Written by Brian Kazungu
The prevailing socio-economic and political atmosphere in Zimbabwe is of concern to existing, emerging and potential entrepreneurs but nonetheless some businesses even though operating below capacity, seem to be finding ways of navigating these murky economic waters.
Based on the above observations, I did some analysis into a few of these businesses and then extracted some approaches that they have adopted as a way of showing that even though there are some crystal clear challenges, it is still feasible to start and run a sustainable business in Zimbabwe.
As such, I am going to highlight some practical examples from different industries in support of the above. The aim being to help you to see if there an approach applicable to your business interests and to also encourage you to think outside the box.
1) Break bulk to beat liquidity challenges. Liquidity challenges (cash circulation problems), lack of employment and less than average salaries makes it hard for people to have cash in hand for transactions and this consequently translates to low sales and depressed business but cleverly enough, some companies such as Nestle Zimbabwe have introduced very small packs 30, 40 and 50grams for the cereal brands (Cerevita, Cremora and Cerelac) in order to tap into the new cash reality. Personally, I have witnessed some excited customers who have found it a welcome development in terms of convenience and affordability.
What is the point here? The point is that sometimes you don’t have to remain rigid when you can simply work on the existing product or service to suit the new reality. You just need to package it to suit the new income thresholds and prevailing cash reality in order to avoid closing shop.
2) Cut out the middleman. Where possible, cut costs by doing away with middle men. For example, Curechem an Agro chemical supplier are directly engaging real farmers on the ground instead of waiting for hard wares to buy farm chemicals from them and then sell to farmers.
You can also establish strategic partnerships such as the ones adopted by Koala Meats and N Richards and other wholesalers. Koala Meats is using the existing structures by these businesses to sell its meat and thus tap into the already existing, established and organized customer base.
More-so, TM Supermarkets and their South African counterpart Pick n Pay are also now lumped into one unit in order to capitalize on much of the retail merchandise that was coming from South Africa into the Zimbabwe market.
What is the point? The point is every business have stakeholders and therefore find a way of striking a win-win arrangement with your stakeholders than to simply wait for the next rainy season.
3) Get your pricing right – You can adjust prices by adding a reasonable but viable mark up as compared to super pricing and super profits that were obtaining in the country especially since 2008 onwards during the start of the US$ era. For example cellular phone SIM cards now selling at $0.50c were even more than $20.00 in some instances.
What is the point? The point is you must have an understanding of the socio-economic and political dynamics in your pricing so that you won’t lose the appeal and market at the expense of your business. Some prices still being charged in the country lack a reasonable commercial basis.
4) Dispose non-core business – If you are a holding company, you can dispose non-core business units. For example, Delta Corporation once bought Ariston, a horticultural business which was exporting flowers during the forex dry season in this country and then later disposed it off once the situation normalized. If you are not yet a corporation or a holdings business, you can discontinue some products or services that are no-longer contributing to your profitability and then concentrate on the cash cows or else you can actually add some complimentary lines to create a one stop shop environment depending on the circumstances at hand.
What is the point? The point is regularly review and revise your selling and business approach to suit the new market scenario. Do not be rigid.
5) Always review and revise your procurement approach. This is because buying, procurement or purchases have got a significant bearing on the total cost of the product and this in turn has a bearing on the selling price and consequently on affordability and turnover especially in this world of alternatives (substitutes and competing lines) and where savings matter the most.
As such, you need to do away with some middle men whenever and wherever necessary and where viably possible and then go direct to either the wholesaler or manufacturer or you can even strike a deal on pricing with your suppliers.
For example, Econet wireless Zimbabwe made it a point and agreed with its suppliers for a cut on prices of goods and services to be supplied to Econet if the supplier was to remain on their suppliers list.
In your case, if you don’t yet have a muscle to influence such a decision probably because of your business size, you can lobby to do that either through your industry associations or even the responsible government ministry.
What is the point? The point is that you must always be vigilant of your costs and whenever necessary and possible, eliminate or reduce some avoidable costs and let this decision be premised on the need to increase turnover and profitability.
6) Always be alert on the most viable and efficient payment options. With changes in time and circumstances, different modes and mechanisms for effecting payments are introduced and these must be analyzed relative to your type of business and whenever possible be adopted if you are to retain or attract customers in that payment mode bracket.
For example, in Zimbabwe, because of technology and the cash challenges, people have adopted some electronic means of payment such as Ecocash and point of sale machines (swipe cards).
This enables people to transact on these platforms and as such, depending on the nature of your business and type of products, you may see that if you don’t move along with this development, you may lose out on actual and potential clients who have migrated to this electronic platform.
A number of big businesses and even SMEs are now on this platform and so why can’t you?
More so, depending on your nature of business and type of products, you may also need to consider working out a payment plan strategy in order to keep the cash coming and to keep sales turning over.
In this regard, you may have already realized that schools such as Herentals Group Of Colleges are now allowing parents to pay for school fees across the term on a monthly basis than using the traditional once off payment usually effected at the beginning of every term.
Some businesses are also closing or fail because they are owed a considerable amount by debtors and this affects liquidity and the day to day operations.
On that note, you may also have realized that as a counter measure, some institutions here in Zimbabwe such as Harare City Council and ZESA have devised payment plans with their customers as a way of debt recovery and boosting of cash reserves. Such initiatives must be considered and be adopted where possible and viable.
What is the point? The point is how people pay for your goods and services have a bearing on sales and these sales have a bearing on relevance, profitability and continuity. So be flexible and conscious of industry developments especially of technology and payment methods.
7) Partner and Innovate. You need to consider group product promotions where you partner or team up with your suppliers and other stakeholders to mutually reduce costs and subsequently the selling price in order to push volumes by adopting the small profit quick returns philosophy.
I am sure you may be already aware of the Ok Grand Challenge Promotion, TM Bargain Bonanza Promotion, Food World Promotion etc. These promotions are based on the small profit quick returns concept highlighted above and the same promotions also serves multiple purposes such as advertising, sales volumes and ploughback etc.
The mentioned retailers and their suppliers mutually agree to jointly reduce their mark up or profit margins. For example, generally in the retail business i.e. supermarkets, the mark up for tinned beans is let us say around 13% by the retailer and 20% by the manufacturer or 10% by the distributor or wholesaler.
Based on that, they may agree that the retailer knocks off 3% and the manufacture or distributor knocks off 5% to make 8% the total reduction in mark up. This combined mark-up reduction of 8 % can be split where the 3% can be directed towards a massive advertising campaign and the other 5% can be proportionately directed to something else which is mutually beneficial to the relevant stakeholders e.g prize money.
What is the point? The point is it is still possible to engage in a win-win arrangement with your stakeholders than to simply wait for the socio-economic and political environment to miraculously change on its own.
Brian Kazungu – Media Personality, Business Consultant, Opinion Leader, Entrepreneur
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