The Sunday Mail
Howdy folks!
We have, as a point of departure, every reason to understand the Zika virus disease currently wreaking havoc in some parts of the world and take measures to prevent it, as a Republic.
A popular aphorism goes, “Prevention is better than cure.”
Zika virus is not just another faraway country’s problem. There is surely a reason why this Zaka cowboy is really worried about Zika.
You see, the month of February did not only come to bring February 29 for the first time in four years; but also started with a declaration by the World Health Organisation of the Zika virus disease as a “global health emergency of international concern”. And as Zimbabwe is part of the international community, we should, therefore, understand what this virus is all about and the role we can play in fighting it, especially as experts like the US Centre for Disease Control heads up that “Zika virus will likely continue to spread to new areas”.
And Zimbabwe may not be an exception!
Our landlocked nation is infested with a significant quantum of bugs responsible for the transmission of this virus.
Yes, we have Aedes species mosquitoes that can become infected with and spread the Zika virus. And the virus has already spread to more than 30 nations, some of which our folks travel to for holidaying or other purposes.
So let’s be proactive on that one!
But back to the subject of the day, which is informed by the proliferation of mergers in the Republic. We have heard the Competition and Tariffs Commission say that it has not opened a year as busy as 2016.
The Commission said it was already working on five mergers before the end of January. Ordinarily, the Commission says it has three mergers for the first quarter, but 2016 has been an exception as it expects the mergers to increase as the year progresses.
Is this good, or should we be very afraid?
What seems to be the compelling factor for these mergers is the persistent recession we are witnessing in the economy with the Zimbabwe Revenue Authority recently telling us that it missed its revenue target for 2015 by -6.96 percent. While we have some merger entities that have worked, we also have some that have not; talk of Kingdom Bank and Meikles Africa; Kingdom Bank and AfrAsia; and many more. Folks, give it to them; the CTC is doing a very good job of promoting and maintaining competition and fair trade in the economy and preventing and controlling monopolies.
We all know that mergers can kill or ameliorate competition, giving mergered firms monopoly power. And if more firms in the same industry merge, we may end up with a less attractive situation whereby they can cartelise to fix higher prices much to the disadvantage of consumers. Yes, you may make profits and accrue economies of scale by merging, but your debts will remain. This may strain your ability to access adequate resources to run the merging entities. But what is key to note is that your current suppliers may not be in a position to produce your additional requirements after expanding your businesses. And who knows whether they will be also willing to raise your credit limit, with the coming on board of the new guy they don’t yet trust? Some companies don’t really consider the harm that may occur to their good brands once they get in bed with entities that have soiled images or have principles contrary to the expectations of stakeholders.
It’s, therefore, important to always calculate those risks before you cross that point of no return. But my main worry is not how mergers may result in the rationalisation of human resources; this in an economy already grappling with high unemployment.
The rationalisation may also result in loss of human resources endowed with rich institutional memory that was responsible for the shaping of the organisation’s de facto culture.
Losing workers who have a deeper understanding of the business comes at a higher expense to the new outfit’s success.
We also cannot rule out the culture shocks that come with merging companies.
Here, we are talking about, say, two companies that have had their own way of doing things for years and are now required to summarily renounce all that and adopt new ways of doing things. The inclination for inertia is certainly inevitable there. Although the media may paint some mergers as unions made in heaven, mergers are usually hell to employees.
They may cause a lot of friction and internal competition, as employees naturally jostle to find a chair to sit on when the loud music stops. Who wants to be demoted, or to be sent home? It is also very likely that the merging companies may be agreeing on major factors considered for the merger, but with conflicting fundamental objectives. So, you may end up having a new bunch of people who are more profit interested when you perhaps had other objectives surpassing that.
Many firms that merge often make the mistake of looking at only what is in their best interest, while overlooking consumer perceptions. If a company that is known for adopting best environmental practices in its business conduct merges with another that is known for pollution and other unprofessional tendencies, it might dilute the way they are viewed by clients.
We may say more, but it boils down to one thing – we need competition in this economy!
It is one of the key pillars to improving consumer welfare. As companies compete for market share in a fairly competitive environment, it is more likely that prices will go down, and that benefits consumers. When prices of goods and services go down, it increases the spending power of consumers – eventually allowing them to access more products on the market. In the same vein, competition reduces barriers to entry in an industry. The reduction of barriers to entry in an industry can result in new entrants in the same industry previously characterised by few players. The benefits that accrue to the consumer as a result of new entry are better service and quality as new firms come in with different products and variety.
In markets characterised by few players, the dominant firms are known to abuse their market power by deliberately excluding new competitors or exploiting consumers.
The CTC at one point investigated Harare City Council’s abuse of dominance in treated water provision. Council was investigated for non-supply of water yet continually billing water to residents, ironically billing without taking actual meter readings, in some instances. The investigation proved that council was indeed abusing its market power, thereby disadvantaging the consumer.
A public hearing was conducted; the results will be of interest. The CTC is this year ceased with the mammoth task of analysing the potential competition-reducing effects of a number of proposed mergers. The analysis criteria include assessing post-merger market shares, barriers to entry, public interest and market concentration in the industry where the merger is taking place.
It is our hope that all proposed mergers that are likely to substantially lessen competition and/or result in monopolies that can disadvantage consumers will be weeded out.
It is heartening that the Commission has since its inception disapproved a significant number of mergers, based on the criteria highlighted above. But let’s continue to search for the real panacea to the economic challenges we face. While we do that, let’s seriously reflect on what Zimra board chair Mrs Willia Bonyongwe said in her 2015 Revenue Performance Report: “The major challenges facing Zimbabwe’s economy remain unresolved.”
Later folks!
