HOSTILE BUSINESS ENVIRONMENT

A potential investor, advised that they are no longer considering Zambia, as they have been deterred by the number of businesses closing and returning to Zimbabwe and RSA. They were told that contracts were not honoured and that the environment is hostile. The experiences that these companies had in Zambia, has frightened the investor off.

From my perspective, it is disappointing that the investor did not take the time to research the other side of the story. I would like to believe that attitude and approach may be a reason. So many new entrant, believe that they are here, to teach Zambians a thing or two. As affable and friendly as Zambians are, they loathe this superiority complex and will very quietly, sit back and watch things fall apart.

The salary disparities between the expatriates and the local salaries are a real bone of contention. In smaller companies the local wages are unrealistically low. A review of salaries, contracts and terms and conditions is needed. This is very applicable to local entrepreneurial companies too.

The common mistake that is made by foreign companies especially those on our borders is that they cut and paste what works in their country here in Zambia. This is a different market. Research carefully.
The population of Zambia at 12 million looks high, however consider that 50 per cent are children under the age of 14 years, and people in formal employment is not quantifiable. This means that the informal sector drives the spending of money. Factor in too the size of Zambia which means that reach and distribution is expensive. Setting up office and getting all the basics in place is high.

What happens, is that the large profit margins are slapped on imported and local goods to absorb the cost of doing business. The consumer is smart and buys where they can get a cheaper price.

Making a quick buck is the order of the day in Zambia and this is what structured, new entrant companies grapple with. Prices are outrageous for services. Three quotes are a must for even personal purchases. The minute a Muzungu face is seen there is a 100 percent increase on the quote and same goes for Zambians driving luxury cars.

Contracts – for everything – are another must. Don’t think that you have the business without the appended signatures. Word of mouth agreements are a strict no no.
Local Zambians find it difficult to get business without an introduction at the multinational companies. They lament that companies would rather bring in foreign consultants, to do the same work, for a much higher fee.
It isn’t a straight path to getting business in Zambia, there are so many obstacles. Speed is one of them. Large companies, have a , bureaucratic process. Payment too, is fashionably and acceptably late. The postponements and cancellations of contracts are common place. Last minute.com should be the overall name of the way many businesses operate.

This creates a hand to mouth existence and there is a never ending queue of people waiting to pay and be paid. The focus becomes – get it now – so the cycle is perpetuated.

So the market is fickle and not cash rich. That is why, the get rich quick deals and high quotes are thriving. The thing is that it is not sustainable. You may catch someone once with the over pricing but not twice. Short cuts are the order of the day for companies and individuals that don’t have adequate cash flow. Many times there are requests for inflated invoicing so that the purchaser takes the difference. These figures are often over 50%. This affects those companies and often new entrants because they cannot compete on an ethical basis.

There is a lot of activity in Zambia – its palpable – its exciting. The challenge is to work for the long term. To set up business ethically and trade fairly. Honour contracts, shave the prices down, work on repeat business: not once off business.

Business everywhere is tough but Zambia can be a quietly, underground, hostile environment if you don’t know your way around. Key attributes to surviving is being tough but fair, don’t pay peanuts, respect people, be ruthless with contracts and quotes and prices for services. Be street wise and make sure that there is working capital for at least a year. I am going to harp on marketing again. New entrants, think that people will knock at their door and buy their products and services. Make sure that you have a marketing plan and talk to your market and find out what they want. I don’t know why businesses find it hard to talk to their market one on one.
Exit interviews in the workplace are useful and the Zambia Development Agency would do well to do the same with businesses that exit Zambia. Lack of preparation and knowledge of the market as well as realistic time frame to be profitable ; I will bet are 3 fundamental issues that contributed to their exit.

Let Zambians get up and fill the gaps by those exiting – after all you know how to survive in this market place. You make the rules!

ideas@carolwhiteconsultancy.com
www.carolwhiteconsultancy.com