'If Sheila Gashumba was an employer, she would not rant over poor pay'
Jaluum Herberts
There's been a lot of talk about salaries and wages for employees of late sparked off by Sheila Gashumba's tweet over poor pay of the people who work in the media.
Many people have given their views on this from different perspectives. Some from the employee's side and some from the employer's.
I have read a couple of opinions from various people and thought I should also add my own opinion to the debate.
For starters I own/run a 4 year old Business Consulting firm (Young Treps) and I also have two other ventures namely Campus Doctor which is a health care service firm targeting university students and Boro Boro a Financial Service Firm offering financial services to SMEs whilst working towards becoming a fully fledged online bank someday (both just about a year and half old).
I hire a good number of people and have also been employed before (for about 5 years).So I can speak with some authority on this issue.
The views I hold now as an employer are slightly so different from the ones I held five years ago as an employee.
Standing in the shoes of an employee, I totally get where they're coming from and standing in the shoes of an employer I also totally get where they're coming.
It's like when we were kids, a lot of the things our parents told us didn't make sense to us until we became adults and became parents ourselves.
Now we look back and see things more clearly with hindsight.This is the same thing that applies in this scenario.
As an employee, you look at how much the business is making and also look at how much the business is paying you and assume whatever remains goes to the business owner.
The business makes 10M a month and you're paid 1M so presumably the owner is taking all the Shs 9M balance.
So unfair isn't it? You make this money and yet you only get 10% of it and the other person takes 90%.
The one thing most people don't look at is the reality that, the business owner invests capital which most of the time (70%) isn't their money but money borrowed from the banks, relatives, investors money name it.
This capital comes at cost.
Even if the capital came from the investor's personal money it comes at a cost. If I had 100M on my account, there various options.
I could fix it and get my Shs 10M at 10% without the risk of losing the money.
I could buy bonds and make about 15M at 15% with no risk at all or build rentals that give me 1M a month,that's 12M a year with no risk.
The cost of foregoing all those options to invest the 100M into a business in which there's 100% chance I could lose the money is also a cost.
So yes, even when the capital comes from my pocket it comes at a heavy (opportunity) cost.
Those are things an employee doesn't see or take into consideration.
The cost of capital. When I invest Shs 100M in a business the business owes me Shs 100M and until the business brings back my Shs 100M the business is still indebted to me.
That's why you hear that businesses aren't making making money or worse losing money even when they open every day and you see money coming in daily.
This is still one thing that doesn't make sense to most.
Why open if you're not making money?
I even saw a whole minister ask such a question so I don't blame a lay employee for thinking the same.
If that money was for the bank I would have to pay it meaning everything that came in would right away go out back to the bank.
Labour is a crucial resource/factor of production just like capital, raw materials, power e.t.c. but what makes a business a business are mainly three things, the idea, the organisation and implementation of the idea and the risk.
Truth is all those three things (burdens) are carried by the business owner.
If the business didn't make money for a year, the owner can't tell the employees that we won't be paying you because we aren't making money yet require you to keep offering us your labour.
The employer will have to find a way to make sure the employees get paid.The risk isn't on them. Isn't it only fair that he who bares the greatest risk gets the greatest reward if it ever comes anyway? I will give you a practical example.
We are setting up a TV station. We have so injected about Shs 800M in equipment, licenses, furnishing and even then the station isn't yet running.
Since January we've been paying backroom staff. We have a wage bill of over Shs 50M a month without other operational costs like power, food, stationery name it.
So employees alone have cost Shs 250M plus since January and the business hasn't made even Shs 50 .
What happens if it closes now? Yes, employees will lose their jobs but they can always get employed elsewhere.
We shall have lost over Shs 1 billion.
In the business plan we gave ourselves 2-3 years before we break even depending on when we get started/go on air (coronavirus messed us up).
When salaries delay by a week you see how panicky employees become hahaha.
Someone (owner) needs to dig from nowhere to get them paid.
By the time the business finally makes money maybe we shall have spent Shs 5 billion.
Is it fair if the owners decided to reward themselves hugely for taking such a risk taking into account that money could still be spent and the business doesn't work.
Only about 3 television stations out of 40 plus reported some kind of profit last year.
Those are thing we don't factor into this discussion of wages and rewards of investors or business owners.
I think we need to have this discussion with a little bit of honesty, less self centeredness and context.
No one says employees don't have to be paid well but I think we need to look at salaries/wages in context and relation to all the factors and production.
Jaluum Herberts Luwizza is a founding partner and COO at Young Treps,Campus Doctor,Boroboro, a Keynote Speaker, Writer, contributor with the Nile Post. He is also a Business & Investment Consultant with YOUNG TREP East Africa's No.1 Business Management and Consultancy firm that helps people start and grow profitable businesses.
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