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Why are Zambian businesses not competitive?

NCHIMUNYA MUVWENDE

Analysis: NCHIMUNYA MUVWENDE
JUST like it is the desire of every parent to see their child grow, business people desire that their businesses grow to their imaginable sizes.

A quick browse through our major outlets would lead to spotting of products produced in countries like South Africa, Kenya, and Botswana, but are Zambian products equally on foreign markets?
Most stores in Zambia are filled with imported products (including those that could be produced in Zambia) but why import products we can easily produce and develop? Is it possible that something can be done to encourage entrepreneurs to be more competitive?
After pondering on these questions, it would be wise to discuss what factors could have led to why Zambian businesses are where they are now.
UNDERSTANDING OUR HISTORY
It is important to know that entrepreneurship is relatively a new concept to Zambian people because business was something that was not really necessary during the early post-independence period. After Zambia got independent in 1964, the new leaders, in a bid to fulfil pre-independence promises, decided to use the inherited resources for free education, water, medical facilities, sanitation as well as general infrastructure development.
People basically depended on Government for everything they required under the statement ‘Boma ilanganepo’ (Government must do something).
The UNIP government brought about a command economy, in which Government is totally in control of the economy. Under the Mulungushi Economic Reforms of 1968 and Matero Economic Reforms of 1969, there was a policy of Zambianisation where almost all major industries were put under State control and this was the beginning of the curtailing of creativity, innovation and entrepreneurship in the Zambian people.
The problem was that there was no competition in the economy, the goods produced were usually of poor quality and there was a severe constant shortage of essential commodities, which often resulted in riots in some parts of the nation.
Further, people had to constantly queue to buy goods and a dependency syndrome was cultivated in the minds of the people, hence killing the entrepreneurial spirit in many.
However, the coming in of the MMD government in 1991, under the leadership of Frederick Chiluba, began to shape the picture of entrepreneurship. The MMD government began the privatisation of companies, introduced the market economy, which saw Zambians begin owning their own facilities and start businesses.
Privatisation opened the need for entrepreneurship because people began to realise that they could no longer completely rely on Government for the provision of all their wants, and so, they had to find other means to fend for themselves.
It is important to understand that the economic policies that the government of the day embraces will determine whether entrepreneurship will boom or burst.
ACCESS TO FINANCE
To run and grow any business, money is needed but this seems to be a major constraint in the Zambian set-up. The cost of borrowing finances in Zambia is quite high as compared to other neighbouring countries and this affects the growth prospects of many businesses.
The bank lending rate had reached as high as 48 percent, but as of December 2016, the average commercial bank lending rates in Zambia averaged 29.4 percent as compared to South Africa, which averaged 10.5 percent, Zimbabwe averaged 12 percent and Botswana averaged 7.5 percent.
Imagine how a Zambian business is able to compete against businesses in other countries like South Africa, where people can borrow at relatively lower amounts than Zambia. It means the people borrowing at such a rate must make a profit exceeding on average 40 percent in order to be able to pay rentals, carter business costs, and pay back loans but still remain profitable.
However, with fluctuating high inflation, increased fuel prices and various business challenges, how do we expect businesses to grow to competitive levels except by being a means of survival for families?
It is important to note that the lending rates in Zambia are high due to the strong relationship between lending rates and credit risk.
The banks will not want to lend money anyhow because if credit risk is high, it means that there is a high probability of defaulting on the part of the borrower, hence affecting bank operations.
BUSINESS OF CONNECTIONS
Many a time, people believe that the business cannot stand alone unless they have some sought of connections with certain people or organisations often those in Government. To become a good businessman in Zambia, one often requires to have some sought of political inclination, hence creating continuous compromise on growth prospects of products.
Overreliance on Government and other personal connections have a great capacity to collapse a business in a short period. Political connection often leads to a business to grow for a short time and when that connection is loosened, the business then begins to stumble.
Probably the question every business person ought to ask themselves is, will my business still thrive if such a person was removed from this position of authority or if Government is changed.
The problem that comes with dependency on a contact or contract to be a supplier is that often, quality is affected and so the commodities cannot be deemed competitive enough to be exported.
This culture being embraced of having to know someone in order to grow a business is curtailing a mindset that limits innovation, creativity and ability to realise that quality products are what are needed to make a successful business.
Lastly, it is important that Government creates an environment that will promote Zambian products such as working on policies that will foster the bank lending rates to be reduced, educating of the youths on entrepreneurship activities as well as award contracts on merit basis.
Ensuring that quality exported commodities are produced should be placed as a priority if we are to compete with other nations and grow our economy.
The author is a fourth-year economics student and a member of the University of Zambia Business and Economics Association.

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