Farm To Fork The Backstory

A husband and wife were dining at a 5-star restaurant. When their food arrived, the husband said: “Our food has arrived! Let’s eat!” His wife reminded him: “Honey, you always say your prayers at home before your dinner!” Her husband replied: “That’s at home, my dear. Here the chef knows how to cook…”

Towards the tail end of last month, the National Emergency Response Committee on Coronavirus approved and issued a set of guidelines for the partial reopening of restaurants and eateries following a directive by the President on the same. Watching from the sidelines of an organization that runs a restaurant, it has been amazing to see the various iterations that the guidelines have been through in the short two weeks since the initial announcement which has caused massive confusion and costs to restaurant owners.

An even more illuminating discourse began on Kenyan social media on the demerits of opening up eating establishments with folks loudly wondering, in misplaced righteous indignation, whether the government really knew what it was doing. I reached out to a chief executive of a chain of restaurants to get the back story on why the government would select the restaurant industry for relaxation of lockdown restrictions and he opened my eyes on the invisible-to-the-naked-social-media-eye value chain that exists from farm to fork. He gave me an example of a long standing supplier of pre-cut potato chips to the restaurant. The lady, who shall go by the name of Mary for purposes of this piece, has been supplying potatoes to restaurants for the last twenty years. Mary started off by buying potatoes in bulk at Nairobi’s wholesale vegetable mart, Wakulima Market, and her entrepreneurial skills were borne as she realized that she could undertake backward integration by planting the potatoes herself. Twenty years later, she has over 300 acres in Naivasha, undertaking large scale rotational vegetable production using pivot irrigation. She transports her potato harvests to her processing plant in Nairobi where she peels and cuts the potatoes into chips for sale to various restaurant chains. She hires hundreds of casual laborers during harvest time and last month, in April, had to plough back 300 acres of potatoes into the soil as compost. Mary had to make this painful decision for two reasons: firstly, she couldn’t get the casual laborers to help in the harvest due to travel constraints following travel restrictions, as the laborers only came into Naivasha during harvest time and secondly, the demand for chips had dried up significantly following the reduction of sales in most restaurants. At about two tonnes per acre, those are 600 tonnes of potatoes that were reduced to compost at the turn of a plough!

The CEO then gave me insights into the milk industry. Between hearty servings of tea and coffee, milk products are also used in the restaurant industry in the form of cheese for burgers, pizzas and salads as well as ice-cream and yoghurt. His particular chain of restaurants typically used 400 litres of milk a day, and his larger competitor, with 62 branches, used about 105 litres a day per branch making for a total of 6,510 litres daily. This is not counting the additional milk required for the daily ice cream and yoghurt consumption. So if just two restaurant chains are seeing a drop of almost 7,000 litres of milk daily, imagine the impact on the dairy farmers whose cows continue to produce milk daily with nowhere other than the drain to pour out the milk to. You see, the retail milk market does not have the capacity to absorb all this extra product as there’s only so much milk the individual can consume at home.

Restaurants are not just made up of the formal dine-in varieties, but also include the informal mabati structured vibandas where many blue collar workers also partake their daily meals. These add to the thousands of dining establishments that need meat, potatoes, tomatoes, onions and other myriad raw ingredients which make up the food value chain that ends up at the end of the proverbial fork. The negative economic contagion on farmers countrywide means that the COVID-19 impact is far reaching beyond the urban lockdowns and curfews that we see with the naked eye. So before one postulates yet another insipid conspiracy about which fat cat manufacturer the government is protecting by trying to reopen the restaurant industry, do the potato math. As James Carville expressed during the Bill Clinton 1992 presidential campaign, “It’s the economy, stupid!”

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Twitter: @carolmusyoka

Criminal Liability For Directors

Being a company director is hard. Scratch that. Being a company director in Kenya, is extremely hard. And nothing brought that point painfully home more so than the press release issued by the Director of Criminal Investigation George Kinoti a week ago. In the document dated 25th February 2019, the Director released the names of one hundred and seven companies and their directors, on the premise that “the underlisted companies and their directors are believed to be connected with or have information which will assist in ongoing investigations into fraudulent [sic] construction of Arror and Kimwarer multipurpose dams valued at Kshs 63 billion…”

Both mainstream and social media took to the list with much glee, as the list of directors read like a who’s who in the Kenyan corporate scene. Criminal culpability was being imputed for executive actions taken in what seems to be the extraordinary course of business. Note my use of the word “executive”. While the story is still being unraveled, what is slowly coming out is that goods and services were procured in the name of the construction of the dams. Said goods and services were provided by companies who had executive officers that execute decisions and boards that provide oversight and accountability for the acts or omissions of those executives.

 

The accounting officer in a company is the chief executive officer (CEO). He or she is responsible for all the decisions and actions that the company undertakes. However, the board is ultimately accountable for those decisions and actions. Since the board is not involved in the day to day actions and are meeting on a minimum of a quarterly basis, it is not unfair to assume that they are in the dark about what cheques are being signed by the management accountant in finance at 3 p.m. this afternoon. Boards rely heavily on management to follow approved policies and procedures, the internal auditor to provide real time assurance of controls and the annual external audit process to verify that the business is under overall effective control. Failure of the board to provide effective oversight is supposed to be met with retribution from shareholders whose interests the board represents.

 

But this is where it gets interesting. Enter stage left the Director of Criminal Investigations. In the same press release, he continues to aver that the companies and directors were “..paid to offer various services. They should avail the following documents (i) quotations (ii) invoices (iii) delivery notes amongst other relevant documents.” It goes without saying that feverish phone calls were quickly made by directors to CEOs asking them – with varying degrees of consternation – what the heck was going on and what documents are these that were being referred to? Board directors wouldn’t have the first clue where to find these documents, but management should and would. Which then begs the question why the Director didn’t just address his press release to the companies and their CEOs?

 

A strong message was being sent in that press release. The social capital card was in play, you know, the one that relies on embarrassment and peer pressure to yield up results. It would be a herculean task to directly link a non-executive director to the provision of goods and services of a company unless they signed the invoice in their own blood. But dragging their names in public would mean that they could likely sing like proverbial canaries if required or they would help to apply the necessary pressure on recalcitrant management to produce what was needed. ASAP. Sadly, the names of directors included a number who had resigned from those companies years ago, thus whose names were unnecessarily being published.

 

One critical lesson here is that anyone who resigns from a director role must ensure that not only is that resignation accepted and acknowledged, but that the company secretary on record files and updates the company’s records at the Companies Registry. There is a dangerous precedent being set here in dragging non-executive directors from the board room and into the fifth floor accountant’s office. Board room conversations in this country will now have to have an operational risk agenda item: who are we doing business with and what kind of trouble can it bring us? Banks have already been forced to do it with the anti-money laundering breaches and prohibitive regulatory fines following the National Youth Service corruption investigations last year.  I guess even tile and towel importers will now have to do the same.

 

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Twitter: @carolmusyoka

 

CEO New Year Resolutions

New Year Resolutions From A Chief Executive Officer

 

I can’t believe the end of 2018 is nigh. It’s been a good year, at least far better than 2017 which I daresay we achieved budget by the grace of nothing but terrorizing staff. On my fiftieth birthday this year I promised myself that I would be more intentional about my goals so here are my 2019 resolutions.

 

Resolution 1

I will engage youthful customers. My marketing team keeps harping at me about how I am completely out of touch with that segment of our customer base. Of course I’m out of touch, those ingrates don’t have the spending power that our older customers have. Can you believe that marketing made me attend some allegedly popular Sauti something concert so that I could watch how the youth engage with products? I hated it. Loud, brash, packed like dengu in a bowl and no one seemed to have a concept of personal space. I think I prefer to observe these fellows on their social media turf. It’s more hygienic anyway.

 

Resolution 2

I will learn more about social media. My seventeen and sixteen year old daughters cannot get their noses out of their phones and burst out into laughter when I said that my Facebook account was proof that I knew social media. After threatening to cut off the wifi subscription for the house if she didn’t introduce me to what was considered cool social media, the older one showed me what I figure must be her ‘safest’ friend on Instagram. The pictures people put on their feeds or is it stories are cringeworthy. She showed me one of the feeds from the boys in her class. I need to have a long conversation with the principal of her school. How in heaven’s name can underage boys proudly post pictures of themselves smoking and drinking on a public forum? And these are the boys in class with my girls? I need to talk to my wife about home schooling. Maybe she should retire early since she’s always complaining about her job and teach our children from home. I asked daughter number two to show me her Snapchat account so I could join and learn. All I got back was a “You’ve got to be kidding me DAD, that’s gross”.

 

Resolution 3

Maybe I need to rethink resolution 2. Wife would never quit her job.

 

Resolution 4

I will have monthly meetings with my direct reports. Look I hate team meetings. All that people do in those sessions is whine about why they are not delivering on their targets. I prefer to meet my direct reports one on one so that I can really give them an unfiltered piece of my mind while in the privacy of my office. But my board chairman is getting concerned that my team seems to be disjointed and pulling in different directions based on his razor sharp observations. I think I’ll have people dial into an online conference number so we don’t all have to be in a room together at the same time and they don’t feed off of each other’s negative vibes.

 

Resolution 5

Scratch resolution 4. Who does the chairman think he is? I know how to get the best from my people and having team meetings is not the panacea. Divide and rule is how I’ve run this joint and it’s worked quite well for me since I became king of this castle.

 

Resolution 6

I need to work on my retirement plan. I need to start and finish building a house in Vipingo Ridge at the coast. I have no intention of building a house in the village, how will my peers ever get to see it unless they come there? Which we know that they will never come to that rural backwater. Vipingo has class, it has pedigree, it brings vacationers who always “ohhh and ahhh” when they see the homes there. That means that I need at least two more good bonuses. That means I need to cut off the fat found in the costs of running this place so that I can drive up the profit for the next two years. Let me look at those headcount numbers once again….

 

That’s it. No one said that they have to be ten resolutions. These will serve me just fine for now. It’s time to run this place like a boss!

 

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Twitter: @carolmusyoka