JORAM NYATHI: Zim should employ best business practices

18 Jan, 2015 - 00:01 0 Views

The Sunday Mail

Global oil prices have been going down precipitously for the past few months. I am not an economist so I don’t know what that should mean for the local economy in this global village.

At some point those prices were at $120 per barrel. At the last count last week, the price was in the region of $50 per barrel. That’s not fun. Especially for economies so badly dependent on oil exports such as Russia which is the target of the oil glut since the US mobilised sanctions against it for standing by its nationals entrapped in eastern Ukraine. (That’s to divert.)

My assumption as a non-economist, from the little I have heard, is that fuel is a major cost factor in the production chain. The other key cost factor is labour.

In the case of Zimbabwe, a third one is obsolete equipment. That is why our exports are said to be uncompetitive outside, and have no buyers at home, hence the flood of cheap imports.

Use of the United States dollar has only compounded a terrible situation, coming in as a fourth factor. (Don’t worry about the order of importance or culpability. Real economists can deal with that. My only hope is that I should be correct about the impact of these factors on our economy and our ability or failure to attract the elusive foreign direct investment.)

Now, Zimbabwe does not have oil wells within its borders. All the fuel is imported.

That means our businesspeople must be out there benefiting from the recent collapse in oil prices. We should be enjoying a comparative regional advantage given the value of the US dollar versus the depreciating South African rand.

We don’t know how long this slide will last definitely, but I have seen investors on the stock market gamble on such falling prices by picking cheap stocks in the hope that when the tide turns, they will make mega profits.

Often the trick is in determining at what point to jump in so as to maximise returns on the rebound. For instance, someone might have rushed to buy when oil prices dropped to $100, hoping they couldn’t fall much further. He would have spent more to buy the same number of shares as someone who buys at the current price of $50 per share. Tough luck they say.

So far we ordinary motorists have not had the benefit of having a single buccaneer ready to take the plunge to bring us cheap fuel. Perhaps we don’t have entrepreneurs after all, only traders and “foreign goods and assets” managers.

That should explain why indigenisation and economic empowerment policies are such a hard sell. Where would we go without the white master!

Media reports show that there has been a lot of hedging about when it comes to reducing retail fuel prices. We have been told that our fuel dealers are still trying to liquidate old stock at the old prices of close to $1,50 per litre.

Never mind that few Zimbabweans have the inclination to fill up their vehicles outside our borders, the stocks still won’t run out.

Never mind the huge vehicle population clogging the urban roads at peak hours if not throughout the day, especially in Harare’s relatively narrow streets, the old, expensive stocks won’t go away.

So we keep buying the most expensive fuel while the rest of the world with better functioning economies is getting it cheaper! Why indeed are we so blest?

Which is to say, once again, we probably have no entrepreneurs but real dealers in the fuel sector. What are the lead times and quantities imported and money tied up in fuel which goes for months stored in underground tanks while other opportunities pass us by? If this is the culture, the general practice in running local businesses, any wonder that we are in this fine mess? Who expects such feckless business minders to compete anywhere in the world, let alone claim to drive the engine of economic growth? Shame.

Alternatively, let’s give them the benefit of the doubt and assume our fuel dealers are liars and they have been importing cheap fuel.

They are happy to maintain the same prices for fuel purchased when oil was selling for $120 per barrel. Greedy capitalists.

My phone dictionary describes a huckster as “a person who sells small items, either do-to-do or from a stall or small store; a mercenary person eager to make a profit out of anything . . . ”

We don’t ordinarily describe as businesspersons vendors selling their wares on street pavements or small stalls. Not even in our new economy which is being sustained chiefly by the unbanking “informal” sector.

It is safe to guess that fuel dealers are the big guys in town who are part of the old economy, in the formal sector. These are probably the hucksters, the mercenaries “eager to make a profit out of anything” regardless of the impact of their actions on the consumer. They must maximise profits by profiteering than use appropriate business strategies.

These are people who don’t miss an opportunity to attack Government for bad policies which supposedly impact negatively on business profitability.

In Europe and America businesses are told to innovate or die. In Zimbabwe it is Government’s duty to save and protect mismanaged businesses which have no empathy for the embattled consumer.

Which brings me to the point, business giving hostage to fortune by forcing Government to intervene in the fuel price rip-off in the name of protecting the motoring public and other consumers.

Energy and Power Development Minister Samuel Undenge was last week forced to take the “unpopular” decision to order fuel dealers to reduce the retail price of fuel by 20 percent. They were given a whole two weeks to effect the reduction. (That’s how easygoing life is in Zimbabwe.)

You would expect some contrition by business. Not in Zimbabwe. There is fierce resistance to “price controls”. Affirmative Action Group national president Chamu Chiwanza last week described the behaviour of business as tantamount to “economic sabotage”. One is inclined to agree. A reduction in the price of fuel in sympathy with global oil prices would benefit commuters and lead to a marginal reduction in the cost of goods in shops and more disposable incomes, thus boosting spending in the economy.

There is no such benefit. Alternatively, you would think these dealers would declare higher earnings and bigger tax to the ficus. It’s a joke.

But the risk is that once business calls Government’s bluff to impose controls, this might just spiral to other sectors. Why can’t they adopt best business practices and stop this hucksterish, heartless profiteering which undermines overall economic performance?

 

◆ Joram Nyathi is the Zimpapers Group Political Editor

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