Hard times call for hard financial decisions
THE basic principle is that national economic performance has an impact on the cashboxes of our businesses and finally into our wallets. Business owners have to become entrepreneurs before they become political supporters. Business owners have to influence the direction of politics so that politicians create a political environment conducive to the desired business ecosystem.
As I move to meet with our clients around the country and in parts of South Africa, I meet with people who are relaxed and reading the political landscape as though it is completely disconnected to their businesses, yet they see the declines in their cashboxes and often blame it on other things. Many seem to be concerned so much on the political directions they wish which in some cases may take their business to an opposite direction.
The region is continuing to face serious business challenges caused by political decisions of our leaders, and political instabilities in the region. The challenges of Zimbabwe, the current challenges of South Africa, which includes credit rating downgrades, our own political instabilities that have forced us to go into snap elections one after the other, have serious impact on our business landscape. The industries we operate in are being affected. Although a few can still sustain or thrive in these situation (especially tenderpreneurs receiving political favours) but their successes are not sustainable too. If there is a hole on the ship and the ship is sinking, others may drown first because they are on the lower decks, but your time on the high deck will soon come, with no one to help you as all will have been swallowed by the deep sea.
We are in hard times, and the business owners must see this and influence the political direction using their influence. The economic activity is lowering, interest rates are most likely to go higher, the banks will be more risk averse, the prices of inputs are going higher, Pet- rol and diesel prices will rise, the result is higher production costs, increasing unemployment, inflation and crime.
We are in Hard times. It requires a different thinking. Einstein warned the world that the problems we are facing today cannot be solved by the same level of thinking as the one that created them. The hard times will call for the change in our thinking, and the new thinking involves: We are first business people before we are political people. This means, our political interests should never override our business interests. In fact the business interests should take preeminence over all the political decisions we make.
We should be prepared to support any political party because it has the right policies and the right people irrespective of our traditional political interest, or rather force our political parties to develop and execute the policies that focus on economic development and growth.
We should never accept or give bribe or receive favours that temporarily give you an edge but eventually destroy the industry which you will need to keep and build. We need to seek to be greater than to be bigger. There is a thinking among small business owners that significance is reached by going big, while going smaller and leaner may even be greater. Greatness is long-term sustainable business value. Greatness includes higher longterm profitability that is shared by the business owners, the community, and the current and future generations.
In simpler terms the profits are made for business owners but the same profits are used to support the community (social investment and human rights protection), and the business activities are not damaging the planet’s sustainability (waste management, resources use efficiency, pollution, biodiversity, energy efficiency etc.).
Business owners must be willing to divest in business units that are not profitable and in these hard times concentrate on the business units that add or create value.
Look at all your business units, which ones need to be kept, which ones need to be disposed off, do you have capacity and competences to move into new business, which business units do you have to harvest, and use profits to create or concentrate on others. Hard on the purse. You need to manage the cashbox more than before. The old adage that you need to manage the pennies to manage the pounds is even more relevant in these hard times. As a premier brand in management accountancy myself I get involved in cost reduction strategies for our clients, and ‘cutting the fat’ is still a challenge for many business owners.
I have realised that text books have not caught what I call status costs. Status costs are those fixed costs that are adding to value to the business but are kept for purpose of status, e.g. better cars, more employees because a business owner wants to beat competitors in employment figures, or keep certain costs inhouse to appear big, e.g. fail to outsource accounting and financial services, because the owner wants to have numbers and offices, extra fleet that will be kept to appear big, the list is limitless.
It is critical that you obtain consent of your financial director (in-house or outsourced) for every investment you make. The times cannot afford duplications, redundancies, and waste of any kind.
The Hardest Talk
The Economists and Financial Experts keep on prophesying doom for the global economy. We are seeing how technology is becoming a business accel- erator for some businesses but how the same is killing smaller economies that are as yet under resourced. Large economies are moving to protectionism, having low interest to sustainability, there is a growing price war, sustainability of equitable resources and income distribution is in question as regional economic-political communities are breaking or changing e.g. SACU, EU etc. The sad story is that our business environment is highly threatened and we seem to take no note of that and only wishing that all will be well.
Before our eyes Zimbabwe, Portugal, Ireland, Italy, Greece, Spain faced hard times that led to sovereign bankruptcy. We in Lesotho have far less resources to withstand the pressures that faced the above economies.
Yes we need political reforms, Amen! But along with them we should start economic reforms. If US sees protectionism as a path to economic growth, we probably need to enforce government and its entities and agencies to buy local and use local taxes that local business generates to grow local business.
Here I mean local water, local accountants, local lawyers, local consultants, local auditors, local trainers, local products etc. We as business owners have to use the local consumers money we received to go local. We need to trade amongst ourselves first, rather than get local money to enrich other economies.
The mind-set that local is inferior is an insult to ourselves, because if you are local, you are then inferior, and the only way we can move out of that inferiority is when we start doing something about it, and not to reject one another.
Mr Likhang FICS, ACMA, CGMA, CA (L) — is a principal at RL Consulting & Chartered
BUSineSS owners have to influence the direction of politics so that politicians create a political environment conducive to the desired