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Tapiwa O. Nyandoro Correspondent
“The exact cause of the latest disaster is not known to me. But (fuel) station owners are becoming increasingly irritated by excuses being offered as to why things are not working. Luckily for me, my site is on the preferred list of fuel suppliers. This means that I am given priority for fuel deliveries, and I will still receive regular supplies if there is stock available, whereas smaller sites will not.

“This list of (preferred) sites is never spoken about, and the fuel companies (wholesalers) will vehemently deny the existence of such a hierarchy of preferred sites. But the retailers are not blind. Through all the fuel crises and strikes, it is the same sites that are kept wet, whilst the smaller sites are left high and dry.

“They say that a site that pumps 230 000 litres per month is profitable and all sites pumping less than that figure are making a loss or barely getting by depending on the retailer’s financial gearing (debt burden). Each time there is a crisis, these small sites are affected more than the larger ones, which will actual pump more volumes as customers who normally visit the smaller sites have to go to the bigger sites for fuel. And so begins a downward spiral for all the smaller station operators.

“The other problem is that these fuel refinery breakdowns are not widely communicated to the average customer. The loyal customer who will visit site A on a regular basis finds that one day this site does not have any fuel. The first thing that goes through the customer’s mind is that the site is being run badly and there must be financial problems. Once they have driven off to the slightly bigger site down the road, and find that there is fuel, they might well now switch away from there regular petrol station out of fear that they may experience the same problem again.

“This is something the smaller site, battling month by month to get by, can ill afford. It may well cause that particular retailer to lose everything,” wrote columnist TJ in Leisure Wheels (February 2015) on the South African fuel supply chain.

It matters not whether the enterprise is a bus company, butchery, bar, a legal firm, a farm, a medical practice, a hospital or aircraft manufacturer, critical mass, size and hence economies of scale determine the fate of firms. Countries too seem not to be spared. The recent rise of China, India and Brazil testify to that.

In Zimbabwe the situation is the same. “Recent closures of AfrAsia and Allied banks is not an indictment of Zimbabwe-owned banks, but rather yet another warning that small undercapitalised banks are more susceptible to threats that are far more easily overcome by large and better funded financial institutions,” thundered a recent editorial in The Herald (March 2, 2015) aptly titled, “Bigger banks prove resilient to shocks”.

The editorial went on to urge other smaller indigenous Zimbabwean banks to beef up their balance sheets or merge into more stable, bigger and better entities. “Size,” it noted sensibly, “is far more important than the nationality of the shareholders when it comes to accessing stability.”

The editorial made a case for critical mass and economies of scale in the financial sector very well. The fact is universally applicable and should be a lesson to all sectors of the economy, in particular policy makers.

Recent Press reports, if my memory serves me well, have quoted both VP Mnangagwa and President Mugabe as saying both A1 and A2 farm sizes are proving too big for farmers. The opposite in fact may be true if financing and legacy issues are addressed.

The real problem is not farm size, but the lack of titling, and thus suppression of market forces on land. Reducing farm and plot sizes will not bring transformation in agriculture but will greatly increase land apportioned to costly supporting and social services infrastructure such as electricity grids, roads, shopping centres, healthcare facilities and schools. It will also discourage bigger investors.

Small farms increase overall overheads of the agriculture industry and resist mechanisation. Where equipment such as tractors or trucks has been acquired, the small size of a farm ensures underutilisation of equipment and slower recovery of capital investment. The most productive of machinery, which are the bigger expensive trucks, tractors and accessories, are not only beyond the reach of small-scale farmers and their bigger capacities make them an unsound investment for all A1 farms and even most A2 farms, which is why, previously, equipment such as combine harvesters had to be shared by a number of large scale white farmers.

In comparing early American industrialists such as Henry Ford, the youngest (cars) and Leland Stanford (railways), commonly and affectionately known as robber barons, who transformed American society materially and socially in the 19th century and early 20th century, to today’s Silicon Valley tech barons like Bill Gates (Microsoft software) and Mark Zukerberg (Facebook), The Economist (January 3, 2015) noted that the two groups had one thing in common: “Both relied on the relentless logic of economies of scale.

“Economies of scale,” the weekly noted, “allowed the robber barons to keep reducing prices and improving quality.” The tech barons have “performed exactly the same trick”, as falling prices of computers, their improving quality and capability have shown

Sadc and Zimbabwe’s timid policymakers need to take note. “God”, it has been said, “favours the bigger battalions”.