eBusiness Weekly
The year is fast drawing to a close and for most businesses in Zimbabwe, 2020 has been the end of one era and the start of a new one, although it might take time for the dust from all the challenges for many managers to realise just major the changes have been, and just now what needs to be done.
For most, when they look back, three thing will dominate their memories of 2020: the Covid-19 lockdown, the extreme inflation in the first seven months, and the sudden, and what looks like permanent, macro-economic stability for the rest of the year.
At the same time, business needs to start thinking how new development strategies initiated by Government will open new opportunities and how they can enter those new openings.
The lockdown was pretty hard for most businesses, with even the essential supermarkets and food producers having to think about shifts, working hours and how to deal with customers. But a great deal was learned at the same time about how managers could tighten production and work processes, the importance and low costs of clean and hygienic surroundings, better collection and distribution and just how important online systems actually were when finally a decade of fast talk and lip service had to be translated into reality.
Even if the lasting results are simply better managed businesses, healthier workforces, more managers out there managing rather than spending half their time in meetings or commuting to meetings, and a careful reorganisation of the corporate transport department to match the new needs, the gains from the lockdown will outweigh the damage.
The bout of hyperinflation was appalling to live through and work through, but since it ended with the long-awaited monetary policy reforms made possible by almost two years, at that stage, of fiscal reform and discipline, it did allow the inherited make-believe and fairy tales to be eliminated from the economy. Zimbabwe landed in the real world with a bump, but it was the real world without anyone pretending that printing fake US dollars was going to solve anything, and with the new systems eliminating most of the crony capitalism, fake wealth creation by shuffling paper, and the like.
So we end the year with stable exchange rates, which will move up and down but slowly and in tiny weekly steps, minimal inflation, although getting electricity and water correctly priced was done later than it should have been done, although backsight is usually wiser than foresight. But generally just about everything is now correctly priced by market forces, rather than someone writing down a number, and while consumption sectors need to think how to access foreign currency, the productive sectors and those that support the productive sectors have no problems buying their foreign currency, at a price that can be estimated within 1 percent, thanks to the rules and systems on the auction.
So the ground has been cleared.
Corporations have been setting up their plans and budgets for next year, but it is likely that more managers still need to read in detail their downloaded copies of the national development strategy and the 2021 National Budget, for this is where the opportunities are available.
Many of the opportunities will have to be inferred, which is why study is needed. At the first level we have Government raising capital expenditure to just over 30 percent of the budget. This means that almost a third of tax dollars will be used to buy stuff, and businesses need to have a good idea of what sort of stuff.
The new tender rules of pre-clearance of potential suppliers and then a fairly rapid process of floating and adjudicating tenders means that any business wanting to be considered needs to go through that qualification system well in advance so they are listed in time. The acceleration of the anti-corruption drive means that the suppliers will be the people who run their businesses properly and legally, and who can offer the highest quality and the lowest price. Being someone’s in-law will no longer matter.
But businesses need to tunnel further. At the next level the Budget makes it clear that even when imported goods and services are required, growing local content will become important. There are tax concessions if, as a vehicle supplier, you do the assembly locally, and if you can add in some Zimbabwean content you are more likely to win. In many other areas the person with the Zimbabwean factory will be taken more seriously.
But the strategies go further still. One major thrust is fixing small-holder agriculture and converting this from subsistence farming to small businesses. When you look at the output from one small-scale farmer guaranteed a 15 percent profit on their crops might not excite anyone. But multiply that number by a million farmers, and suddenly there is a very large pool of profits.
Those farmers will be spending their profits, but the question for many factory managers is on what? The businesses that can answer that question, and can produce the desired goods and services, are going to grow. But anyone who thinks that smallholder farmers can be conned with rubbish needs to think again. All those jokes about gloomy farmers counting their change and thinking for a week before they spend a single dollar reveal some essential truths: impulse buying is not on their agenda, and they want a combination of quality and good pricing. But if you can start building your brand then you can grow with them. Customer relations are going to enter a whole new world.
The strategy about evening out development, making sure the poorest communities in rural and urban areas are included, means that there will be pools of customers that perhaps have not had much attention. That in turn will need careful thought about distribution, about branch offices, and about finding and cementing relationships with honest and competent wholesalers and retailers. You might have the greatest product in the world, but if your agent retailer in some area gouges their customers and stores your product in a rat-infested storeroom, who will be buying.
Another area is creating the supply and value chains. It is all very well expecting the Government to fund the growing of soya beans and the Grain Marketing Board to handle the middleman’s role. But a cooking oil business might well do better to have a few tens of thousands of farmers on contract, to ensure supplies, and by splitting the middleman’s fees pay farmers better at a lower cost.
The tobacco industry was rebuilt and accelerated into record harvests by just this approach. Merchants built up lists of competent, hardworking and honest farmers to contract, and it must be remembered that the whole system of input credit and payment is built on total trust by both parties, rather than on tangible securities.
We saw an example this week of a company wanting sesame seeds, quite a lot of them. They figured out the best way to get supplies was to pay farmers to grow them. But someone had to figure out the right areas to grow the seed, semi arid areas to be precise, and then find the competent, hardworking and honest farmers, possibly through local contacts and Agritex. No one invests US$25 million without being dead certain they can get the money back with a bit of profit, so the creation of the sort of relationships that the tobacco merchants use in better-watered areas seems to have been crucial homework before the financial manager opened the safe.
The Government can do some of the initial heavy lifting, and Agritex is being built up again to being the sort of organisation that can advise and monitor farmers, but there is nothing to stop private companies setting up their own supply chains, using the track records from Government schemes if necessary to create short-lists, and building those long-term relationships that guarantee supplies in good years and bad years.
Zimbabwean businesses that can create supply chains, produce efficiently, and grow their customer base by offering great value with good customer relations are the ones that will, in the end, be on top of the pack. No one claims this is easy. But under the new dispensation and the new systems the rewards will go to the competent and hardworking, who know exactly what they are doing and are so honest that they are trusted by suppliers and customers.
