CZI takes dramatic new course

09 Sep, 2022 - 00:09 0 Views
CZI  takes dramatic new course

eBusiness Weekly

The Confederation of Zimbabwe Industries is moving into new territory by seeking capital financing for its members through private sector initiatives, with US$300 million either secured or almost secured.

This comes from at least two financial concerns and possibly three, with working capital and raw material financing included along with the longer term need to cope with pure capital finance to replace or add plant and equipment.

This starts moving CZI out of the realm of being just a talk shop and pressure group, and although it has always sold itself as a representative body for industry able to bring critical common issues to the table and negotiate, as well as being able to give feed back to industry, that was limiting.

One major problem, as we and others have noted, is that CZI tends to group the larger firms in the formal industrial sector. Partly this arises from its history, going right back into the settler economy when industry was largely a modest number of formal companies, some set up locally although many subsidiaries of foreign companies but with a high ratio of local management.

In that era a couple of hundred people could meet in a congress and represent just about the whole formal industrial sector, and could for all practical purposes ignore the informal sector that was largely one-person miniature businesses that might just make buckets or window frames in the open air and sell them in informal markets. There was no continuum of industry.

CZI was an independence rename of the old Arni, set up as the Association of Rhodesia and Nyasaland Indistries, and then renamed after the collapse of the Central Africa Federation as the Association of Rhodesian Industries but with that final “n” on “Rhodesia” able to keep the same initials.

Unlike the settler commercial sector, which was far larger and so became a grouping of local chambers of commerce, one in each city or town or even grouping of small towns, Arni was a centralised organisation because of the small number of firms, most of which were in Bulawayo with Harare in second place, and a scattering in Kwekwe, Gweru or Mutare.

The model worked, but only for that sort of era. UDI did make industry more exciting, since the Smith regime was keen on expanding industry, but even then the fairly small number of formal companies and the system of very tight control of imports and foreign currency meant that companies tended to have individual relations with the Government, rather than operate as a group.

Arni was largely a networking place, ensuring that these formal companies at least knew each other and what they could supply. That was valuable so firms retained membership, but in the tiny settler society was hardly critical.

Independence did provide new challenges and opportunities, but at least in the industrial sector not much in the way of radical change in the first few years. While the Government was able to insist that the two main, racially divided, commercial groupings combined, and worked out how a continuum of commercial concerns from small country stores to large groups could operate together, sort of, the structure of industry was different: big companies and a large group of handymen in tiny concerns that were not really into CZI or even registered for tax.

Now CZI became very important and in many ways entered its heyday. The formal industrial sector, while recruiting a lot more widely for apprenticeships and the like in the 1970s as the Smith regime recognised the white population pool was too small, still had a very pale group in the executive dining room and so industrial concerns needed to be able to talk to a completely new Government about a lot of issues, and needed their more articulate members to lead the discussions. It worked and fairly quickly the growing white emigration and retirement rates changed the demographics of the executive dining rooms. So the political pressures diminished.

The new Government retained the tight control of imports and foreign CZIcurrency, but did have a policy of opening up industry to newcomers, and the peculiarities of CZI meant some of these were not desperate to join.

But what happened next meant that CZI found it hard to adjust. Increasingly we saw a continuum develop in industry. There were a lot of small and medium firm opening, ones where the managing director might well be the operations manager, a sort of super foreman, or where the managing director was the lead salesman. And these people did not have time to put on a suit and attend meetings and did not see much value in doing so.

Factory space was at a premium, but often what was needed was a collection of smaller bays rather than one large factory, and in fact some of the older dinosaurs were split up. CZI adapted slowly and we now have a position that while in market capitalisation CZI does represent a large chunk of industry, in terms of numbers it does not. In some ways it was becoming irrelevant. The large premises were sold off, a much smaller headquarters was bought and most industrialists ceased to care.

The new thrust of CZI, to see how it can help arrange finance, might well be the sort of policy needed to make it a lot more relevant, but it probably needs to be part of a new reforming of the organisation.

Seriously large industrial concerns can almost certainly get finance, and are more worried about the terms, the length of loans and the like rather than the actual access. As you move down the scale recognition comes in. And here CZI could offer a lot more. For a start, CZI could even start working out a how it could do some of the needed work on checking out members, giving banks useful information.

While a mutual guarantee scheme might well be a pipedream, since the firms with the money are unlikely to come in, a more active involvement between CZI and financiers wanting lower risk, and so offering lower rates, could be productive. Assessing risk takes time, and when you are dealing with smaller companies the cost might not be worth the profit. CZI could help by reducing the costs of that risk assessment.

At the same time CZI needs to bring in a lot of the newer and smaller industrialists by offering them benefits. There is the voting problem, but having several classes of membership could be the answer. There does not seem to be anything fundamentally objectionable about giving a major concern more votes than a little company, and adapting subscriptions to suit.

CZI could then work more closely with the Ministry responsible for SMEs, as well as lobbying the Ministry of Industry and Commerce, and if these schemes of bringing in outside financiers works out extend the concept to the SME industries.

The eternal problem with these internal schemes will be the allegations of favouritism, and special treatment for those in the executive committee and such like, and it would be hoping for too much for everyone to work together rather than looking out for themselves. But some of this can be addressed with independent assessments and co-operation with the SME Ministry and relevant finance houses and even suitable NGOs.

With the growth of industry outside the main cities, some sort of chamber system, whereby more could be done in the localities where industries are being created and growing, would help. Expecting people to travel to Harare or Bulawayo is not really practical for many.

To be more relevant CZI needs to be able to grow industry, as well as represent industry. And this is the big challenge that now faces this venerable organisation. It can remain as it is, the mouthpiece of the big formal sector, or it can work out how to bring in everyone in a practical way.

Remaining simply sees the continual erosion of influence while working out a new system will see CZI return to the heydays when it really mattered and every industrialist wanted a membership card.

The new journey now starting is a good sign that the CZI realises this, becoming a more self-help organisation. Now it needs to take that ball and run with it.


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