Now is the time to focus! — Lionesses of Africa

By the Lionesses of Africa Operations Dept 

The world famous free solo (alone and with no rope!) climber Alex Honnold as pictured above (whilst climbing the face of the world’s most famous rock, the 3,200ft El Capitan in Yosemite National Park) yes, we’ll just say that again – with no rope, says that often his most dangerous moment on any climb is just before the end when the climb starts to level off towards the top of the mountain and he starts to relax. That is when he is far more likely to slip and fall than when he is vertical, clinging to a crack a thousand metres above the ground. See the terrifying trailer from National Geographic here of the film by Jimmy Chin of this amazing assent. The film, “Free Solo” even won an Oscar for best documentary.

This is often true in business. One of the most dangerous times in a business’ life is when you have been through the tough times, perhaps even to the brink of bankruptcy. The sun starts to shine once more, business returns, customers wake up, we relax and the sales staff act like they are a child alone in a sweet factory, and customers having been so good while you pushed them to pay during the dark times, now forget where the cheque book is… We have all been there (perhaps without even realizing it), as the light we see at the end of the tunnel suddenly becomes not the exit, not the spring of a new dawn, but yet another train hurtling towards us.

Alex has been quoted as saying that climbing and especially free solo is very much like the entrepreneurial life, mainly because in climbing you have to make a conscious decision to move up. To fight against gravity. To move one hand and one foot higher. Nothing (good) happens in climbing without a conscious decision. Likewise building a business, there are very few who just left things to their own devices and then woke one morning to find they were successful. As Alex says, skiing is different, gravity takes you down hill, so conscious or not, down is where you are going, but climbing and entrepreneurship is a conscious effort of will-power, skill, preparation, training (anyone thinking skiing also takes a lot of skill, preparation and training has not seen our Head of Finance (‘HoF’) on the slopes – gravity rules…) and inner strength.

So why this warning of the dangers of relaxation at this time?

One of the main fears of any business is uncertainty and volatility. We have often quoted the Arabian curse in the last 12 months: “May you live in interesting times” and a curse it is, especially for businesses. Business leaders need consistency, calm markets and security of supply in order to plan, grow and thrive, and anything ‘interesting’, anything ‘out of the ordinary’, often throws a spanner in the works.

So where are we still seeing issues?

1. Covid is not over. 

Africa as a whole seemed to weather the first wave surprisingly well, but the second wave is a different story. As the Lancet says (here): “Our analysis showed that the African continent had a more severe second wave of the COVID-19 pandemic than the first…”. In some parts of the world and with the new variants some countries are slipping into a third wave such as Germany, report here…It is not over.

The vaccine rollout is going well in some ‘western’ countries such as the UK, and indeed in the USA, President Biden has just announced that having promised 100 million jabs in his first 100 days, they will in fact do 200 million jabs in his first 100 days. But behind this good news, vaccine wars are breaking out amongst the rich countries creating a disjoin between them and the developing world –  the less well off countries are now left with the realization that they are expected on the whole to wait and hope.

The cheapest vaccine on the market, the Oxford/Astra Zeneca, which is being sold at ‘cost’ for humanity and especially aimed at the developing world given the lower cost and zero profit for the company, has sadly become part of a serious EU vs UK spat. This has  resulted in millions of these vaccines being hoarded, not being used with a public unsure and unwilling to use , yet with the governments themselves refusing to export them to other countries… 

Covid continues to change and adapt. We have had the English variant, the South African variant, the Brazilian variant, and now in India we are seeing a variation on a variant. As each of these come out the nervousness increases as companies and governments wait to see if the current vaccines will still work.

2. Banks are still unwilling to lend.

As we have discussed before, lending from banks into SME’s in Africa continues to be highly restrictive (if you can even get a loan of course) and often with 200% personal collateral. When we wrote last about this (here), according to The World Bank, the average amount of collateral required was 213%, and that’s an average across all firms, not just SME’s and certainly not amongst Lioness businesses!

Determined to control their non-performing loan ratio and to keep it below certain levels, Banks are protecting their loans by concentrating on those companies to which they have already lent (historically a male dominated list). If you are not already a borrower, then you have to join a very long queue…

3. World trade is disjointed. 

What do we mean by that?

One of the biggest costs in trade is the return journey. If you ever spend time talking to logistics companies, it is not your trip they worry about. Dar es Salaam to Nairobi is easy, but they will spend the next week desperately finding the ‘return trip’. Nothing is worse than taking an empty truck back. What a waste of time and cost. 

When Covid struck and the world closed, this problem became real across the globe. Ships were stuck in huge ports around the world, but as the world reopened (with China first), ships in Los Angeles or Long Beach still idle, the USA closed, quiet or sluggish, there were no natural return journeys. Meanwhile in China ships were filling up fast and heading to the USA. It was as if all trucks had stopped in Nairobi having run out of Diesel, yet the Diesel was sitting in Dar es Salaam…This added and still adds to shipping costs.

Containers also were affected. In our example above, the USA was full of empty containers, yet these were needed by the factories in China. This added and still adds to shipping costs.

Certain of our members will have noticed recently that the cost of plastic has risen – same issue, plastics are either in the wrong port looking for a container and then searching for a ship, or the factories themselves have issues. This is especially true in the USA one of the world’s largest manufacturers of Plastic resins. Unplanned outages due to a huge winter storm called ‘Uri’, on the back of the pandemic, coupled with planned outages left the plastics market gasping for supply across the globe.

As reported on Bloomberg (here): “At the root of the problem lie a series of factors ranging from plants being shut down, the winter storm in Texas and the global shortage of shipping containers — which got thrown off their usual routes due to the pandemic. Add to that the strong economic recovery in Asia and demand for consumer goods in the U.S., and companies are at pains to secure supplies…

As if that wasn’t bad enough (although will at last prove the British correct in their automatic panic buying of Toilet Roll whenever there is a global issue) – yes, Toilet Roll could be the next hit by the lack of containers, see here, again from Bloomberg… There is a company in Brazil that supplies about a third of the hardwood pulp that goes into Toilet Paper, but are unable to find the necessary ‘break-bulk’ cargo vessels. You have been warned!

How can you plan for these events?

Answer is you simply cannot, but if 2020 has taught us anything, increased uncertainty, increased volatility of prices and increased nervousness means you as a business leader have to be extremely careful at this moment. We are not out of the woods yet, there is light at the end of the tunnel, but it is so far away that it could very certainly be another train coming towards us.

So what can you do? Expect the unexpected, keep your company as cash rich as possible. Twelve months ago, seeing the huge terror in Italy we gave you the same instructions – put ‘she who will not be moved’ onto debt collection FAST, ‘fair but firm’ being the instructions she must have from you – now is not the time to tell her to relax. You won’t go bust with cash in your bank, but going bust with a nice full warehouse, now surely that’s just daft!

For your sales staff, selling is great, but they must avoid stuffing the now empty warehouse that you worked so hard to empty, with gleaming new goods, keep a strong hold on the inventory. Allow it to grow with a plan, any ‘straight in, straight out’ sales should be celebrated. Banks are not your friend, they are there for their shareholders and because of this low NPL ratios.

But seriously what else could possibly go wrong? Surely we are at the end of the tunnel?… and then this happens:

Source link

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *