Foreign exchange markets appear to be stabilising, at least by recent Zimbabwean standards, and this stability is in both the auction market, where the rate is rising slightly each week, and the black market, where it is slowly falling or remaining constant.
To give most businesses their due, this is reflected in retail pricing with the incredible inflation seen over the last few months diving south. The full effects will not be seen until the July, and better still the August, monthly inflation figures come out, but so long as there is honesty among producers and retailers, these figures should be low. Consumers, as they very slowly start catching up, will start buying more volumes.
Inflation in Zimbabwe is not driven much by demand pressure, except in the sense that there is demand for foreign currency. Rather it is driven by cost-push inflation, with producers continually pushing up prices as the cost of raw materials rises. This places the burden on producers, a burden they have to take seriously since the pressures for intemperate and unthinking dollarisation comes from consumers and, to a lesser extent, from retailers, not from producers.
Zimbabwean industry now owns its home markets. You do not have to be the most efficient hotshot cost cutter or manager to undercut imports, at least so long as the importers pay their customs dues, pay VAT and so on. Those car-boot grocery shops win because Zimra does not hit them, not because they are very wonderful.
Producers are in an interesting position. The economics of their businesses mean that they need to be pushing the limits of their capacity in order to be efficient, and in say a totally free-trade Southern Africa market, let alone a free-trade African market, many right now would be drilled. The advent of the Zimbabwe dollar and then the free-trade in currency, regardless of whether this was legal or illegal, has given them the sort of protection they have been screaming for.
It is a protection driven by market forces, not by decree or legislation, and market forces can so easily take away that protection unless the producers use the opportunity to take possession of their home markets through a combination of quality, efficiency and pricing.
On quality most industrialists are already there; the fly-by-night businesses that grew up in the closed economy of UDI and the first two decades of independence are defunct, killed in the hyperinflation and the dollarisation decades.
Efficiency and capacity utilisation are still variable. There should be no excuses now, 40 years after independence.
The opening of education to all soon after independence, and the vast expansion in university and technical education mean that the pool of people with the expertise required is now large, and since just about everyone under 50 benefited from this expansion in education and training, the pool of qualified and experienced people is also large.
Of course, as most businesses have discovered, framed certificates on the wall are just a start. There has to be a willingness to apply knowledge, and most importantly build on education.
There has to be a realisation that hard work, the daily grind, is vital. Despite all these extra hurdles, there is an adequate manpower pool.
So questions do arise, such as why South African businesses with a smaller percentage of qualified technical staff to draw on are more efficient.
A sense of entitlement does still drift inside Zimbabwean culture, at both high levels and low levels of business.
The inherited race divisions, now gone, have left a legacy of a class division that still generates huge levels of inequality, and a sense that some are entitled to live the same way as their colleagues in a highly developed society.
So resources are quite often misdirected, not always and not in every business, but often enough to cause pressures that should really be there.
Discussions of the Government Vision 2030 miss one essential point, that middle-income status requires everyone to advance, together rather than retaining the huge division between the golfers and the social soccer players.
This is something for those who oversee the creation of human resources policies need to really think about, and work out ways of attracting the best of the doers rather than just looking at the best of the people in offices.
The third factor, of pricing, is critical. Henry Ford, when he started making cars as a mass consumer item rather than a luxury for playboys with rich fathers, saw two critical points. The first was that making millions of cars was useless if no one could afford them. So he continually cut his prices in nominal and real terms as he built up productivity. This not only allowed him to create new markets, but even to survive the Great Depression with more money.
The second was a longer term policy, of actually creating consumers. He started converting the higher productivity into higher salaries for the actual workers on his assembly lines and in his part manufacturing units. That combination of higher wages, but higher because they were built on higher productivity, and falling prices meant that he converted assembly line workers into car owners.
That allowed his business to grow fast, despite his reluctance to innovate and make technical changes. To be fair he had started with an advanced product that incorporated a great deal of innovation, and his manufacturing and technical innovation at the start were so high, that he had a large cushion.
The same problem was seen in Germany, when a British major general allowed a bunch of Germans to restart manufacture of a near decade-old car design. The Volkswagen Beetle was so good, and manufacturing quality was so high, that it came to dominate markets for another 20 years. The teams that made it managed, after some hesitation, to apply their skills to innovation when that became essential.
Obviously no one can produce at a loss, and that problem keeps managers and accountants awake at nights in an inflationary environment, but having the best product is not much use if there are an ever-falling number of consumers.
So at times risks have to be taken, especially when you are trying to predict replacement costs. This is why it is so essential that the foreign currency systems work properly.
The auctions are just four weeks old. The last one saw that businesses are learning. The gap between the top bid and the bottom successful bid was down to $20,80. That in one sense is very high, and would be laughed at in most countries. But it is better than it was.
More critically, the gap between the bottom successful bid on $64,20 and the average of $68,88 suggests that most serious bidders were in a far narrower range, probably somewhere between $64 and $72.
“Price discovery” is a fascinating topic when that process is driven by markets but, as is common in business, becoming good at the necessary predictions has a price. You keep your business and so keep your job.
But as has been noted, there are a lot of other factors to look at, from upgrading human resources to thinking about business models.