He told me that when he had just started his business of Mandela Auto Parts that sells car spare parts, he stayed in a rented flat in Musajjaalumbwa flats off Rubaga road.
By Moses Byaruhanga
Many people make New Year resolutions some do follow them up while to others, they end at pronouncements. This is my first article this year. I will not make resolutions in the article, but share with you what some of you could consider in your resolutions. It is said that many Ugandans don’t save. From a banker’s point of view, this could be true.
However, as a Ugandan, I see how the Ugandans save. It is true many don’t save in banks. Looking at a young person who has finished school, they look for a job. This is natural. When they acquire some income, the next thing is buying a car normally paid for in installments. The next thing is buying a plot of land and construction starts. In other words, young Ugandans save in form of vehicles, unbuilt plots of land and finally in houses built over time. They don’t borrow for the construction. It is basically on their savings.
Recently, I was having a discussion with my friend, Haj Omar Ahmed Hussein, commonly known as Haj Mandela, the proprietor of City Oil fuel stations, Cafe Javas restaurants and the new Mandela Millers producing maize flour and wheat flour under Supreme.
He has many other businesses. He told me that when he had just started his business of Mandela Auto Parts that sells car spare parts, he stayed in a rented flat in Musajjaalumbwa flats off Rubaga road. He didn’t think that building a house was a priority at that time of starting a business or between starting a business and constructing a personal house, he chose to start a business and construct a house much later.
He told me that his friends would visit him and criticise him as to why he was renting in a flat when he had money. He would tell them that he was concentrating on reinvesting and expanding his business. He told me that as a result of that focus on making money first and building houses later, today he can buy any house in Kampala.
As pointed out above, many Ugandans put all their savings in construction of houses and buying cars. Others go beyond construction of a house for personal accommodation and construct houses for rent. A house in Kyanja, Kisasi, Namugongo areas of about sh200m can fetch rent of sh500,000 per month. In other words, with your capital of sh200m, you are earning sh500,000, if you are renting it or even if you reside in it as the owner. In a year, you are earning sh6m.
Supposing you sold that house and got sh200m and put it in the most risk free enterprise, say on a fixed deposit, at the current 11%, you would earn sh22m before tax. If you put that money in many other different businesses, the returns would be much higher. Some of the processing factories need an equivalent of five houses like the one under reference. So five of you can set up a factory with much more returns than the rentals and when you have saved from your investment you can build your desired house.
While discussing this subject on a talk show early this month, my friend Joseph Beyanga, asked like many would, that if he hadn’t built a house, with the housing shortage in Kampala, where would he be staying. This is a good question but it is also true that many build houses not because they have nowhere to stay. They build when they are already renting like Haj Mandela was renting and move to their new houses. But to answer Joseph and others, with a housing shortage, the rich who have a lot of savings would build houses for others to rent.
Why the rich would be the ones to build houses is that for them they have accumulated savings and they will find it easy to build rentals as a store of their value not necessarily for what they get from the houses. The one am discouraging from building houses is that one starting in life. They build houses and cry of lack of capital to do business while they are sleeping in and driving in capital. It is said that some Asian visiting Uganda commented that Ugandans drive cottage industries on the roads, meaning that the personal ethic we start with in life, that money could be invested in a small cottage factory.
So you who have already made the mistake and built a house worth so much money, but you lack capital to engage in business what do you do? My answer is simple. Get a bankable business idea. If it is a good and capable of generating income and pay off the loan, walk into a bank and use that house as collateral, get the money and do business. Ugandans will say that interest rates are high. Granted. The Government has for about 10 years now been working with commercial banks lending out money to those in agricultural processing at 12%. This money is there in the banks. But even at the going rates in the banks, some people have borrowed and made it.
At the talk show referred to above, Godber Tumushabe said that his friend Andrew Mwenda visited him some time ago and criticised him for staying in his own house instead of investing in a business. He advised him to use the house as collateral and get money from the bank and do business. Godber did that. He told us that in six months he will complete paying the loan and get his tittle back and the business he invested in will continue going strong. If Godber did it and succeeded, why can’t you do it?
If Haj Mandela stayed in a rented flat why do you rush to build a house? We only lack entrepreneurial skills to turn around our lives and our country. If we did this, we would create so many jobs in our economy. If you don’t want to borrow, sell the house and rent it from the buyer. You will later buy it back after some hard work.
The writer is a Senior Presidential Adviser on Political Affairs