Business Weekly Last Word
Businesses will be joining the eternal farmers’ chorus — “This year will be better” as they re-open factories and warehouses, take a deep breath and get down to work. And it very likely will be better although no one is going to get a smooth ride and vast profits without some serious effort.
The business community faced a lot last year as we stripped away the make-believe, allowed the real markets to dominate for the first time in 55 years rather than operate what the Indians aptly call the “licence raj”. The end result is, interesting, a stronger business sector with most of what they had been calling for over the decades in place, although few would have predicted just how severe the transformation was going to be.
Many results can be seen in a short stroll through a large supermarket. Even a year ago imports dominated most shelves, although not as completely as during the heyday of the US dollar when any local supplier still in production had to fight for even 30cm of shelf space. Now the vast bulk of products have a Zimbabwean address on the back and for many lines we have a growing range of suppliers.
Newcomers seeking an angle have been climbing in, using price more often than not to gain a foothold, and undercutting and effectively competing against older and more established brands. That benefits consumers more than any ministerial warning or threat of price control. But it is also a wake-up call for the large and cumbersome older giants who now need to think how they will cope with a “normal” economy where the competition comes from a nimble start-up, not from some fancy and pricey import.
This might well be one of the major shifts in thinking that will be required this year as the last CEOs who can remember the day of open competition, when they were little children before UDI, retire to be replaced by a generation that has never, never seen normality.
The second area where business people are going to have to look at, is the gaps in product ranges. Shelves groaning with half a dozen competing Zimbabwean brands for one set of products sit interspersed with shelves where the local content is minimal, sometimes just packing and at other times the only local intervention is to cut open the carton.
There used to be Zimbabwean products in many of these ranges. Import controls by bureaucrats in the ministry handling commerce and industry once decided what was imported and who did the importing. Then we had bureaucrats in the Reserve Bank of Zimbabwe deciding who would get the allocation of foreign currency for an import, and who would not. Now markets decide a lot and presumably during the next 12 months will take over entirely from the bureaucrats and politicians.
But with cheaper imports, or people following international brand advertising, or insurmountable other problems, the switch to markets did not save everyone, although admittedly some were wiped out by hyperinflation, or by the grossly overstated local costs when we were using the US dollar and pretending our own printing was real foreign dollars.
Now those gaps can be filled again, and preferably filled with competing products. This is starting to happen, as bright, young and well-educated Zimbabweans move in. One area particularly over-dependent on imports is toiletries and make-up and yet we hear of budding entrepreneurs slicing through the imports. In one odd image making tabloid article we even hear of an accountancy graduate wandering if she wasted her time working for that degree instead of building her business. We suspect, that behind the scenes, that degree is providing the raw material for cost and inventory controls and a business model that would make Ebenezer Scrooge proud to call her a great-granddaughter.
While a walk through a supermarket can raise hopes that our economy is finally moving forward, another morale-boosting walk would be through any light industrial sites. Thousands, of modest businesses are hidden behind run-of-the-mill signs yet are pushing out required products by the carton load. The factories might be small, but with tight staffing, modern equipment, and managers supervising on the shop floor rather than attending conferences and wearing suits, their output-overhead ratio is astonishingly large.
These new generations are building businesses properly and their sole contact with the authorities is the quarterly trip to Zimra to pay their taxes.
But all this optimism still needs input from the Government and the Reserve Bank of Zimbabwe. Almost four months of stability in exchange rates, creep rather crash, has generated stability within the business sector and allowed people to plan. So almost number one on any list is for that stability to continue. The interbank market needs continued improvement. We agree it has to remain a bill-paying market; we cannot at this stage or for some time to come allow currency dealing in the main forex market. But every effort and incentive must be pushed to ensure that all export earnings are fed in one end and almost all import payments are made the other end.
On the taxation front Minister of Finance and Economic Development Mthuli Ncube has shown some interesting adjustments. He has basically from this month stopped charging income tax on people who earn below the Poverty Datum Line. He never collected much so he is not collecting much, but purchasing power of the poor has been enhanced. His slight trimming of VAT, by 1 percent, is more symbolic but a useful symbol.
But now the Government and the private sector have to work out ways, separately and together, to reduce imports while enhancing exports.
The biggest single import bill is for fuel. It makes sense for business houses to reduce their fuel bills, everything from combining loads to forcing their truck drivers to maintain a 100km/h speed limit. A lot of fuel saving in a business is a litre here and a litre there, but saving several hundred litres a month when it is all added up can make a positive effect on the bottom line.
The Government needs to press ahead with its building up of the Zupco fleet and operations. A first class public bus service will do more than just relieve pressure on the poor. It will make it attractive for many car owners to take the bus to work, just as top managers in major cities like New York, Paris and London take the metro or tube to work because it is quicker, safer and easier. That would save huge blocks of fuel.
Fixing the National Railways of Zimbabwe would have cost benefits for business and a useful side effect of reducing the number of gas guzzling trucks on the road and pressure on diesel imports.
Rebuilding the textile industry would be an obvious way of reducing imports and enhancing exports. We talk and talk. But now it must be made easy for adequately-financed private sector companies to move in and turn the talk into cloth. Again this requires complementary Government and private action.
Sorting out muddles in irrigation is now essential. We cannot afford to be a major food importer. Some aid will be available but as we move towards middle-income status we will be expected to grow and buy our own food, and obviously the more we grow and the less we buy the better. The Government needs to sort out the land and water rights; the private sector then needs to work out which farmers need to be supported on contracts, and farmers with irrigation rights are a far safer bet, and then the Government needs to ensure that there is normal business security of easily-enforced contracts and probably bankable land leases.
The last year saw a lot of change, and one change was turning talk into action such as the work on the large extension to Hwange Thermal Power Station and the adjustment of electricity tariffs so that it becomes viable to invest. Unfortunately it takes three years to build a power station, but we need to start building more now, and this time making sure we are building stations that will produce.
We are not out of the woods yet. But we know what can work and what does not work. We need to press our successes and stop trying to repeat our mistakes.