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WHY START-UP BUSINESSES FAIL

TEBOGO TOTENG
MoneyMind


90% of start-up businesses fail within the first year and there is absolutely no surprise in that. It is a widely accepted global statistic after a study of the number of start-up companies that fold within a year was done.


 Thousands of successful businessemen and women would attest to the fact that they have failed many times before they could taste success. In fact an average millionaire has been close to bankruptcy three times, a fact that underscores that running a successful business is not only about the acquisition of capital and production.


It involves an array of factors that we will unpack today specifically to try and assist young budding entrepreneurs to avoid common start up mistakes. While some of the factors are conventional wisdom the MoneyMind perspective is acutely different.


The long heralded belief that a business is different from its owner at least in terms of the legalities has every ounce of truth in it but most of the time a business reflects the characteristics of its founders. The strategic direction and the philosophy of the company in many ways reflects the wishes, ambitions and aspiration of the founders. In view of the above that is why it is important that entrepreneurs must personally develop themselves and their characters and habits to empower themselves to run successful businesses.


Before you think about running a business you need to self- introspect and work on the set of skills that will enable you to be a successful business person. If you don’t the lessons will be taught to you in the University of Hard Knocks in your businesses journey.


In essence it will be very difficult not to transmute your habits into your business especially when you are a sole proprietorship or a single shareholder. If you have good habits that is good inter-personal skills, you are persuasive and you are on top of your numbers then bravo! The problem is if you have bad habits you are likely to transmute them to your company especially financial imprudence.
Below are Money Mind’s’7 ways of avoiding business failure for start-up companies

7 ways to avoid business failure for start-up companies    

Personal Development
Entrepreneurs never stop developing themselves. It is important for a would be entrepreneur to develop and prepare themselves for the world of business. Being an entrepreneur requires a key set of skills that will assist you in meandering through the intricacies of the business world. Because the world of business is changing every day and re-engeneering of processes is as frequent as ever anyone at the helm of the company need to be on top of his game.


Coaching and Mentoring
The best performing athletes have engaged personal trainers, coaches, and dieticians to name a few. They know that their success hinges on getting the best advices from professional experts. The same can be said for young entrepreneurs; they need coaches and mentors to guide them on how to successfully run a business. Mentoring and coaching take place over a long time lasting months and years and possibly even your life time. Bill Gates still has Warren Buffet as his mentor. If you have a coach and mentor you have somebody who have been through the journey and are alive to the pitfalls. Find a mentor or coach in a similar industry and avoid common mistakes.


Networking
Successful business people have robust and powerful networks of people that add value to their personal and business lives. They join networking association which gives them access to people who can give business opportunity. Networking associations provides you with free access to a variety of people with unique skills that you may need from time to time including free counsel. Furthermore network associations are good as ports for referrals.


Build a team
Microsoft and Apple thrived from building teams that share the same vision and ideals. It is important that a business build a team that is clear on its mandate. Every member of the team must fully comprehend their importance to the team. A team moving in unison is the greatest asset to any entrepreneur. Build a team based on the principles of accountability and ownership will create a great working environment.


Financially savvy
The idea behind the business is to push the profit margin and this is generally done by pushing sales and lowering production costs. Entrepreneurs need to have a basic understanding of key financial indicators. You need as an entrepreneur to have a finger on the pulse of your company and there is no better way than be able to read your financial statements.


Decisive
Be decisive as an entrepreneur because procrastinating to take remedial action when needed may only exacerbate the problem. This also true when you need to make decisions on new opportunities. Decisiveness is one attribute that entrepreneurs have; they are never in the middle and know exactly what they want.  Take a decision now than later. They say indecision is a decision in itself.


Selling skills
Everybody is in sales, so you need to be a good sales person to be able to sell yourself and your company. Entrepreneurs are very persuasive and gifted with a great ability to make others sees their vision. Your employees need to buy your vision and the market needs to buy your products and the best way is to be a good salesman.

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Business

Global recovery from COVID-19 remains unbalanced

2nd March 2021
Global recovery

As COVID-19 and its variants continue to cast a shadow over the world’s health systems and economies, the level of uncertainty and strength of the economic recovery will vary across countries. The real GDP in all G-20 countries is expected to grow compared to the previous year, but some countries will take longer than others to return to full capacity.

According to Mooody’s Global Macro Outlook 2021-22 report released this week, precautionary behavior and official restrictions are still hampering interpersonal interactions. The resulting toll on global economic activity has been staggering, even as the economy has also shown a remarkable degree of resilience.

Overall economic outcomes in 2020 exceeded Moody’s forecasts in most countries because of stronger-than-expected rebounds in the second half of the year. Aided by technology, many people and businesses quickly adapted so that they could carry on with daily activity with reduced in-person interactions.

However, Moody’s says the recovery remains unbalanced, with the pandemic affecting individual businesses, sectors and regions very differently. According to the group, goods demand has almost fully recovered because goods can be produced and consumed with limited in-person interactions, while the recovery in service continue to lag.

Within services, businesses that were able to effectively deliver their products at arms-length have stabilized, if not prospered. Large businesses with access to cheap funding have performed better than small and mid-sized firms. According to the report, the transportation, hospitality and leisure and arts sectors continue to languish, but the information technology, consumer goods, pharmaceuticals and financial sectors have thrived.

According to the report, many individuals around the world (including Botswana), have lost their jobs and continue to face employment uncertainty, but on the flip side, the forced decline in household consumption and the rise in asses prices have buttressed household financial balances at an aggregate level. Moody’s reported that all G-20 countries will post growth rates in 2021 and 2022, but the pace of recovery will vary significantly.

“The COVID-19 shock has exposed differences between countries in terms of political leadership, community health management, fiscal and monetary policy response, economic structures and inherent economic dynamism. Public health considerations drove the economic shock of the pandemic. In that sense, the steep declines in GDP in 2020 across advanced and emerging market countries were less a reflection of underlying weaknesses in the economy, and more a function of the combined effects of the spread of the virus and the stringency of lockdown measures,” says Moody’s.

Economic outcomes will remain closely tied to the pandemic, Moody’s said. “The quicker countries can curb the spread of the virus, the faster their economic activity will recover. Otherwise the costs of keeping parts of the economy shut, in terms of lost income and revenue, will keep adding up. The longer the crisis lasts, the more difficult it will be for governments to compensate the private sector for its continuing losses.”

Without adequate government support, Moody’s predict that large-scale deterioration in asset quality will ensue. Such detrimental effects, it says, could eventually transmit the shock through financial channels to other parts of the economy.

“We have cut or estimate of the 2020 contraction for the G-20 countries. We now expect a collective contraction of 3.3%, compared with our previous estimate of 3.8%, because of a better-than-expected recovery across a wide range of advanced and emerging market economies in the second half of the year. We expect the G-20 countries to grow by 5.3% in 2021 and 4.5% in 2022, up from our prior forecasts of 4.9% and 3.8% respectively.”

US ECONOMY TO LEAD THE GLOBAL SERVICES DEMAND RECOVERY

The US economy advanced at a 4.0% annualized rate in the fourth quarter 2020, but the headline figure masks the fact that the economy has lost momentum since November, when COVID-19 cases began to rise. Moody’s says it expects this current moderation in economic growth to be temporary. Economic momentum will likely puck up pace over the course of 2021 and 2022, supported by: enhanced pandemic control, significant additional fiscal support to the economy and a more predictable policy environment.

With infection rates now starting to fall, economic momentum should naturally pick up in the second quarter and into the summer as individual states progressively ease up social distancing restrictions, Moody’s reports.  “We believe that a stronger pandemic management response from the Biden administration, will increase public confidence and allow for a relation of restrictions over this year and next.”

COVID-19 SHOCK EXACERBATES EXISTING STRUCTURAL CHALLENGES IN SOUH AFRICA

South Africa’s economy is expected to growth by 4.5% in 2021 and by 11% in the following year, following an estimated 7.0% contraction last year. According to Moody’s, this will make South Africa’s recovery one of the weakest among emerging market countries. The economy has struggled to build momentum for many years, and as a result suffers from chronically high unemployment. The COVID-19 shock has made the economic situation all the more challenging, says Moody’s.

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BOL, MDC advised to take interest in Kavango oil tale

2nd March 2021
BOL-MDC

Reconnaissance Africa, a Canadian exploration company has started piercing the natural resource-rich lands of Kavango basin in Namibia, the company in searching for oil and gas.

The prospective area stretches into North West district of Botswana, the company through its local subsidiary Recon Africa Botswana has been given the nod by Ministry of Mineral Resources, Green Technology & Energy Security to explore petroleum mineral for four (4) years.

Amid all the negative reports around the company’s drilling activities in the Kavango basin, which covers ecosystem components feeding into the mighty Okavango Delta, the bottom line is that there are prospects of billions of dollars beneath the area in form of oil and gas-and Recon Africa is out to unearth the treasures.

Member of Parliament for Selibe Phikwe Dithapelo Keorapetse says Botswana should strive to participate in the exploration and development of these potential oil and gas deposits in the North West district. Contributing to the 2021/22 budget speech on Monday Keorapetse cautioned government against watching from afar while a potential multi-billion pula industry unfolds in the Okavango area.

He implored Botswana Oil Limited(BOL) and Mineral Development Corporation Botswana (MDCB) both state owned enterprises, to take up equity stakes in the exploration activities as early as now to “ rather than being spectators and waking up late when the foreigners are enjoying the billions”.

ReconAfrica through its subsidiary Recon Botswana was issued an exploration license under the Petroleum Act to explore for petroleum minerals in the North West District of Botswana, on 1 June 2020, for a period of four years.

“Botswana Oil as the country ‘s petroleum investment company together with MDC-a state owned mineral interest holding company must come together and acquire a stake in the ongoing exploration activities ,not to wait until Recon is making money and you say you want shares”. Keorapetse made reference to Karowe mine which Botswana’s diamond mining partner De Beers Group sold to Lucara over a decade ago while still at exploration stage.

Lucara bid on the site, and its internal partner Lundin provided a bank guarantee to De Beers for fifty million dollars, capturing some seventy per cent of the stake.Soon afterward, Lucara bought the remaining stake by acquiring De Beers’s London-based junior venture partner, African Diamonds. Lucara now owns AK6 (now Karowe Mine), having spent a little more than seventy million dollars.

The mine has since developed into a prolific rare gem producer celebrated worldwide, having unearthed some the world’s largest diamond ever in history , such as the over 1000 carats Lesedi La Rona, Sewelo and the magnificent 813 carats Constellation.

“We are now mulling acquisition of shares in Lucara but when transactions were happening in 2009 we were just spectators, we could have acquired shares back then when they were affordable now it is expensive to buy into Karowe mine, we must not make the same mistake with this oil and gas projects” said Keorapetse urging Government to be pro-active and move quickly to approach Recon Africa for a stake in Recon Africa Botswana.

ReconAfrica is a junior oil and gas company engaged in the exploration and development of oil and gas in North East of Namibia and North West of Botswana—the Kavango Basin. The company officially launched the oil and gas exploration project in Namibia in early January 2021. The exploration activities are taking place in the Kawe area, Kavango East Region, Namibia.

ReconAfrica holds a 90% interest in a petroleum exploration license in Namibia which covers the entire Kavango sedimentary basin in Namibia, the remaining 10% is owned by Government of Namibia. The exploration licence covers an area of 25,341.33 km2 (6.3 million acres), and based on commercial success, it entitles ReconAfrica to obtain a 25-year production license.

Further, ReconAfrica holds a 100% interest in petroleum exploration rights in Botswana over the entire Kavango sedimentary basin in the country. This covers an area of 8,990 km2 (2.2 million acres) and entitles ReconAfrica to a 25-year production license over any commercial discovery. The company acquired a high-resolution geomagnetic survey of the license area and conducted a detailed analysis of the resulting data and other available data, including reprocessing and reinterpretation of all existing geological and geophysical data.

The survey and analysis confirm that the Kavango Basin reaches depths of up to 9,000 m (30,000 feet) under optimal conditions to preserve a thick interval of organic rich marine source rock, and is anticipated to hold an active petroleum system.

“We believe that the Kavango Basin is another world class Permian basin, analogous to the Permian basin in Texas It is estimated that the oil generated in the basin could be billions of barrels. Recon Africa’s initial goal is to establish the presence of an active petroleum system with its fully funded 3-well drilling program starting early January 2021.

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Lucara suffers P287 million loss in 2020

2nd March 2021
LUCARA

Canadian mining company, Lucara Diamond Corporation, well known globally for producing rare gems of unprecedented quality, has not been spared by the 2020 global market downturn caused by the COVID-19 pandemic.

In their financial results for the year ended 31st December 2020, released from Vancouver Canada late Monday, the junior minor reported a significant net loss of $26.3 million for the year (approximately P287 in Botswana currency).

This according to the financials is a loss of $0.07 loss per share, which is a significant decline when compared to net income of $12.7 million ($0.03 per share) in 2019. The company which wholly owns and runs Botswana’s Karowe mine registered total revenues of $125.3 million (over P1.3 billion), a 34 percent drop compared to $192.5 million (almost P2 billion) recorded in 2019 or $335 per carat from $468 per carat in 2019.

The decrease in revenue resulted in adjusted EBITDA of $18.4 million, a decline when compared to adjusted EBITDA for the same period in 2019 of $73.1 million. Lucara executives explained that total revenue decline was a result of challenging market conditions, a longer ramp-up for production and polished sales in the latter half of 2020 under the HB supply agreement.

“As a result, revenue from certain polished diamonds from Lucara’s highest value stones that would otherwise have been recorded as revenue in 2020, is now expected to be realized in 2021.” reads a commentary alongside the figures.

During the year ended December 31, 2020, Lucara sold 373,748 carats at an average price of $335 carat. Diamond sales for the fourth quarter of 2020 were held through a combination of regular tenders, Clara, for diamonds less than 10.8 carats, and through HB under the supply agreement for those diamonds greater than 10.8 carats.

The Company recognized revenue of $42.4 million or $402 per carat from the sale of 105,648 carats. Price recovery was observed in most size and quality classes. Of note, prices achieved for goods sold on Clara (under 10.8 carats in size) in January 2021 have now recovered to the level of pricing achieved early in 2020.

For the year ended December 31, 2020, Lucara registered revenue totaling $55.2 million from the two agreements with HB, including an accrual for variable consideration of $7.2 million related to “top-up” payments arising from polished diamond sales in excess of the initial purchase price paid to Lucara.

With global restrictions impeding travel for many diamantaires, Lucara says interest in Clara grew significantly in 2020 and the number of buyers on the platform increased from 27 to 75.
During 2020, Clara began selling stones on behalf of third party sellers, which was a significant objective for the year.

“As Clara becomes the online marketplace of choice for rough buyers, discussions are underway with several producers to begin trials for the sale of their diamonds on Clara” the company said
Amidst challenging circumstances for the diamond industry in 2020 Lucara forged ahead with the Karowe mine underground project.

During the year period under review $18.7 million (over P190 million ) was spent on project execution activities including the following: Site earthworks (consisting of laydown preparation and clearing of shaft and surface infrastructure locations), geotechnical test pitting and drilling, and completion of two pilot holes at the shaft locations, a 746 metre hole for the ventilation shaft and a 768 metre hole for the production shaft.

The Company was able to complete on-site earth works and geotechnical studies by using local contractors while a State of Emergency remained in effect in Botswana.  Long lead time item orders were also placed for shaft muckers, and hoist and winder refurbishment was initiated. In addition, power line engineering and detailed shaft design and engineering (consistent with original targets for 2020) progressed.

In Q4 2020, the Government of Botswana approved the proposed powerline route and granted a 25-year extension to the Karowe Mine License to 2046, sufficient to cover the remaining open-pit life (to 2026) and the expected life of the proposed underground expansion, currently planned to 2040.

Lucara says it’s currently actively exploring opportunities to arrange debt financing for the underground expansion for those amounts which are expected to exceed the Company’s cash flow from operations during the construction period. The underground expansion program has an estimated capital cost of $514 million (over P5 billion) and a five year period of development.

President & Chief Executive Officer of Lucara Diamond Corporation, Eira Thomas said the measures that Lucara took early in the pandemic, including the decision not to sell rough diamonds in excess of +10.8 carats after Q1, helped protect and support prices for large, high value diamonds that account for more than 70% of the company’s revenues.

“These efforts in conjunction with our transformational supply agreement with HB Antwerp executed in July, resulted in strong price recoveries by Q4, a trend which has continued into 2021.”
Thomas said the recent recovery of two, high value +300 carat stones “continue to highlight the extraordinary nature of the Karowe resource and underpin the rationale for underground expansion, extending our mine life out to at least 2040”.

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