Time to sing from the same hymn sheet

21 Jan, 2022 - 00:01 0 Views
Time to sing from the same hymn sheet

eBusiness Weekly

The new year is well underway, all factories have reopened after their annual shutdown with the maintenance teams missing the holiday while they do the heavy work, and the Reserve Bank of Zimbabwe auctions now functioning.

There are a swathe of factors that will govern this year’s business, some global, some national, some needing Government intervention and some needing the businesses to be serious, and some even needing a handful of businesses to grow up.

The first factor is that the global economy, the African economy and the Zimbabwean economy are all growing, with the Zimbabwean economy almost certainly going to do better than the global, African, and southern African growth, according to both the Government and the World Bank. There might be debate on just how fast the Zimbabwean economy will grow, but no disagreement that it will be among the fastest growing economies in Africa and the world this year.

This means, for the average Zimbabwean business, that they will grow as well, presuming good management and sensible planning. We are no longer talking about survival, unless you are already a basket case, but more about how to take advantage of that growth, and for that matter how to contribute to that growth.

While the primary producers, the farmers and the miners, will lead the local growth, it is time the industrialists started taking a more prominent role and switch modes. For a start they can continue pressing their import substitution, a strategy that saw many become established and survive.

But although regional and continental growth will be slower than Zimbabwe, we are still talking growth and so export markets become more likely. The growing progress towards freer trade means that there will be premium on raising local content to meet the trade rules, and that means a switch in emphasis from being a packer or assembler to being a manufacturer and figuring out how to source more raw materials locally.

This, to a degree, is a medium term strategy, but since the governments implementing the freer trade are talking years, not decades, it seems sensible to start that process now, not next year or the year after or the year that the agreements are implemented. The local markets are more than suitable for the beta testing, and as Zimbabwean consumers become more sophisticated, manufacturers need to provide good quality at the right price, the exact test they have to pass to fight off regional competition as barriers fall and get into the export markets themselves.

A major question mark in almost all surveys is availability of foreign currency. Technically this is not a problem since inflows are greater than outflows, so the currency is available. The question dogging businesses is whether it is easily available on the auction system, and since just about everything a manufacturer needs is counted as a priority import, the complications facing some in the retail trade do not exist.

This is where the Government, the Reserve Bank and industry need to be on the same page. For a start the Reserve Bank, with Government backing, needs to ensure that accepted bids are paid out promptly. The build up in delays over part of last year erodes both confidence and creates horrific inflationary pressures if producers have to dabble in the black market.

There is more confidence that this year will be better, but industry needs to be campaigning actively to ensure that the percentage of earned foreign currency assigned to the auctions is large enough to sustain the auctions, even if some rules have to be amended to do this. Pro-active suggestions and recommendations, rather than handwringing is required from the Confederation of Zimbabwe Industries and its economists.

The second aspect where industrialists need to be active is to ensure that everyone grows up and starts realising that the way to make more money is to produce and sell more, rather than mess around trying to find loopholes in the system and make money shuffling paper.

The Reserve Bank has over the last year noticed some direct cheating, which it is clamping down on hard, using its right to deny a business access to the auctions if necessary. But it has also noted that there is a degree of speculation, with businesses with empty bank accounts bidding and businesses trying to move into the middleman markets, rather than looking after their own factories.

That, on the evidence presented at the auction this week, the first of the year, is still a problem with more than 28 percent of bids on the main auction and 22 percent on the SME auction rejected for failure to meet the bidding conditions, which now include having the cash in the bank when you bid. After a five week gap, when surely even the laziest CFO could have fixed the paperwork, is worrying.

All businesses need to be on board and using the rules rather than circumventing them.

A majority are, but they need to make clear that the mavericks in their ranks are simply doing what is unacceptable. Rules can be changed, but submissions on how to change them will only make a lot of sense if everyone is following them, so the authorities can at least listen hard to serious ideas.

Cheating also affects the honest, by reducing the amount of currency available for the law abiding, so there is a practical advantage to helping the authorities nailing the dishonest, and many know who they are or are likely to be.

This is what we mean when we say everyone needs to be on the same page. It also, mind you, requires the Reserve Bank to be somewhat more open itself, and give out more information on the state of reserves  and the like. These statistics eventually come out, but more real-time reporting could boost confidence and if there are likely to be glitches a bit of warning would help.

But again this requires a bit more “us” and a bit less “we and them” from both industry and the authorities. If industry wants more support from the authorities, it also needs to respond by giving more support to the authorities. It is a two-way process and a recognition that we are all in the same country facing the same problems, and facing the same opportunities.

One point worth noting from this week’s auction is that all valid bids were accepted in full, even with the lowest main auction id being $105 and the lowest SME bid being $100, a good bargain for one bider. The Reserve Bank was not trying to talk up the exchange rate.

The second point is that only just US$31 million was bought at the auctions, even after five weeks, suggesting that more raw material is being sourced locally and that some demand for imports is decreasing. To an extent this can be explained by the growing production in agriculture, and obviously the fertiliser companies, having now made and sold most of what is needed this season, can give the auctions a bit of a rest.

There is also the fact that the annual shut down, coming soon after most businesses resumed bonus payments and with staff continuing to be paid without new stuff being made, did reduce liquidity in most businesses, so with the rules about having the cash before bidding there might have been lower demand at the auctions.

That will help reduce the pressures we have at the beginning of every year, a few months before the next tobacco crop starts being shipped.

Again, more information on when currency availability is likely to surge and a bit of co-operation could help everyone, such as suggesting when bids for new machinery and equipment should be submitted.

The other big factor is inflation. Progress slowed in the second half of last year although is resuming. There is no single source of inflationary pressure. Some, admittedly, did come from auction payout delays, and some did come from those businesses and their bankers messing around with premature loans and so breaching money supply targets through a new loophole.

Both need to be tackled.

Generally the opportunities for business this year are huge. The problems are probably manageable, but as we continually stress taking advantage of the opportunities to the maximum and managing the problems effectively requires us all to be in the same choir singing from the same hymn sheet. And choir practice can start today.

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