eBusiness Weekly
Kudzanai Sharara Taking Stock
A lot is going on in Zimbabwe. For entities in the country, the economy seems to be creating various pathways which will eventually determine whether or not an entity exists over time. The economic maze is so huge that it is easy for one to lose their way into oblivion.
This has happened before, and some companies never came out of it. Some iconic names have since disappeared from the radar. Talk of Apex, Gulliver, Steelnet, Celsys, Chemco Holdings, PG Industries, TN Holdings. They all failed to emerge out of the hyperinflation era, albeit for various reasons.
Following abrupt dollarisation, PG Industries was caught with no working capital and inadequate stocks. Initially sluggish in its response, up to today, efforts to revive the company are proving to be a mammoth task.
Other firms were more impulsive in their survival tactics, but by failing to identify key ailments, they were left worse than before.
Talk of Interfin (abusing depositors’ funds), TN Holdings (venturing into multiple product lines without specialising in any), Trust Holdings (regulatory compliance), Red Star (value chain disintegration). Only those companies that were true to their circumstances, and thought outside the box for custom solutions, managed to survive.
Today, we are in another state of flux, as economic growth stagnates and companies struggle to bolster their going concern. The narrative from reporting companies is uniform.
The business operating environment has continued to be challenging. Shortage of cash and foreign currency constraints have hampered operations. Inflationary pressures are starting to creep up in an already fickle consumer market. As we forge ahead, the only thing that is certain is uncertainty. What remains clear is that there is no clarity.
Driving this uncertainty, in part, are questions around the country’s ability to sustain the multi-currency system. Conventional understanding says the stock market is being driven by fear and is suddenly the haven of choice.
Because of this fear, the monetary landscape has individuals and companies losing up to 35 percent of their money’s value. Others are holding onto US$ out of the irrational fear that government will debase the bank balances and bond notes.
Yet, by all official indications, the chances of that happening are very low. However, it is likely that companies that are paying dividends, notably Axia, Seedco, Delta among others, are trailing a progressive path.
Appreciative shareholders will remember this in future, and will likely answer when called upon to inject more capital. There is also elevated risk of policy contradiction in the current environment. There is the dilemma to pay for imports, particularly raw materials.
The quandary is as authorities hasten to facilitate cross border transactions, there is less effort on encouraging local manufacturers struggling to pay for raw materials.
Credit terms by foreign suppliers are being changed almost daily risking halting of production. While priority is understandably given to exporters, there is also need to understand that local manufacturers can only be competitive by being consistent at what they do and perfecting their product on the local market. They also need to be able to operate at optimal capacity. Further, power providers frequently threaten to cut off supplies to motivate regular payments.
At such moments, there is need to think outside of the box. There is need to re-imagine the future just as some companies did during the hyperinflation era. Delta is a good testimony. The company did not lose many of its skilled personnel, but instead recommended their competence and continued development at sister companies in the region.
Current CEO Pearson Gowero was sent to Zambia and came back good enough to take over the reins from Joe Mutizwa. Those who could not be placed outside were given share option schemes, attractive enough to keep their commitment to the ship. To secure equipment and raw materials, major shareholder then still SABMiller, was enticed by shares in exchange of sustained supplies.
Given the current challenges, we are at that time again where companies should be perceptive to navigate through the maze that is the Zimbabwean economy. There is need to influence the future, without clear sight as to what it will look like. While most companies are stuck bemoaning present circumstances, smarter companies are pre-emptive in shaping their destiny.
Axia’s latest results give some testimony to potential pathfinders. Within the statement accompanying the group’s results for the year ended June 30, 2017 is a line that says: “The business has successfully partnered with some local manufacturers to produce certain imported products under license, in an effort to reduce foreign currency requirements for imports.”
Such import substitution deals do not only resolve the challenges of accessing foreign currency, but also result in transfer of skills and job creation. There is a positive multiplier effect here, and if more companies can pursue such pre-emptive strategy, we can expect broad growth!
Ariston Holdings is another good example. The company partnered with a major trout producer to improve the genetics and production methods at their Clairmont Estate and the results are now being seen with most major retailers & hotels stocking the highly valued fish.
