Cost structures need revision

Vandudzayi Zirebwa Buy Zimbabwe
There has been divergent view on the magnitude of the challenges that are being faced at the moment with one executive even having the temerity to suggest that the present scenario is worse than what this country experienced at the height of our hyperinflation period in 2008. Such is the human mind that in times of trouble we forget what we have been through and tend to exaggerate the pains of current circumstances and over glorify the past.

When the Israelites were being delivered from Egypt to Canaan they faced several hardships which made them reminisce about their time in Egypt and it took several miracles to make them believe that they were destined for a better future. Those that did not take heed died in the wilderness before reaching Canaan.

We are facing similar circumstances today. Since the adoption of the multicurrency regime which was ushered in by Finance and Economic Development Minister Patrick Chinamasa there has been stability in the economy and instead of looking at what we can do to change things that affect our productivity, competiveness and ability to realise goals that have been set in ZIMASSET we mourn, express powerlessness and glorify the past, including its darkest point.

Unfortunately by so doing we worsen our condition and fail to appreciate that we have the capacity to remodel and prove that we are masters of our own destiny.

Government at least has demonstrated its boldness and a willingness to confront problems within the public sector by moving resolutely to slash salaries of executive to $6 000.

Of course the hope is that what has been set is simply a scenario meant to address current anomalies and not to punish performers while rewarding under performers.

In the future it would be ideal to ensure that even in the public service we reward excellence.
That said, we cannot escape the fact that the United States dollar is appreciating at a time when regional currencies are declining and so we have to pay close attention to cost structures.

In the case of parastatals it defies logic that a CEO would earn a salary which is not linked to the companies’ revenue base.
It boggles the mind why salaries alone would be more than double the gross income of that organisation.

Our observation though is that even within the private sector whose focus should be on enhancing profitability and ensuring that products and services are competitive and not be obsessed with earning lots of money.

Instead of competing against the other market offerings we are competing against each other’s presumed material status.
When given loans to retool, companies are diverting funds to ensuring that lifestyles of executives are comfortable.

Buy Zimbabwe is aware of companies that have either collapsed because of this scourge or forced investors who were willing to pour in large equity capital to pull out because of bloated executive perks.

In one well known example, just before signing an agreement investors got wind of the fact that executives had failed to disclose the identity of a supplier which was being used to siphon funds and inflate costs.

Naturally, the deal collapsed and the company has continued to struggle. Meanwhile workers who thought that their troubles would soon be over have been left in the cold, facing a very uncertain and bleak future.

A combination of a weak corporate governance framework, corruption, insider trading, lack of accountability and transparency have been the key drivers of this phenomenon which has seen our cost base making very little sense.

The solution though lies in both public and private sector moving away from a culture where we apportion all the blame on Government and begin to address those problems.

Naturally we need to look at how we can generate our cost structures. We also need to look at the costs that we can slash and deal with them in a manner that not only makes us lean but importantly set a on the path to robust growth.

We need to look at how we can increase transparency in the setting of executive perks and communicate to every employee the value of linked salaries to productivity.

By looking at the issues above we can isolate those issues that are within our control and work out strategies for tackling concerns that require a more collective approach.

In a typical market economy, at least as defined by Adam Smith, the challenges that our country is facing present opportunities for emerging entrepreneurs to come up with new products and services that meet and satisfy customer needs.

However what is evident in our country is that the free market does not exist. Instead monopolies still exist and pricing collusion even among our SMES is rampant. In a few days Buy Zimbabwe is set to hold its annual conference which is designed to bring stakeholders together to discuss nation building and competitiveness in local firms.

At that conference issues on managing our cost base will be fully addressed.
International speakers, key government ministers and experts and players in both the industrial and financial sector will also be at hand to deliberate and make practical suggestions on what needs to be done.
The future is in our hands and we need to make the present count.

Till next time, God Bless, email, [email protected]

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