EDITORIAL COMMENT : Business needs help to fix lockdown damage

04 Mar, 2021 - 00:03 0 Views
EDITORIAL COMMENT : Business needs help to fix lockdown damage

The Herald

As businesses re-open after the two-month level four lockdown, there will be economic damage especially in the sectors where the small and medium enterprises dominate and in the informal sector with working capital diminished as money was used to buy food and pay other critical bills.

Even among the industrialists, who were largely able to remain open, there are swathes of companies according to the Confederation of Zimbabwe Industries that have seen sharply reduced output following reduced demand as spending power decreased, along with companies still operating at close on 90 percent capacity use.

Obviously outfits like maize millers, bakers, cooking oil refiners and others whose products are the last to be chopped off shopping lists will be little affected, but as you move up the line to semi-luxuries and luxuries demand did decrease.

One positive result was the growing trend for shoppers to use price rather than brand loyalty when making selections, and it is noticeable, particularly outside northern suburbs supermarkets, that some local producers have been struggling to keep up with their growing market share although most have managed to keep some stocks on the shelves.

As people find the local and less expensive replacement products are, in fact, suitable we can probably see more of this happening, so there are winners from Covid-19, at least among the local producers who have resisted the temptation to profiteer or raise prices and have instead gone for modest unit profits on rising volumes. Many of these are classified as SMEs, so face competition.

The Ministry of Industry and Commerce is aware of the dangers posed by monopolies, near monopolies and potential cartels, where the temptation to raise prices to compensate for falling demand is harder to resist, and has already begun investigations using the competition laws and regulations.

But the most seriously damaged businesses will be the newer companies and traders among the SMEs.

Many were running on minimal capital and few owners just starting out have other assets, like expensive houses, that might serve as collateral with banks when they seek to borrow more working capital.

The higher interest rates now required by the Reserve Bank of Zimbabwe to combat speculation and other dangers do not help.

The Retailers Association of Zimbabwe has already put forward a plea for a stimulus package, and has a strong case, but care will be needed.

Probably the best way forward is to accelerate the growth of the SME banking sector and put in place a system for special recovery loans at concessionary rates of interest and delayed repayments.

Bankers, perhaps justifiably, have a reputation of being hard-hearted and suspicious.

But that is precisely what is needed if more capital is available for lending. Each applicant needs to be able to show actual real need and be able to convince the banker that their business is fundamentally viable.

We are back to the doctrine of knowing a customer, and the recent warning from the Reserve Bank that some banks are processing dubious foreign currency auction bids serves as a reminder that this doctrine needs to be enforced.

Any stimulus package must be used to help those who deserve help and must eliminate cheats and those trying to use contacts, smooth talk and vacuous promises rather than being sound business people who can be trusted.

The informal sector is a special problem, as the Government already sees with its survival living allowances put in place to help these micro-business people cope with the lockdown.

The fact that a large swathe of people in this group have never been fanatical about public health, even in the days before Covid-19, is additional problem along with the inadequate measures taken by some local authorities, including Harare, to find a way that micro-businesses can operate near their customers, but operate safely in an environment that makes it possible, as well as easy, to follow rules.

Here private sector investors have taken a lead with their controlled markets, ranging from modest flea markets right up to the large SME markets such as the Gulf complexes and the Old Mutual Eastgate Market.

This now needs to be encouraged and local authorities encouraged to follow the same path for their huge markets. Even modest investment can do a lot to ensure proper stalls, correctly spaced, decent hygiene and good access control so customers are scanned, have clean hands and wear masks.

Banning the informal sector is not a solution, simply creating hardship, and trying to set up markets far from where customers live or work is a waste of resources. A glance at the flourishing private markets will see that they are near bus terminuses or in suburbs, often both, and manage to combine safety and convenience.

The space barons in public markets now need to be totally defeated and eliminated, again simply a matter of control and monitoring. Private markets manage this well so it is not impossible, but then in the private sector corrupt councillors and council officials do not oversee the markets and stall allocations.

Small stall rentals will be cheaper than space baron charges, bribes, fines and kickbacks, so the stall holders will go along with a fair system that eliminates corruption.

Covid-19 has caused hardships, sometimes severe hardships, but it also has provided the first outline of a decent public transport system, and has opened opportunities for an open, better organised and far fairer informal sector if only local authorities start thinking through what is needed by those in the sector and those they serve.

Basically this means working with the honest majority in the planning, rather than against them and instead making it easy for the  corrupt.

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