Hard times call for hard fi­nan­cial de­ci­sions

Sunday Express - - BUSINESS JOURNAL -

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.

Hard Think­ing

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

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