Imagine that you spent 5 years at university, learning all the intricate technology and detail of your proposed profession ñ without a single business course.
Imagine that you spent 5 years at university, learning all the intricate technology and detail of your proposed profession ñ without a single business course.
What does 5 years at university cost these days?
And imagine that you then set up a small retail store to ply your trade, with sureties to your landlord, and a huge overdraft to buy stock and shop fittings with sureties to the bank.
And imagine that you then employed about 7 staff members to help you in the store because it is a 7 day a week operation.
What would happen if the government intervened and limited your gross profit on any individual sale to just R26-00 ñ no matter how big that sale was? Which means that if I purchase a R1000 item from you, the transaction would work like
this:
R1000-00
+
R26-00
Government legislated maximum profit per item irrespective of price
+
R 143-64
Plus
VAT
=
R1169-64
Equals total paid by credit card
-
R1000-00
Cost of
-
R 58-49
Bank gets credit card bank charges [just for this transaction]
-
R 0-50
Telkom gets telephone call from card machine to bank to process transaction because R1000 is above floor limit
-
R 0-50
Telkom gets telephone call to get authorisation because my card is getting full
-
R 143-64
Government gets VAT
=
R 966-51
You get this nett payment
=
R 33-49
You lose this each time you make this sale
Thatís excluding the other indirect costs you face each month:
Shop rental
Staff salaries
o Including PAYE
o SDL
o UIF
Bank charges for the monthly cheques to government
Interest on overdrafts and loans
Accounting fees to pay for the reconciliations that government demands
And all of those other costs associated with running a business but not associated with any individual sale
I know it looks completely unbelievable ñ but it is true! Honestly, how long could you stay in business under these circumstances? And if you chose to continue in your business, what would you do to limit the damage?
In my simple mind (and I know I must be wrong, because our beloved leaders and their committed staff slaved for years to implement these fine regulations) you simply couldnít continue for long. And if you chose to continue, your first action would be to stop selling the big ticket items ñ because theyíre going to put you straight out of business.
And thatís the challenge that your local pharmacist faces right now. Government insists that these new regulations are good for you ñ the medical consumer ñ because they will keep drug prices low. They will ñ but these regulations will also drive 50% of the 2,500 local pharmacies in SA out of business ñ and those pharmacists are going to get deeply injured in the process, as are their employees. Government also assures us that theyíre doing this to relieve the burden on the state medical program ñ but is that really true? What happens when your local pharmacist cannot profitably support your particular disease? Mine is diabetes ñ and almost everything about diabetes is expensive.
I tried using the state services back in 1992, and it cost me a whole day each month to get the drugs I need to stay alive. I really do not want to go back to that. Yesterday I had a medical emergency. The new regulations meant that my own pharmacy in La Lucia Mall (which has just changed hands and become part of the Clicks operation - maybe there is method in all this madness) refused to supply the insulin I needed to get my blood sugar under control. (They had a computer error which duplicated all of my scripts ñ but lost the one I needed last night.) These new regulations so terrify them that they refused to acknowledge the urgency. Maybe theyíll be the winners ultimately because they wonít be losing money supplying me insulin in future, ëcos I wonít be going back.
The next pharmacy I tried didnít stock this particular insulin because they couldnít afford to. [Would you be carrying R1,000 stock ñ costing R150 per
year in interest just so that you could lose another R33-49 when it finally sold to some deranged stranger wandering in?] Then back to my doctor who gave me a script [which I insisted on so that I can laminate it and carry it around in my case] for every single drug that I currently need, before going to a local private hospital to get the insulin I needed. Isnít it interesting how tiny mistakes can escalate so rapidly into full scale crises?
Why am I concerned? Well, I know more about the social habits of the Kazakhstan Welwitchia Weevil [precisely nothing] than government knows about the reality of our small businesses in this country. [So do you.] And as a sufferer of a chronic disease, I know more about what is really happening at street level in my local pharmacy than government does. [So do you.]
Unless this stops soon, I am going to choose to find myself a little spot in paradise where my taxes pay for my drugs, delivered to me by nubile bronzed bikini clad assistants while I sip my beer on a sunny beach near a lagoon unsurrounded by electrical fencing designed to protect my meagre possessions and occasionally fry a migrating duck. [Itís great to dream, isnít it?]
And if I offer to bring with me a thousand qualified [but currently unemployed] pharmacists and 1500 other Business Warriors ñ each employing about 7 persons and each generating real wealth for the economy, what government [except, of course, ours] would refuse such an offer?
Genuinely, unless you have experienced the intense anxiety that a blood sugar event can engender, itís difficult to conceive of how important yesterday was for me. The Russians (back when Russia was the kind of socialist paradise that our current leaders aspired to and which we now seem bent on achieving) used insulin as a truth serum, because when your blood sugar hovers at about coma level you will cheerfully kill your parents to get some sugar.
And if theyíre doing this large government bull in the tiny pharmaceutical china shop routine now, how long before government feels the need to control profits
in your sector of the economy. Or mine. [In fact, theyíve already attacked the Internet industry with that marvelous piece of legislation ñ The Electronic Communications and Transactions Act designed to level the playing fields ñ which weíre all trying to ignore.]
Right now I do not know of a single small business that is completely legal ñ fully up to date with every single tax [including Local District Council taxes], and compliant with every one of the 143 pieces of legislation regulating our roles as small business owners. None of us can afford the staff needed to read, analyse, and comply with PAIA, ECTA, CIPRO, FAIS, FICA, and the host of others ñ all which will be used to penalise us sooner or later ñ yet more attempts to extract blood from the desiccated veins of small enterprise in this country. Now that I think about it, who the hell has time to sell any more?
After all, as ëeverybodyí knows we small business owners are just privateers sucking the lifeblood from the wallets of the workers, and the only folk that have enough judgment to ensure that each citizen gets his/her fair share are the semi elected folk that control our futures. Some of this anti-capitalism prejudice runs awfully deep. ëProfití is a dirty word in the psyche of government. I wasnít kidding about the blood sugar paranoia, was I?
Bottom line, I think that about 50% of all existing pharmacies will close within the next 24 months. Itís simple small business economics. And a lot of well trained folk are going to lose their homes, their cars, and their financial credibility. And about the only thing to do when that happens is to go somewhere else ñ like
These poor folk will do anything to keep it alive, but I donít see how theyíre going to get it right unless government sits down and works through the numbers from a commercial, rather than a political, perspective. How will that impact on you when your child has a medical crisis and you cannot get the drugs she needs?
And which industry are our beloved leaders focusing on next? Yours? Mine? Are we, dear brothers and sisters in commerce, going to hang around like Zimbabwean farmers waiting for new tenants? If Petes Weekly suddenly stops arriving in your InBox, you will find me drooling outside the empty shell of a shop that used to be a pharmacy. Otherwise, next week will probably be a somewhat more relaxed view on life as the Prozac kicks inÖ
September 22nd, 2004
- Umhlanga Rocks.