expenses to celebrate the good times – entertainment accounts, fuel guzzling cars and fat travel allowances.

Business owners will have to sharpen the discipline of biasing expenditure towards investment and away from consumption.

Easier said than done. But it will make the difference between you collapsing economically or still being alive to take advantage of the opportunities that will be available when the economy turns around. Because it will turn around. These things tend to be cyclic. What we don’t know is when this will be, next month? Next year? The year after?

In the absence of certainty we need to do the best we can to manage the resources we have now in the hope of a better tomorrow. There are no guarantees but we improve our chances of success tomorrow  if we manage our affairs well today.

All that being said I have no doubt in my mind that this economy is the place to be and that if we just work hard and spend prudently the good times will come.

We have not even begun to exploit the great potential in this country’s land, people and other resources. That means there is huge up side.

The people who come out the other side of this economic slowdown are the people who will have front row seats to the opportunities of our future.


(OCTOBER 2018)



Labels:

Comments

Post a Comment

Popular posts from this blog

CONGRATULATIONS ON YOUR GRADUATION, ITS NOW TIME TO WORK….

Thousands of students will be graduating from their respective universities in coming days and months. Makerere, our country’s oldest university will kick off its ceremonies on January 15th and the other universities will follow. The graduates have already had a taste of the real life, having finished their studies mid last year and tried to get employed. Many know by now that the world can be harsh and unforgiving. I hope many are tightening their belts in readiness for the struggle ahead. Some may have decided to kick the tin down the road by continuing with school. And others may have given up altogether. My prayer is that there are more of the first and less of the last kind. In talking to young people, I find that what is needed is a reorientation of their minds – a mindset change. Let me share with you certain facts to help manage their expectations of the world and how they can fulfil their potential in our context. First of all, the world owes you ...
Post a Comment
Read more

UMEME A RECOGNISED SUCCESS BUT …

  Recently the World Bank did a survey of the power utilities on the continent. Of the 39 utilities surveyed only two, in Uganda – Umeme and in Seychelles, were able to cover their operating costs and capital expenditures – maintenance and expansion of the grid. The report went on to point out that only 19 or about half of the surveyed utilities were able to meet their everyday costs like salaries. Essentially most of our power utilities on the continent are technically bankrupt. This has far reaching ramifications for the industry as a whole. When you, the client, pays your bill, Umeme then passes money up the line to pay the transmission and generation companies. If Umeme does not collect the revenues due to it or does not price the power at an appropriate rate, the pain will be felt up and down the sector. The transmission company would not be able to maintain and extend its network and the generation company would not be able to generate efficiently or build ...
Post a Comment
Read more

OIL IS COMING BUT LET US NOT FORGET OUR GOLD

The country is operating on a time table that first oil will be seen in 2020. There is a lot of frenetic activity around building supporting infrastructure, getting investment approvals, ensuring local participation and any number of other things to ensure readiness the moment the oil starts gushing down the pipeline to the coast. And so we should. I was intrigued the other day to read in the Kenyan press how Kisumu County, just across Lake Victoria from us, has set upon an ambitious project to ensure egg and poultry meat self-sufficiency for the county within the next few years. Under the plan Kisumu County will train 100 farmers every month over the 12 month pilot period. The intended aim is to be able to satisfy the county’s demand for 25,000 broilers and 75,000 eggs daily. Whereas I would prefer that this was private sector driven deal, I like this plan for a number of reasons not least of all that it shows leadership by the county and secondly, it relies o...
Post a Comment
Read more

OUR HISTORICAL SITES SHOULD NOT GO UNATTENDED TO

Recently I was at Makerere University to attend a wedding ceremony. I hadn’t been on the university’s grounds in a while. I was shocked at how run down Mary Stuart and Lumumba Halls were. They are in need of serious work. These thoughts were reawakened with the recent launch of the coffee table book “Beyond the Reeds and Bricks” promoted by the tourism ministry, the cross cultural foundation of Uganda and the European Union Delegation. The book which is aimed at the protection of historical sites and buildings in Kampala, Entebbe and Jinja, is a moving collection of pictures of buildings and sites we know, but probably take for granted when we pass them as we go about our business. "Entebe za Mugula in Entebbe, Mackay’s Cave, the post office in Entebbe, the Stanbic Bank Branch in Jinja, Hamu Mukasa’s house in Mengo, the main building at Makerere , the Bahai Temple, Kibuli mosque and many other sites have pride of place among the 60 pictures in this book, which is ...
Post a Comment
Read more