eBusiness Weekly
Businesspeople are a bit like farmers at year end, saying to themselves that “next year will be better”, except that this Christmas they are probably correct.
The last few months have seen real economic stability, with stable exchange rates coupled with ready foreign currency at the auctions for the productive sectors, growing spending power by those in private and public sectors, low monthly inflation, and a Government ever more willing to trust and use local businesses.
So the basis for growth in business is there.
But while business as usual might well ensure survivability, the real rewards will go to those who can learn from this year, who can adapt and change, who can innovate and who can seize opportunities.
One major lesson from 2020 is the fact that moving online is not just something to read about and talk about. The online meetings most companies now hold must have saved hundreds of man-hours. The advertising potential, as more people go online to find out what is going on or even just for entertainment, has grown.
And there are opportunities for those who provide online services. Business listings are now difficult. The old days when all you needed was a copy of the latest telephone directory and some good yellow pages are long gone. Many smaller and medium businesses now longer have a landline, even, so the TelOne online directory, which is rather good, is less useful than it might seem at first glance. There are no directories for mobile networks. Some sort of business directory including name, types of business, phone numbers and address could be useful, and business organisations might want to start compiling these for listing their members.
The second major lesson is that consumers are less loyal to brands than many hoped, with loyalty to wallet now being the priority. So pricing has to be tight and competitive. To be more precise there is a close match up between quality, price and volumes. Consumers, and other businesses, want value for money, so if your product is not the cheapest there must be a sufficiently large quality gap to justify the premium.
This has opened opportunities for some newcomers. One example, at the more luxury end, has been the decision by some coffee growers to roast, grade and blend their own coffees and sell these as “single estate” blends at a premium over the main standard commercial blend that dominates the Zimbabwean market for pure coffee.
In other sections of the market we have companies coming in with processed foods that significantly undercut imported equivalents, and which can compete on price and quality with more established brands. This is first a warning to the producers of those established brands, that some bright business person reckons they can control costs better and cut margins, and secondly gives consumers a lot more choice.
A number of new producers run quite small businesses, with modest factory units in Msasa, Ruwa or Graniteside, and have been importing required raw materials and doing their own formulations of a wide range of products such as household cleaners. At one time some were actually charging more than the lowest-priced imported substitutes, but they are no seeing reason, are below imported prices and are fighting amongst themselves as well as against imports.
As these products mature, we will no doubt see what we have already seen in other products where the imports have totally vanished from the shelves, but being replaced by half a dozen local equivalents.
There are still plenty of openings for local manufacture, including some product ranges where there seems to be no local import substitution as yet. With correct pricing of foreign currency, a growing range of local raw materials, and the import duties, admittedly modest but still there, on everything except the most critical consumer goods there seems to be an opportunity.
Admittedly some serious thought has to be given to marketing. There is a regrettable tendency in Zimbabwe to regard imports as more desirable and automatically better in quality, and the smugglers in some areas selling for US dollars out of the boot of a hatchback have a cost control advantage that makes it even harder for the honest Zimbabwean industrialist.
But others have managed to break into specialised markets, against potential consumer resistance.
SMEs have particular problems in this marketing area. Their volumes, as they grow from the “S” to the “M”, are modest and cannot support an expensive marketing strategy worked out by some advertising or marketing agency. Yet they need this to grow. So there is an opening for some bright creative people to figure out just how to do this. Anyone who can sell at very modest prices marketing and advertising services to SMEs, or even to get their businesses known to the general public, has a future.
One area where innovation, and looking at appropriate technologies, even old-fashioned technologies, is preserving fresh produce. Vegetables and Zimbabwean fruit are very seasonal and come in gluts and shortages. Cold rooms can help, and if someone can design a simple cold room using, perhaps, solar power they might find a market.
But for thousands of years societies around the world have been preserving fresh foods. Root cellars, with potato clumping and unwashed carrots kept in sand, allowed a lot of people at one time to keep these vegetables for months. Pickling methods, especially in east Asia and northern Europe, were exceptionally common, and although still in use are now largely done for consumer demand rather than for ensuring adequate food supplies.
But a visit to the Mbare market, where waste can at times be horrific since some products have a shelf life of a day or two, shows that there are openings that need to be exploited, and some of those openings require creating consumer demand for new products, or even traditional products such as Zimbabwean dried vegetables, rather than vast capital expenditure.
Again, it is getting the breakthrough that is so important and once again there is the problem of how to market something new and interesting but without the marketing costs outweighing the production costs.
The financial sector, oddly enough, has managed to figure out how to provide basic service to SMEs at affordable costs. There are now a range of concerns that offer a lot of off-the-shelf services, such as basic bookkeeping systems and tax calculations, and even shelf companies. They rely on volume and the fact that a SME might need a bookkeeper for a few hours a month to make up the accounts, calculate VAT and calculate quarterly business taxes.
For larger concerns, there are even chartered accountants who will spend one day setting up the bookkeeping at a medium company and give that same company one day a month of high-priced talent and advice, which is far cheaper than hiring your own. These concerns all rely on having a lot of clients, so that the few hours a month that each client requires add up to a sufficient block of hours to make the service business viable. Something similar in the marketing area would be useful, along with co-operation among SMEs in the same location or the in the same line of business. In France, for example, a lot of the very fancy and well-known cheeses are made by very small producers; but they gang together to preserve their regional appellations and do combined marketing.
All this local industry growth will become even more important with changes in two Government policies. First the fiscal discipline has seen the budget capital spending rise to around 30 percent of tax income. That is a lot of money and some of it is spread with that devolution agenda.
This benefits people like cement and brick-makers, but also contractors in many communities. Procurement rules now mean that quality and price have to be competitive, but openings exist.
The second new policy is the discovery by the Government that hiring outside experts and contractors was wasting a lot of money. The switch to Zimbabwean firms and Zimbabwean products not only stretches the tax dollars spent, but also gives those firms and producers openings that had been closed.
Standards need to be set and maintained, but this sort of State support, driven by market forces not political subsidies, but the honest and competent can climb in with a base market.
