The economy of the country is in a bad shape. Foreign currency is scarce. Once believed to be 1:1, the exchange rate between the US dollar and the bond note keeps going up. At the moment it is hovering around 1 USD : 3.5 Bond. Fuel supply is erratic. Production is at an all time low for most industries. However, in the middle of all this mess, there are some businesses which are smiling all the way to the bank. Below, we look at businesses which are performing well despite the prevailing harsh economic climate.
A number of banks have posted impressive results this year. Steward Bank reported a 103 percent increase in revenue and a 139 percent increase in earnings. This is according to their half year results for the six months ending 31st August 2018. Commercial Bank of Zimbabwe (CBZ) and National Building Society (NBS) also reported encouraging results. There are a number of reasons why these and other banks performed well. The cash shortages prevailing in the country have forced people to embrace the use of plastic money, thus banks benefit from transaction charges. Steward Bank went on a massive customer recruitment drive which has left them with around 900 000 customers to date. Their Kwenga innovation became a game changer as cash transactions were replaced by digital money.
NBS attracted customers by targeting sectors of the market. The Social Security Center was partly established to service pensioners. Their focus on pensioners and other special groups has been their value proposition. Overall, bank charges and transaction fees spurred profitability for most banks. Banks also benefitted from the mopping out of non performing loans (NPLs) carried out by the Zimbabwe Asset Management Corporation (ZAMCO). It remains to be seen how much more Steward Bank will make from their new *236# innovation where customers can instantly open bank accounts without visiting the bank.
As expected, during difficult economic times, many default on their loan repayments or other financial obligations. In trying to recover their money, those owed end up opting to auction properties, equipment, office furniture and other goods. Recently, Mazowe Mine, a member of the Metallon Gold Group had its underground hoist and main plant auctioned to settle a debt they had with the Zimbabwe Electricity Transmission and Distribution Company (ZETDC). In another high profile case involving Chinyan’anya and 36 others vs Courtney Hotel Private Limited, the hotel has been opened for bidders. Kukura Kurerwa Bus Service assets were also auctioned last month. This means more income for the auctioneers. As many individuals and companies default on their financial obligations in the face of the prevailing economic crunch, the auctioneers are ready to pick up the pieces and profit from their demise.
Zimbabwe’s economy is highly informalised. At the moment, the government has not been able to put in place proper measures to fully account for the informal sector. As such, they are not remitting any statutory requirements like taxes to the Zimbabwe Revenue Authority (ZIMRA). If we take Artisanal Miners (makorokoza) for example, there are no proper mechanisms to ascertain how much minerals they are extracting. On the other hand, selling to the government owned Fidelity is not a very viable option as they are given 50% of the money in Bond notes instead of 100% forex. As a result, the artisanal miners end up selling privately and there is a ready market that pays US dollars in cash. The truth is that there is no shortage of US dollars in this business although it involves dodging the government here and there. For those law abiding small scale miners selling their minerals to Fidelity, profits are still there to be made although the payments are half forex and half bond notes.
It is clear that some businesses are taking the harsh economic situation currently being experienced in the country as an opportunity to grow their brands. In any case, it is often said that business is about offering solutions to the problems that people are having, solutions which people will be prepared to pay for. If that is the case, the more the problems, the more the opportunities to do business.