Most of the time when I say this a lot of people think I am being cynical but over 80% of businesses funded by government as subsidy scheme will fail. They fail simply because having loads and loads of cash at your disposal makes you cash rich but does not necessarily make you an entrepreneur.
The political will is there to drive citizen businesses but the majority of people myself included are graduates of a schooling system that emphasized going to school, finishing and getting good grades and then finding a job in a reputable company.
The reality of the matter today is that government has overemployed, the private sector is too small to absorb thousands of graduates who are already a mismatch to the human capital needs of the country. Entrepreneurship provides an alternative employment avenue but unfortunately as I said entrepreneurship is more than just having cash and money to pay rent and I am sure some might be surprised to hear this but skill alone is also not enough.
The employment dilemma has led to hundreds of dysfunctional companies. Young people who have pinned their hopes on being business owners have been awakened to the reality that it is not simple to run a business or easy as they thought. They have gotten the product right but they have found markets are difficult to penetrate.
The matrix of running a successful business is embedded in a functional company strategy that is reviewed timeously to react to ever-changing market conditions and a product that is market centred not inward looking. In today’s article we are going to search for key critical areas that one must look at before they get into business.
Market A new product or service must be aimed at filling a gap that exists in a market. The product or service must be a solution to an existing problem. Everybody gets into business to make money but the process of going at it is what distinguishes entrepreneurs from wanna-be- richies.
An example is simple wet-wipes. Before the advent of the wet wipes, a diner would have to go to a tap, press the soap dispenser and open the tap to wash their hand and the use a serviette to wipe themselves dry. Somebody thought about wetwipes a mini pack that wet wipes your hands right at your table and that’s it. The picture below illustrates the thinking pattern of an entrepreneur versus a wanna-be-rich
The company strategy and the market revolves around the effectiveness of the solution that is being presented by your product or service. In order for a business strategy to be carried out properly it need the appropriate human resource. The right balance of these three factors augmented by a solution that speaks to the market provides a good foundation for any business.
Lack of attention to any of these factors will inadvertently affect the survival of the company. There will be a company that has a great product but which the market does not want. Or conversely the company might have a huge market demand and inefficient people to deliver the product.
These we often think are basics yet so many entrepreneurs are getting it wrong. The big three question that every aspiring entrepreneur must ask themselves are;
Product The biggest question is whether your product or service is solving a problem in a particular market or not. A good friend of mine love saying that in order for you to survive in business you must be first, different or special. Your product must offer a unique proposition or they must be a differentiation strategy that distinguishes from other existing businesses. Otherwise if your product does not meet the First Different Special theory then you are doomed to fail.
People Does your company have the talent to be able to manage the resources and put in place controls and strategies to produce? One of the biggest words in investment language is efficiency and this simply means optimal use of resource for production. If you are not efficient your product will be expensively produced. This will impact on your pricing and market entrance will be a nightmare. People management therefore presents one of the key critical areas for aspiring entrepreneurs.
Market Market research is a daunting task but it is unavoidable. You can have a nice product if you don’t have people to sell to then the product is useless. You must segment your market and know exactly who you will sell to.
If you get this basic right you will have a good foundation for your business See you next week
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This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.
The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.
Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.
He was speaking in Parliament on Tuesday delivering Parliament’s Finance Committee report after assessing a motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.
Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.
The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.
The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.
The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.
This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.
Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.
Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.
However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.
Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.
When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.
This as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.
Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.
The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.
Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.
In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.
Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.
Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.
Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.
Acknowledging the need to draw down from GIA no more, current Minister of Finance Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”
He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”