Would BPO be the vaccine against sme infant mortality?

‘…this has been an interesting but short dialogue, it deserved at least three days, so much was left undiscussed in the interest of time’, Mzee BSN told us that evening, after being ‘guest’ during the Validation Dialogue for the Second National Strategy for Private Sector Development (NSPSD II). This is an initiative of the Ministry of Finance, Planning and Economic Development (MoFPED), that targets linking State and non-State actors in the economy with the overarching aim of enhancing the Ease of Doing Business and competitiveness, thus driving private sector investment, linking it to national development priorities.

The ultimate outcome, according to MoFPED, is overall growth of the economy and citizen standards of living. Having been on a business trip here, Mzee attended at the invitation of his business partner, a former workmate in a regional multinational. We attended the same event ‘incognito’ to each other, since we knew he had left the previous day. And so, we had to ‘revenge’, in the evening and host him.

One notable factor raised during the NSPSD dialogue was the informal nature of Uganda’s SMEs, which accounts for the high infant mortality rate of businesses started by Ugandan entrepreneurs. Paradoxically, this informality cuts across the social strata, and includes even highly educated professionals.

According to Mzee and what he shared with us; SME mortality rate is in direct proportion to one’s level of education. The explanation, he says, has two variables, namely risk averseness and what he calls ‘ujuwaji’ (elitism). Two cases from his experience brought his latter argument home. The first was a bakery business, started by three friends, professionals in different fields. 

The business had a faulty start despite the potential market, till one of the directors shared its challenges with Mzee over lunch. Mzee offered to do a mystery shopping visit to the business, including an evening coffee chat with the owners, the purpose of his presence unknown to the other two directors. He came out with a conclusion and turn-around proposal: the business had all the success variables including an insatiable market, but was bogged down by the ‘professionalism’ of its owners. Each needed his views to over-ride, thus decisions took long to arrive at, while operationally the staff had been recruited for ‘who they were’ instead of ‘what they were’. Solution was simple. BPO. BPO is Business Process Outsourcing.

In simple terms, it means one invests in a business, but contracts a different firm to manage the business on agreed terms including the management fees. The Board bought his proposal. Contract signed and essentials agreed, he imported two key managers: production manager and financial controller. And as promised, in a hundred days, the business was up and profitable, with unbelievable market growth that necessitated opening two production branches in two other towns within one year.

In the second year of the BPO, the owners were ‘incensed’ that this guy was ‘making a kill’ from their business. They demanded it back, since it was now mature.  Eleven months after the severing of the BPO, the business closed. Same disease that had threatened it in infancy. The second success story Mzee gave us is of a bus company, under his management.

Run along airline practices, with dedicated termini, scheduled departures and arrivals, on-board purser services, ‘read-and leave’ literature (books, newspapers, magazines), it has become the preferred company for elite travellers, despite the fare being 75 percent higher than the ruling general travel fares. ‘…this to me, is the vaccine that Ugandan SMEs need’…he concludes as we close the day.

Matsiko Kahunga, [email protected]
Business