First quarter in retrospect

29 Mar, 2019 - 00:03 0 Views
First quarter in retrospect

eBusiness Weekly

Kudzai Mubaiwa
The first quarter of this year has been harsh for small businesses. What would have been the first productive week of the year following the hard impact of fiscal policy announcements in the prior quarter became a shut-down week that pushed everything on by another week or two.

As a result, business only began the year in earnest in February, in which month transactions and trade were mostly tentative as the market waited for further direction from a delayed monetary policy.

That too, dragged activity as stakeholders took time to digest and understand the meaning of it all. The weeks that followed into March were taken up on speculations, interpretations, discussions, engagements and then to some extent acceptance of the status quo.

We now end the quarter with clarity on this score – local “currency” is separate from hard foreign currency. There is a defined range of the conversion rate between them, productivity will need to improve, disposal incomes are low, consumers are resisting certain pricing, and overall we are in the price discovery season.

Once again, it is time for businesses to review their business models in order to be certain they can continue as going concerns.

The events of this quarter were all inevitable and necessary.

We have been trying to find footing after the July 2018 election and it has taken a long while to do it. At this moment, all the information and direction needed has come in.

The major question is, can one’s business survive? The bottom line of business is profitability, and this is dependent upon several factors including costs, pricing, volumes traded, margins.

All these are matters that are to be reflected on inwardly in companies and sobriety is required.

One must ask this question: have we learnt anything? The quarter even had some unanticipated major shocks, the internet shut-down was one that rendered some online businesses obsolete for a whole week.

Similarly, the Ecocash system failure, albeit only for a day, showed how much business, in 2019, relies on technology and specifically mobile payments.

Serious businesses must by now have invested time and resources in navigating around such occurrences as they cannot be completely discounted for the future.

Does your business have a plan for this, or will it remain a victim of circumstances at both the macro and micro-level? Key takeaways from the quarter are as follows.

First, businesses need to appreciate that they will always run in the context of an environment of things they have absolutely no control of and some they have absolute control of.

One can only wait, and put up some limited mitigation measures in the case of external forces.

However, one must thoroughly work on the things within control, as some have said no one has control over what others do but reaction can be controlled.

A looming case in point will be increments for civil servants, due in April.

Businesses may raise prices to outrageous levels, but must be aware that it can be a self-defeating act that will result in reduced volumes, and ultimately reduced profitability.

Even worse a consequence is the inflation that will signal and trigger entire value chains to, in turn react disproportionately.

Businesses have to heed the call to responsible pricing, it is feasible to be fair and make decent profits.

Consumers are now clearly rejecting anything above what they deem reasonable and affordable.

They are also willing to experiment with new products as the requirement is a good or service, and brand loyalty will be sacrificed if the pricing is unreachable.

This is the time for businesses to revisit margins and if using United States dollars as pricing base, check for parity.

Where inputs do not have an import component it is wise to avoid profiteering for the sake of it, some clients may be lost for good – goodwill matters.

This leads to the second reflection for business, appreciating that the world is one big market place now and consumers will search for the best value even across the borders.

Recent reports indicate that internet penetration rate has gone up in Zimbabwe, a little over 60 percent and most of it through mobile devices.

Consumers will and do compare prices for goods and services through price check sites or simply by asking others online where they can get the best deals. Almost everything is being pegged in United States dollars and that provides easy comparison.

Consumers are rationale they will appreciate that there will be some premium to enable businesses to make money, but they will equally resist outrageous pricing.

Be kind and respectful to customers and you will have their patronage for life, they will gift you with the most powerful marketing – word of mouth.

In an economic environment like Zimbabwe, it is very easy to be disrupted and rendered obsolete.

Break even and then add fair margins, many product prices came off in the quarter (evidenced by the slowdown in February monthly inflation) because they were no longer moving in stores.

That must be a learning point.

Finally, stay innovative. As the popular saying goes, innovate or die.

The second quarter will likely come with its’ own dynamics, we are yet to see the full impact of the just started tobacco season, and the coming civil servants increment.

Most employees in private sector are putting pressure for salaries in United States dollars and may get at least a portion as their employer companies start consistently receiving some payments in foreign currency.

We are aware the nostro balances are at about 700 million, that speaks a lot to available spend.

The gap between the bank foreign currency exchange rate and the parallel market transfer rate seems to be slowly closing.

There remains a place for businesses that offer quality goods and services at a fair price.

The aim is to be that business, and it is feasible combined with a lean model that has a vibrant team who focus on productivity, profitability and client satisfaction.

Above all consistency matters, this economy is always rewarding to those who pick a sector, offer value and stay the course. May the next quarter find our enterprises numbered amongst them.

Feedback: Email  – [email protected], Twitter – @kedukudzi.

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