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Getting your company out of a financial ‘hole’

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Jack Welch, the former chairman and CEO of General Electric once said “Change before you have to”. When you see tell-tale signs of a decline in your business you better start taking drastic measures to steer your business back to safe waters.
In the mid 1980’s, IBM failed to pick up signs in the market place of impending changes in the computer industry. IBM thought the future would be much like the past and as a result didn’t have to change much.

IBM didn’t realize how much microcomputers would replace the functions of their bread-and-butter business, the mainframe. Failure to change earlier resulted in tens of thousands of people being laid off when the company suffered its first losses in its history. Many businesses go through such upheavals because they fail to anticipate drastic market share losses.
When faced with a loss making situation, a decline in sales or a decline in your market share it’s time to consider adopting some turnaround strategies. Peter Drucker, an American management consultant and professor once said “The greatest danger in times of turbulence is not the turbulence, it is to act with yesterday’s logic” or not to act at all. Business leaders need firstly to identify that their company is sick and needs to be attended to urgently.

How can you identify a “sick” business? When you see a business that is losing market share, experiencing a decline in profitability or has incurred losses in the previous accounting year, and in the current year and is likely to incur losses in the coming following years or is heavily dependent on debt then know that such a business is getting into serious trouble. You need to come up with turnaround strategies to rescue the organisation.

The main causes of “industrial sickness” could be entrepreneurial incompetence, financial problems, intense competition, or production problems impacting on quality or unfavourable Government policies or lack of raw materials. All these issues can push a company into a serious loss making situation which, if not attended to, can lead to bankruptcy.
It’s therefore imperative for a company to embark on a turnaround strategy. Turnaround involves restructuring a loss making company into a profitable one. It is aimed at reversing the trend of declining performance of a company. Turnaround is a long-term strategy which requires proper planning and implementation to convert the loss-making unit into a profitable one. It’s a lengthy and time consuming process.

There are three phases in turnaround management. You need firstly to carry out a diagnosis of the problem faced by the company, that is, identify the root cause or causes of the crisis.
This could be revenue downturn caused by a weak economy, poor strategic choices, poor execution of a good strategy, high operating costs or high fixed costs that decrease flexibility, a highly successful competitor who has entered the market or it could be an excessive debt burden. All these could be causes of the loss in profits.

Once you have analysed the probable root causes and if there are prospects of turning around the situation, you’ll need to come up with a number of strategic options and then choose the appropriate turnaround strategies from those options. The following could be some of the strategies that one can adopt after a careful analysis: you could change top management, retrench excess staff, adopt all round cost cutting measures, implement some revenue generating strategies, divesting from underproductive assets or a reformulation of the current strategy. These initial strategies are intended to bring the company back into a profitable situation.

Once you have achieved profitability you can then adopt the second phase of the turnaround which basically involves a return-to-growth or recovery stage. The turnaround process now shifts away from retrenchment, cost cutting, revenue generation to growth and development and a growth in market share. This can be achieved through the introduction of new products, or entering new markets, or through increased market penetration.

Corporate Renewal Solutions (CRS), a black economic empowered management consulting firm based in Johannesburg, South Africa came up with a turnaround management philosophy which revolves around short-term survivability while endeavouring not to compromise longer-term turnaround viability.

The whole process involves: identifying the causes of distress, assessing the severity of the financial crisis and the number and nature of internal and external constraints faced, drawing up short-term turnaround strategy to lift the company from a loss making situation, ensuring that the strategies get stakeholder support.
Once you have implemented the short term strategies, you then move on to drafting longer-term turnaround strategies that will move the company towards its vision.

Implementation of the turnaround strategies is very key. Anyone appointed to carry out the process of turning around an organisation requires the support of all key stakeholders. For an organisation to move from a loss making situation it needs to change. Albert Einstein, one of the most significant scientific geniuses of the 20th century, said “Insanity is doing the same thing over and over and expecting different results.” You need to change the way you have been doing business if you have to turn around a failing business.

l Stewart Jakarasi is a business and financial strategist and a lecturer in business strategy (ACCA P3), advanced performance management (P5) and entrepreneurship.
He is the Managing Consultant of Shekina Consulting (Pty) Ltd and provides advisory and guidance on leadership, strategy and execution, corporate governance, preparation of business plans, tender documents and on how to build and sustain high-performing organisations.

For assistance in implementing some of the concepts discussed in these articles please contact him on the following contacts: sjakarasi@gmail.com, call on +266 58881062 or WhatsApp +266 62110062 .

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Jobs galore for Lesotho

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94 000 jobs.

That is what the Millennium Challenge Account (MCA-Lesotho) will create in the next 10 years, according to Prime Minister Sam Matekane.

The MCA-Lesotho was created by the Lesotho parliament last year after the United States’ Millennium Challenge Corporation (MCC) found Lesotho eligible to receive development funds.

The MCC gives development grants to poor countries that respects democratic principles and human rights.

The MCC has unlocked a staggering US$322 million (over M5 billion) to the government of Lesotho after the country enacted three laws the protect people’s basic rights this week.

Matekane advised youths to visit MCA-Lesotho offices to understand how best they can benefit from the fund and the projects that will be financed.

The MCC’s investments are aimed at increasing the availability of water for household and industrial use, enhance watershed management and conservation methods, rehabilitate health infrastructure and strengthen health systems, and remove barriers to private investment.

The MCA-Lesotho’s Health and Horticulture Compact seeks to assist the country in unlocking equitable and sustainable economic growth in partnership with the private sector by addressing key constraints to growth.

Matekane said the job creation potential of the horticulture project alone is estimated at 4 000 jobs.

This excludes indirect jobs that will be created through packaging supplies, logistics, cold chain activities as well as the processing of the output.

“Let us all be ready and ensure we spend all the funding that is available,” Matekane said.

He said the money is going to be invested in agriculture, trade and industry, value chains, infrastructure development, tourism and creative sectors.

“The Compact has come at a critical time when the country is in dire need of financial injections to revive the economy,” he said.

“This second Compact forms the core of Lesotho’s private sector-led economic growth, recovery and job creation agenda.”

He said the MCA staff should work diligently, to implement this Compact.

“There are several Basotho businesses out there that are eager to seize the opportunities that the Compact brings,” Matekane said.

“Serve them with integrity, accountability and dedication.”

Matekane said the government has established the Cabinet Sub-Committee on the Compact which is under the leadership of Deputy Prime Minister Nthomeng Majara.

The sub-committee is mandated to ensure that the government provides overall oversight, strategic direction and support for successful implementation of the Compact.

He said he expects the MCA-Lesotho to ensure the full implementation of the project within the next five years.

“Our economy needs this capital injection to boost productivity and job creation,” Matekane said.

Matekane said the government had to enact three pieces of legislation which were necessary to support the investments that the MCC is making.

The enacted laws are the Labour Code Amendment Bill, the Administration of Estates and Inheritance Bill and the Occupational Safety and Health Bill.

Majara Molupe

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Bank spearheads career expo

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Standard Lesotho Bank will tomorrow host a career expo at the ’Manthabiseng Convention Centre for high school students who will sit for their final exams this year.
The 14th Annual Standard Lesotho Bank Career Expo was launched in Mokhotlong on Monday where the Lesotho Highlands Development Authority (LHDA) welcomed students in areas around the Polihali Dam construction site.

On Tuesday the expo was at the Butha-Buthe Community High School, yesterday it was at Assumption High School in Teya-Teyaneng while today it is in Quthing at Holy Trinity High School.

The five-day nationwide event is dedicated to connecting ambitious Basotho youths with exciting career opportunities.

Standard Lesotho Bank says it’s career expo “is a cornerstone of the bank’s commitment to empowering Basotho youth and shaping the future of Lesotho’s workforce”.

The 2024 edition of the event is the 14th where the bank is now the headline sponsor of this important expo that reaches about over 10 000 students countrywide.

The expo promises to be an even better offering where over 35 institutions of higher learning from Lesotho and South Africa as well as professional bodies will explain different career options to Basotho students.

Standard Lesotho Bank communications manager, Manyathela Kheleli, said students in Mokhotlong did not only learn about different engineering disciplines but got to appreciate engineering in action at Polihali.

He said it was a lifetime experience for students from Mokhotlong, “thanks to the collaboration with LHDA, who are fully responsible for the Polihali leg of the event”.

There were also motivational speakers from different professions in the bank and other selected institutions.

Key influencers in the football fraternity, former Likuena captain and now Corporate Responsibility Manager at Letšeng Diamonds, Tšepo Hlojeng, and former Orlando Pirates dribbling wizard, Steve Lekoelea, are among the influencers that have been invited to address the students.

The event is a sponsorship initiative under Personal and Private Banking that is open to all youths, communities, and individuals, where the bank intends to use this event to drive the new Youth or student Customer Value Proposition and attract high school students to open accounts ahead of their enrolment into tertiary institutions.

The objective of this sponsorship is to first create an environment where future leaders of Lesotho will be nurtured and informed of top career choices that demonstrate various skills requirements for the growth of Lesotho’s economy.

Secondly, the career expo is a clear demonstration of the bank’s intention to put youths at the centre of its initiatives.

This position is shown by the bank’s initiative to not only develop special products for youths, such as the Youth Account but also through several initiatives that promote youth empowerment. These include the bursary scheme and the Bacha Entrepreneurship Project.

“We are more than a bank for our youths, but a good corporate citizen and a partner for the education for Basotho,” Kheleli said.

“We believe that as we grow our youths, they will become assets to this country and by extension, develop into a feeder market for our banking products when they enter the job market,” he said.

The bank has invested M150 000 towards sponsorship of the annual Career Expo.

Staff Reporter

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Ministry launches fresh industrialisation drive

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A new policy to drive industrialisation in Lesotho was launched in Maseru this week.
The Lesotho National Industrialisation Policy 2024–2028 is being spearheaded by the Ministry of Trade.

The ministry says the policy seeks to accelerate economic diversification in the industrial base, enhance productivity and productive capacity for industrialisation and advance domestic and regional value chains for industrialisation.

It also seeks to promote and develop industrial clustering, promote inclusive industrialisation, support entrepreneurship development and strengthen business linkages.
The new policy will also seek to enhance energy efficiency and sustainability, promoting technology adoption and innovation, services-based industrialisation, and stimulating agro-based industrialisation.

This is not the first time Lesotho has launched an industrialisation policy. Previous policies have all failed.

The first attempt was the 2015–2017 industrial policy, whose aim was to accelerate the industrialisation agenda and address key challenges facing the country.

The second one was the 2018–2023 policy, which after its unsuccessful execution during the three years of implementation, the government extended it to the National Strategic Development Plan Strategic Focus (2023/24-2027/28).

The new industrial policy’s target is set to activate implementation on innovation to enhance the efficiency and competitiveness of domestic industries, create decent jobs and improve the welfare of Basotho.

Thabo Moleko, the Ministry of Trade Principal Secretary, said the implementation of the new policy is set to deepen economic growth, promote industrialisation and enhance competitiveness.

“The plan includes greater investment in industrial development with the intention to create employment and incomes while building on maintaining the existing industrial trade,” Moleko said.

Mamello Nchake, a consultant for the United Nations Economic Commission of Africa (UNECA), said the development goals of the industrial policy are set to ensure an achievable inclusiveness and equitable growth as they aim to create sector-led quality jobs for Basotho.

Nchake said the goals are meant to “develop and maintain enabled infrastructure that is critical to the private sectors and also to promote gender equality, environmental and climate risk management”.

“Moreover, the policy (will seek to) harness the collaboration with private sector firms to address common challenges and promote industrialisation,” she said.

The workshop discussed constraints that hindered the implementation of the 2018 – 2023 policy that undermined investment and trade opportunities.

The constraints include access to land for investment, inadequate provision of infrastructure, an outdated and a lack of appropriate regulatory environment, low productive capacity, market size and topological constraints, unstable macroeconomic environment, external factors, and over-dependency of trade preferences.

To address the strategic objectives, the previous industrial policies had proposed tax incentives for industrial development, trade policy and regional integration as the main vehicle for industrialisation and structural transformation.

They had also proposed mechanisms for policy coordination and implementation, institutional alignment and linkages.

However, several key challenges were identified in the implementation of the 2015-2017 industrial policy.

They included limited financial and investment capacity to effectively implement the industrial policy actions.

“Financing instruments are not aligned with the level of development needs of the private sector,” stakeholders heard at the workshop.

They also heard that there is “persistent dependency on few industries that poses risks in the face of global economic uncertainties and ever-changing consumer preferences”.
Another identified problem is limited investment climate that makes it costly for foreign firms to invest in Lesotho.

It was also observed that a shortage of specialised education and skills crucial for growth of industries impact the ability of firms to adopt advanced technologies and improve productivity and the productive capacity.

Stakeholders also heard that there is limited global competitiveness and access to global markets.

Lesotho’s industries, they heard, particularly textiles and garments, face competition from other low-cost manufacturing countries.

The country is also spooked by poor coordination between the implementing agencies due to a lack of a clear implementation framework.

Khahliso ’Molaoa

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