The false dichotomy – employees running personal micro-enterprises – Series 2 of 2

Merry Christmas to you all from Nakabugu in Uganda!

So, we concluded blog series 1, the ‘false dichotomy – employees running personal micro-enterprises’ with a question: What fails private micro-enterprises in Uganda? On this 25th Day of December 2016, and as many of you look forward to the new year, perhaps there is a lesson or two in this blog that you may want to take away with you into 2017.

Factors of production - the lure into a false dichotomous economy for the working class in Uganda Credit: romeconomics.com

Factors of production – the lure into a false dichotomous economy for the working class in Uganda
Credit: romeconomics.com

This is not your scholarly piece – we rarely want to play professorial at the Effectiveness lab. What we bring to your doorstep is context, a deep search for practical solutions, albeit from an effectiveness/efficiency lens. We want to keep it real and practical – and also, as Ugandan as Uganda can be

So as we delve into this second blog series, and one that ends our 2016 work, we want to flag upfront that this particular blog is grounded in hands-on experience from Uganda and to a certain extent East Africa micro-enterprise start-ups; as well as start-up failure pain that budding entrepreneurs suffer. Many start-ups aren’t viable – and if they are, it’s short lived. Perhaps, this is reading you were not looking out for on Christmas day – but sadly, it is the truth.

So, what fails individual micro businesses in Uganda and perhaps East Africa?

In the spirit of ‘keeping it simple stupid’ [KISS] we revert to the basic principles that are used to shape and operate an enterprise, big or small.  Start-up dreams quickly move from wishful thinking to fact i.e. how to access the four factors of production – land, capital, labour, and entrepreneurship.

For you to run a viable and sustainable enterprise, you need: land or in the digital world a place to work even if it’s a small study room in your apartment; capital to make the necessary investments i.e. buy a laptop or tablet for your work; labour – we are aware that in a digital and increasingly networked world, labour and entrepreneurship are at times intertwined.

Our experience from Uganda is that micro-enterprises run by individuals, especially those in formal employment, have access to land or other physical spaces, capital (not considering how capital is acquired), and the knack for enterprise.  The latter three-factor combination is enough to facilitate a successful business start-up. However, the Achilles heel for start-ups in Uganda is the fourth factor of production labour. In our experience, it’s labour that undermines microenterprise long-term survival.

Even more shocking is the inability by many entrepreneurs and wannabes, to decipher that labour is perhaps the number one factor of production that is likely to undermine enterprise sustainability in Uganda. To our dismay, we see many working class Ugandan’s continuing to invest their meagre earnings and other hard earned resources in the new microenterprises, but without taking a step back to ask certain fundamental questions:

  1. What is the success rate of personal business start-ups especially for the working class in Uganda? [Word of caution – you don’t need UBOS statistics for this – do a simple check-in with peers, and there will be many in your office that are running side enterprises – it is a practice that is ingrained in the Uganda working class]
  2. What are the underlying causes of the success and failure of private micro-enterprise start-ups?
  3. Is investment in personal micro-enterprise a prerequisite for success?
  4. What would happen if all the different micro-enterprise investments by the working class in Uganda were channelled into the Uganda or East Africa stock exchange markets, a professional real estate sector, etc.?

Uganda’s employees and the micro-enterprise enigma:

Bad habit:

Let us start on a learning note: many Asian run small businesses are directly run by family members – moreover family members that have opted out of formal employment. On the other hand, Ugandan small businesses are run by ‘other’ employees, mostly non-family members, allowing the proprietors to keep their formal jobs. Why is that the case?

  • Ugandan’s are not naturally entrepreneurial – really? Do you believe that Asians in Uganda were born with some particular enterprise DNA?
  • Ugandan’s are not exposed to situations, and early enough, where we learn entrepreneurship skills – we stumble upon enterprise later in adult life and never properly invest time to learn what it takes to run a successful business. A near authentic proposition, or we think at the Effectiveness lab
  • Ugandan’s, specifically the working class, have heard it easy – we can always get a job, mostly low paying, but find ways subsidise up our small salaries – really? There may be truth in this – i.e. that jobs that aren’t viable on paper are sustainable in practice … we do the ‘dealing’ and somehow come up on the other end of the tunnel. Some people have called Ugandan’s magicians – that we make 10 dollars a month, but survive on 100 – how do we make the extra 90? Well apparently, it’s our ”magic”, not so?
  • Ugandan’s can’t let go of their jobs – as the minuscule national economy is not big enough for enterprises to thrive in – is Ugandan micro-enterprise phoney? That external factors are so weighed against entrepreneurs and success will elude many

Is our problem as simple as, needing to learn proper enterprise skills and to be less risk averse?

Well, not really – we believe that it is near impossible to run a micro-business from afar and without direct owner management.  White collar workers should either take the plunge and run the business themselves, and give it all it needs to succeed; or invest their money in other businesses that are professionally  managed – i.e. buy shares on the stock exchange, simply saving money and accumulating a significant quantum [yes, it is not impossible (think of Village Savings and Savings Associations [VSLA] as your miniature model] and make life-changing investments, etc.

As we go into 2017, let us learn something – other people, and not your nuclear family, can’t manage your micro-enterprise for you – it’s either you or burst.

Labour:

Indeed the bad habit above creates a labour challenge for micro-enterprise management in Uganda, and perhaps East Africa. A start-up may have all the other three factors of production – however, if your labour is not right, the business will never succeed. It is on the latter point that many Ugandan’s and indeed other East African individual micro-enterprise owners have stumbled. And we share the reasons for the stumble below:

  1. The labour you are employing to run your small business is not as committed to the business as you – your business is not their business. Yet in a minuscule economy like Uganda’s, micro-enterprise success requires ownership-grit
  2. The labour pool in Uganda is contaminated by toxic human values – stealing permeates business management in Uganda – at least you won’t steal from yourself
  3. Productive labour, be it for a small or large business, requires appropriate skilling. Many Ugandan micro-entrepreneurs, unable to pay for suitably skilled staff, hire poorly skilled labour – the consequences are obvious i.e. very little to zero productivity – a caveat: skilled labour is at times the most corrupt and laziest [lack focus and commitment]

Go into 2017 committing to bring effectiveness and efficiency to your personal investments.  Stop wasting your money.



Categories: People, Strategy

Tags: , ,

4 replies

  1. Merry Christmas to you to ABG.

    THanks for this most engaging blog that I have ever read in 2016. It is really experiential

    You have nailed it where SME are concerned. It is none of their business unh!!! Yap that is the devastating factor Sebbo.

    You know what they say in Bongo when you put this Bozo at your hard earned ‘capital’ Frame and ask them to be shopkeepers and end up to be shoplifters, they are told by other losers that, ‘bros, if you cant get rich now you will never be’

    That is the Achilles heel’ you are talking about. That’s where many SME fail. Basically it is not lack of entrepreneurial skills, rather as you pointed out, their hideous motives.

    It is a challenge Sebbo, a big one.

    For us blue collared clerks we are between the sea and the devil. Whatever option we make we will suffer.

    Either quit job and engage in capital investment and hope for the best of the worst.

    Or Quit Capital investment and engage in Human Capital and suffer the consequences of lack of control of your own capital.

    Wish you a prosperous new year

    Like

  2. Hello Apollo, well said! Thanks for your time to share such important insights of what appears obvious in the eyes of many. But, kumbe when you read this second part of your blog, the realism in it nails it best on one front – One shouldn’t waste their hard earned shilling to engage in micro enterprise startups. I have experienced 70 to 90% range of what you say here.But here are a few questions that remain hanging in my head! What are we terming as micro enterprises? Is the limit of this kind of business startup, to small businesses run on a daily for purchases and sales? Sure for this type of business, your attention particularly on sales, customer care, etc to ensure business keeps running, needs the owner’s attention to the fullest. OR do we also think businesses such as farming, in particular long term of two to over ten year expected harvest time eg tree growing which does not require a daily monitoring should as well scare our intuition to go micro enterprise?

    Like

    • Dear Fred – a belated happy Xmas from Nakabugu

      You have indeed nailed it – with your example of trees. Invest in business for which you don’t need too much labour or supervision time

      I gave the example of real estate, buying shares on the stock exchange etc

      Yes, be very careful investing in business you can’t supervise – only beyond a certain size of business, can you delegate to external management

      Thanks for reading the blog

      Like

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