eBusiness Weekly
Luke W Gumbo
As the local economy hurtles from one speed bump to another, economic participants and indeed the general narrative has sought to situate the genesis and resolution of crisis within the ambit of the country’s policy makers. I seek not to establish the veracity of this narrative, but instead, train my lens of the disempowering nature of this widely fumigated narrative.
Nowhere else is this theory more evident than the country’s business sector. Business interaction upon business interaction, the accusatory finger is pointed at the country’s political establishment as the cause and as a consequence, the solution to the country’s recurring cycle of economic turbulence and misfortune.
This perspective has too often provided refuge to a business class that almost 40 years since the attainment of majority rule has displayed very limited appetite to embrace ambitions that move beyond our immediate and near term needs.
This examination of the country’s business class is not to exonerate the political class in our country but to examine the consequences of such attitudes on business formation, structuring and prospects. The country’s history of business enterprises since pre-independent Zimbabwe has been one borne out of inward looking policies, first with the sanction busting emphasis driven by the state.
Most businesses looked to satisfy the local market in the provision of products and services and had little appetite for going abroad. Post independent Zimbabwe saw a major emphasis at reducing the inequalities that were created out of racially induced policies by the minority government. When the government liberalised with the implementation of ESAP, local businesses were already on the backfoot. Companies in the main elected to engage and lobby government to create what they termed were business friendly policies at home.
The results have been mixed as government is battling to balance a multitude of contending priorities have acquiesced to business lobbying in some cases while in others have elected to look the other way. In some quarters some on-off government policies have been credited with nursing a dependency syndrome within the business sector. Whatever the reasons a home bias definitely exists.
The result has seen the country produce businesses that while providing goods and services in the domestic market, have performed dismally when it comes to establishing a reputation in external markets. In going global, depending on the type of industry businesses, either export their services and products or set up shop in foreign markets.
In many cases the process tends to be sequential where initial exports from the home base to test the new market, are followed by foreign investment abroad. But the Zimbabwean formal business actor has in the main been a poor traveller. A notable exception has been the case of Econet, which has applied an international springboard strategy, and systematically and recursively used international expansion as a springboard to acquire critical resources needed to compete more effectively against their rivals at home and abroad and to reduce their vulnerability to institutional and market constraints at home.
In contrast in India, the business class reaction to inhospitable domestic policies particularly in the years between 1969 and 1974 that were characterised by stringent regulation of private and foreign companies was markedly different.
Having grown weary of Government policies that did not prioritise business formation and growth in favour of a socialist bias that drove significant government intervention in the economy, major businesses started embarking on forays into foreign markets. Over time this became an established trend, a preferred ambition and practice even. In fact some analysts contend that large Indian firms increasingly prefer overseas expansion to the domestic market, despite the presence of a very large home market in India.
The reason for this is that although the economic liberalisation initiated in 1991 succeeded partly in making it easier to do business in India, significant hurdles still remained in the form of red tape, lack of clarity in the regulatory environment, that made overseas operations more attractive for Indian firms. Indian businesses exemplary reaction are in fact not an anomaly.
For instance, Contractor (2013) reports from UNCTAD’s World Investment Report 2012 that the 100 largest transnational companies (TNCs) from developing and transition economies already account for 32 percent of sales and assets and 56 percent of employees of all of the 100 largest TNCs worldwide. Several companies from emerging economies such as Embraer from Brazil, Lenovo from China and Infosys from India have created globally recognised brand names for themselves.
The example of India is apt, because unlike the Chinese story, the success of Indian businesses going global was not at the behest of central authorities but borne out of genuine frustration at an operating environment littered with impediments. Other reasons cited for the shift in focus included location factors, including the relatively small size of the domestic markets for skill-intensive goods, poor infrastructure facilities and the perennial problems associated with Indian bureaucracy.
Another lesson learnt here is all environments have their inbuilt advantages and in the case of India it was their education system and the relatively low efficiency wage, a result of growth in labour productivity rather than low relative wage rates.
The point of this article is to drive home the point that the business class must incorporate in their solution matrix, a solution that assumes that policy makers will invariably be conflicted and while giving support as invited guests at business functions will not match that enthusiasm in practice. This will drive the discussion towards practical solutions that could see more Zimbabwean businesses going global and that globalisation can influence the implementation of deeper reforms back home that would positively impact business.
◆ Luke W Gumbo is an economic and financial analyst. His views are personal and in no way represent any of the institutions he is associated with.
