Travel Expo 2010

March 25 saw the launch of the Zambia International Travel Expo 2010 at the Mulungushi International Conference Centre.

The event was flagged off by a breakfast event that was graced by a high powered delegation of government and private sector officials which included two Cabinet Ministers and two Deputy Ministers.

The main conference hall in the new wing was filled with invited guests that were treated to some shows on Zambian tourism punctuated by the usual speech making plus dances and songs.

One could not help thinking that if the rich attendance at this launch comprised of potential customers, and if the venue was Cape Town, or Frankfurt, or Paris, or New York, the immediate response would be a flood of inquiries and bookings for ‘Destination Zambia’.

The reality was that the hall was packed with tour operators, lodge owners, hoteliers, car hire company owners, government officials, organizers, and very few people that would actually make the trip to the many tourist destinations in Zambia.

The Expo may have been designed particularly for the purposes of networking amongst the players in the tourism and travel sector, which includes the private sector, government and members of the public.

The opportunities to directly sell packages and options for travel and tourism may have been the consolation side effects of such a large gathering of investors in the sector.

The 150 plus exhibitors made an impressive show and this years Expo outdid itself when compared to the just under 100 participants that exhibited last year.

After some casual discussions with many of the exhibitors, the question of ‘how does Zambia stand to benefit from the upcoming 2010 World Cup?’ soon came up. The common response from the exhibitors was that no deliberate strategy is in place and each investor has to make a private plan to try to bring business to their companies during the forthcoming football months of June and July.

Some airlines have put in place strategies to acquire more aircraft to add more routes to their current flight schedules, and yet other airlines were considering increasing the frequency of flight between Zambia and South Africa, or introducing larger capacity aircraft to service the current flight schedules thereby increasing the passenger traffic during the World Cup 2010.

These are impressive ideas and initiatives but it is plain to see that there is no national strategy on the drawing board and it is up to each business to develop their own independent programs. One cannot expect to see too much success with an individualistic, haphazard, and uncoordinated approach to exploiting the opportunities for both travel and tourism during the World Cup this year.

It was however, refreshing to see such boisterous looking faces that have hope and expectations stamped on their smiles, even though deep down these faces acknowledge that the stream of tourists expected to come to Zambia will not happen by accident or default. Any appreciable increase in tourism this year will only happen by strategic design and meticulous implementation.

Tourism is not a necessity to human well being as compared to water, food, and sleep. Tourism is a luxury that requires to be planned for, budgeted for, and must be an attractive and hassle free experience.

So, we may want to pause for a moment and ask ourselves: Did last week’s International Travel Expo 2010 really help to launch the country into the World Cup 2010 spirit? What can we do to complement and supplement this effort?

One obvious challenge for Zambian tourism in respect to the World Cup is that there has been very little dialogue within the travel and tourism sector on what the opportunities are, and how they can be exploited by the various investors in the sector.

For example, have we had a stakeholders meeting to help us to understand how a World Cup event is run in the preparatory stages, during the actual games, and after the event? Do we appreciate the pattern of expenditure and time management of visitors to a World Cup event? On average how many games does a person commit themselves to watch live in the stadium? What do World Cup visitors do in-between attending chosen games? How do World Cup participating teams use up their time before, during, and after the tournament? Is there a particular way that players relax and recover after a game?

These are just a few of many questions that one may want to ask and interrogate. It is the answers to these questions that make the basis for a strategy to benefit from this years World Cup event.

The answers will input into how many flights need to be put in place between Lusaka and Johannesburg, or Lusaka and Livingstone. The answers will assist Zambia to decide on how a visitor can obtain a visa to Zambia and at what cost. The answers will prepare the Zambian travel and tourism companies to cater for the anticipated influx of new visitors to the country. The answers will challenge the banking industry to consider the installation of Point Of Sale units in lodges, guest houses, travel agencies, and popular tourist attractions. The answers will drive the airlines to consider their air fares into Zambia from South Africa and the region so that more tourists can be attracted to make a detour from the World Cup and visit the Mosi-O-Tunya and other wonders in Zambia. The answers will provoke the private sector to adjust prices of packages and services offered, to levels that would persuade visitors to the sub continent to stop over in Zambia.

It may be this unfinished business that puts the smiles on private sector faces. The smiles on private sector faces may not necessarily be ones that are generated by good strategy and investment, but that of blind hope, unfounded expectations, and of prayer that something will happen to tilt the scales in our favour.

Published 30 March 2010

Regulation And Authority

Zambia chose to move from a regime of government control to that of free market enterprise. Zambia also chose, on advice from the Bretton Woods institutions, to desist from financing statutory regulatory bodies and introduce self sustainability and profit making in public institutions.

The myth that the removal of government control in economic sectors, and the introduction of profit making in public institutions makes for good development economics, has no solid basis to support the argument.

Most developed economies have intitially started the development cycle by making heavy public sector investments in economic programs as a catalyst for private investors to be attracted and invest in the same programs. When a threashold is achieved whereby private investment exceeds public investments in any sector with a healthy active competition, then the public institutions withdraw from the sector to leave the competiton amongst the private sector such that the businesses remain viable and sustainable due to market forces. Even with the promise of competiton and demand driven price structures, the government still puts in place a public interest watch dog mechanism generally refered to as a Competition Commission that focusses on the maitenance of fair competition and the removal of monopolies.

Europe and the North American sub continent have Anti Trust laws that ensure that no single private company can monopolise a business sector. By contrast, the only institutions that are allowed to hold monopolies are governemnt owned, which include defence research and monetary policy management to name but a few.

The understanding is that an economy can liberlise up to a point, but some form of regulation and authority must be put in place to prevent damage to the economy by unscroupulous business people or dictatorial investors.

The regulators and authorities in these developed economies transformed their role and moved away from being aggressive, excluding, oppressive, and prescriptive. Their new roles were of being supportive, informative, facilitative, inclusive, and collaborative. The driving goal for regulators and authorities is to support economic growth and wealth creation in a hassle free manner yet put public welfare on the top of the agenda.

This is the challenge for Zambia. Regulators and authorities need to transform in mindset, preception, operation, goals, and service delivery.

Public companies are seldom subjected to similar treatment as the private sector by regulators and authorities. The reality on the ground is that public institutions are never held accountable to the people in respect to meeting benchmarks, and no sanctions are generally taken against public companies that do not comply with the regulations of the day.

On the other hand, private companies view regulators and authorities as barriers to doing business rather than partners in developemnt because of the aggresive manner in which these government sanctioned bodies engage with thier private sector customer base.

The typical scenes are those of a regulator or authority threatening to shut down any business enterprise on account of relevant paperwork not being in place. This includes licence and permit renewals that may be in the domain of other agencies that are not demanding immediate renewals due to operational difficulties. Examples of this type of harrassement is evidenced in respect to road tax discs, carbon tax receipts, trading licenses, rezoning permits, health permits, fire and safety permits, and other permits and licences that are affiliated to the construction sector, manufacturing sector, tourism sector, mining sector, agriculture sector, and services sector. Every area of economic development is affected and suffers the same plight of threats and punitive punishments rather than facilitative interaction and the promotion of good business practices.

The situation is compounded with further aggression and punishment when regulators and auhtorities are forced to adopt the self sustainablility paradigm and cost recovery charging for services rendered. Regulators and authorities tend to introduce more nuisance licencing and permits regimes that add to the cost of doing business through the government sanctioned monopolies. These bodies are not accountable to the public in respect to the introduction of new charges and costs, and they seldom look at their own operations in an effort to reduce inefficiencies, over spending, and over employment.

Zambia will soon become an active member of the COMESA Customs Union and will have to compete with member states and other players in the region. The neccessity for regulators and authorities to partner with the private sector in order to make Zambia more productive cannot be over emphasised. The Customs Union is the clarion call for collaboration and engagement that will transform Zambia into a more productive state that will grow its private sector and export into the region.

Zambia has the immediate challenge to go back to the drawing board to redraw the values and responsibilities of the various regulators and authorities such that the private sector can embrace these institutions as partners for development and use them as practically as possible.

Today, managements and their workers band together to ward off the aggression of a regulator or authority. Tomorrow we would like to see these statutory institutions become development partners of the managements of private companies to the extent that the issues brought up can become input for managments to challenge themselves and their workforce on better business practices and professional conduct that will benefit the economy through growth, more employment, and better skilled human resources.

Published 23 March 2010

Quick Money

There are two ways of doing business: The well prepared and strategic way that encompasses research, business plans, relevant paperwork, and then implementation; or the crisis way of quick explanations, problem information, and urgency in resolving the bottlenecks.

Experiences show that very few business people and companies go the strategic way and carry out their businesses in an incremental and predictable manner. The majority of Zambians especially in the micro, small, and medium business sector tend to react to business challenges rather than to plan and respond to the ever changing business pressures.

If one speaks on behalf of the majority reactionary business practices, it becomes necessary to carefully understand the various processes of acquiring financing, and the impact and consequences of each option of doing business.

Reactionary decision making in a business motivates the business person to rush off to the bank and seek support. The banks have very clear guidelines when doing business, and even clearer guidelines when lending out money to customers. Banks initially want to know what service the customer is seeking from the bank. The banks then check the balances of the customer’s account and look into the history of transactions that have taken place in the last three months or so. The next step is for the banks to request a business plan from the customer which highlight the company’s strategy to liquidate the intended debt. Finally, the banks request some security which may cover savings, life insurance policies, monthly salary and other receivables, immoveable property, and other assets.

These demands are not easy to put together and therefore appear to be monumental tasks to any business person that is in a hurry to access quick money. Today, banks typically offer loans, overdrafts, and leases at interest rates of about 30 percent per annum. This is the cheapest form of money available and the terms can be renegotiated if the customer is performing very well in the eyes of the bank. Banks in general are concerned about the viability and sustainability of the customer in an effort to reduce the possibility of default and to support the customer to build the business from one level to the next in a manageable manner.

For many Zambian companies, the banks appear to be too demanding and too slow in making money available to an institution or person that wants to transact quickly, so they look elsewhere for a quicker deal.

The next port of call for the average business person is the Micro Financing Institution (MFI). MFI’s tend to be much more flexible than banks because they are not as demanding in paperwork, but on the other hand, they provide quicker money at typical interest rates of 120 percent per annum. This is 4 times more than the worst bank interests rates on the market.

MFI’s usually want to know what the customer wants to use the money for and requests a short term and abbreviated business plan. MFI’s also require some security and will willingly take salary pay cheque remittances, moveable property such as cars and machinery, immoveable assets like houses and other forms of buildings or land, and any other income that can be reasonably proven.

MFI’s are generally more focused on the quality of the business plan to show capacity to pay back and often use some form of security to mitigate against possible default. MFI’s will typically respond to a customer s request within a few days and quick money is put on the table once the formalities have been addressed. The options for renegotiating the terms are limited and the MFI’s oversight in monitoring customer performance is imbedded in the lending agreement.

Many Zambian companies use this route to access quick finance and begin to develop an understanding of the rudiments of borrowing money and the necessary process that have to be undertaken. Many companies also recognize that the cost of money from MFI’s is too high for investment into plant and machinery or medium term programs because the interest rates will quickly outgrow the principal amount borrowed. MFI financing is therefore predominantly used for short term trading that covers not more than one month to keep the interest payments within the 30 percent bracket.

There are a good proportion of Zambians that consider the MFI’s too slow to release money and therefore look for an even faster mechanism to obtain quick money. These business people come out of the sunlight and go into the shadows to find a Money Lender typically known as a Loan Shark.The money lender will make quick money available at their low interest rates of 180 percent per annum, but predominantly offer loans at 365 percent per annum.

Money lenders generally offer quick money within 24 hours but require only a brief explanation about the use of the money and demand tangible security in the form of moveable and immoveable assets valued at typically three times the amount to be given in the quick loan request. The rationale is that a money lender becomes more comfortable that the customer will do everything in his or her power to pay back the loan before risking the loss of the pledged property that is three times more valuable than the loan taken. Clearly the motivation to pay back is based on the bigger loss that the customer would make if they defaulted.

Money lenders are not keen to renegotiate the terms of the loan agreement unless it makes substantially more profit for them. In addition, money lenders tend to secure the loan given with a sales agreement between the customer and the money lender for the property surrendered as security, but include a buy back clause that enables the customer to clear the debt owed and redeem ‘their’ property. This mechanism basically gets the customer to sell the property to the money lender, and the money lender is obliged to sell back the property (by way of cancelling and tearing up the sale agreement) to the customer when the customer pays back the principal with the accumulated interest.

The money lender therefore does not have to go through any litigation if the customer defaults on the loan agreement, but simply carry out the change of ownership process and liquidate the security to recover the money owed.

Money lenders provide the quickest cash in the financial markets, but the risks taken by the customer are higher than any other form of borrowing. Many people have lost homes, vehicles, farms, premises, and machinery because they did not meet the terms and conditions of borrowing quick money from the money lenders.

The lessons to be learned are that any quick money comes with heavy risks. The risk of heavy interest rates and the risk of losing the security pledged in order to obtain quick money is real, and it can be the recipe for a disastrous life thereafter.

Published 16 March 2010

Economic Wars

Since the end of the Second World War, the big powers have concentrated on military might and the build up of arms and ammunition. The Soviet Union on one side and the USA on the other side have spent much public resources over the last six decades on stockpiles of missiles, submarines, and other logistics to become super powers.

What is now evident is that while the super powers were building up militarily, some non descript poverty stricken economies such as India and China were pouring as much resources as they could into economic capacity building over the last four decades.

The irony is that the remaining protagonists of the Second World War continued the war through arms build ups and missile pointing across the oceans, while some developing economies changed the parameters of the war from firepower to economic growth and dominance.

These economic wars have always been around from time in memorial. Today the wars have evolved and become more sophisticated under the guise of the World Trade Organisation (WTO), the North Atlantic Free Trade Area (NAFTA), the European Union (EU), the Association of South East Asian Nations (ASEAN), the South African Customs Union (SACU), the Economic Community of West African States (ECOWAS), the East African Community (EAC), the Southern African Development Community (SADC), and the Common Market for Eastern and Southern Africa (COMESA) to name but just a few.

The WTO grapples with development concerns of various nations. North versus South, East versus West, Developed versus Developing, Socialist versus Capitalist, and the list of economic battles goes on. Free movement of human resources in addition to free movement of goods and services is an ongoing debate. The battle on Intellectual property rights continues to rage between East and West. The patenting of technologies has opened up new conflicts in the Genetically Modified Organisms domain. The debate on private ownership of technologies versus global or public ownership is constantly being fuelled.

The EU continues to battle to get African, Caribbean and Pacific (ACP) developing countries to sign new Economic Partnership Agreements (EPA) in replacement of the unilaterally cancelled Cottonou Agreement. ACP countries are continually harassed by the implications of not signing an EPA with the EU, and spend sleepless nights trying to negotiate a position that will favour economic and social development in developing countries.

The impact of the SACU in southern Africa indicates how domestic growth has been stifled over the last three decades. Lesotho, Swaziland, Namibia, and Botswana display themselves as satellite states of the South African economy with no real domestic economic activity visible on the ground. Much of the economic activities in these satellite states benefit the South African economy to the extent that the launch of a Commercial Court in Lesotho would probably not yield much positive results in supporting the local private sector because many of the significant companies on the ground are subject to South African jurisprudence.

COMESA poses a new set of challenges as the Customs Union goes into operation in 2010. What will be the trade balances amongst member states? How much equity in the regional trade will each member state take up? What mechanisms will each member state use to fast track domestic economic development without undermining the spirit of the Customs Union? What constitutes fair trade in the region? What constitutes a level playing field for trade related activities amongst member states?

These and many more questions need to be asked and need to be answered by our Governments and our private sector. As the doors of free trade begin to open the battle lines for economic wars are soon established.

In the developed world, subsidies were put in place to ensure that strategic industries were propped up and kept operational. These include agriculture to ensure domestic food security, the military and armed forces to ensure protection of the lives of all citizens, education to uplift the value of domestic human resources, health to ensure a physically higher quality of citizen, and government to develop a managed society that follows some basic rules and regulations which foster peace and prosperity.

All of these measures promoted harmony amongst people in a community and set a focus on domestic economic and social development. These measures also invested in a higher capacity for the developed countries to exploit other less developed countries with special know how and developed resources such as money, insurance, knowledge, and other parameters.

Each country in the global economy is an army of producers of goods and services. Some are very efficient such as those in the East. Some are very intellectual such as those in the West. Some are very enterprising such as those in the North who have to face cold winters. Some are very laid back such as those in the South where resources are abundant and the weather is very kind.

The economic wars are more acute and strategic in the East and North. They are patronisingly considered in the West where development is more prevalent. They are largely dismissed in the South where Africa is located.

The economic wars will escalate rapidly as the worlds resources become scarcer with the last deposits residing on the African continent. The last thirty years has seen armed conflicts across the continent seemingly due to political clashes amongst people, but more truthfully, as a result of the scramble for resources which are needed in the developed world.

Africa currently holds vast reserves of diamonds, gold, oil, copper, and other minerals sought after by the developed world. The economic wars will soon be at our doorsteps and we had better be prepared to engage in a manner that will bring prosperity and equity to our people.

The world has become a business market place where economic wars are high on the agenda and the casualties are dead economies, because there is no option for the taking of prisoners.

Published 9 March 2010

Teaming Up

Zambia has registered annual GDP growth of 5 percent or more over the last 5 years. Inflation has come down to single digit figures from around 15 percent to the current 9.8 percent.

Copper prices have gone from USD2,000 per tonne to recent figures of USD7,400 per tonne.

It is quite clear that there is some economic boom out there for some sectors of the economy. Why does the rest of the economy not experience this positive change and growth?

There may be several reasons for this, but it is quite obvious that a management system for growth is not firmly in place. Economies grow through strategic management such that the gains received from boom areas are used to stimulate other sectors in an effort to open up opportunities across the economy.

For example high copper prices generally lead to more investment in the copper industry, which then leads to increased construction and expansion of the mining activities. More mining suppliers are engaged in business, more trucking is done, and growth is registered wider. This form of growth however, is consequential growth based on the natural pressures and demands that increased mining activities generate in the economy.

A more managed and coordinated growth can be stimulated by strategic planning and investment by the Government and the private sector. This teaming up effort requires some basic shift in the economy, such as copper prices going up to trigger some strategic investments, and quickly impact on the broad based growth of the economy.

The opportunities for local value addition open up and the options for local manufacture and supply of sub components can become a reality. The number of other support services to the mining sector covering transport, accommodation, services, storage, security, sub contracting, office logistics, human resource training, banking, insurance, and many other areas of business can be targeted for local companies to engage in. These options can be promoted rather than letting them fall into place by accident.

The 2010 World Cup is another example of an anticipated boom that begs for strategic planning and teaming up amongst Government, the private sector and other stakeholders to bring about economic growth and open the country to a massive tourism explosion. In this case and at this point in time, the various organizations and Government organs impacting on tourism need to team up, and team up fast before the kick off in the next few months!

Zambia opens up for trade to the region by the end of the second quarter when the COMESA Customs Union is finally implemented. An urgent response must be put in place to ensure that the country benefits from the union. The response required should not be a written letter to member states, but the rapid teaming up of all stakeholders in Zambia to analyze, assess, and form a plan of action on how Zambia and Zambians can gain from this opportunity of a regional market of over 200 million people. The teaming up effort should not end at simply drawing up plans, but should go all the way to committing resources against an implementation strategy so that Zambia can engage in meaningful trade with other member states. The net result should be that Zambian industry grows, Zambian labour is productively employed, and the domestic market share grows beyond the eight borders into neighbouring countries.

If ever there was a time when the teaming up effort is demanded by the country, it is now. At the private sector level it should now be a matter of urgency that all business associations begin to share notes and collaborate for the benefit of the broader private sector. It is absolutely necessary for the private sector to engage Government to highlight the opportunities and challenges for Zambia as a member of the Customs Union. It is paramount that Government Ministries and departments coordinate with each other on economic development issues so that they compliment each other. It is in the nation’s interest for all opportunities to be researched and exploited in the quest for economic growth, job creation, and the economic security of the nation.

2010 presents challenges because it is a pre-election year. There is the risk with each successive day that public attention will begin to focus more on the 2011 tripartite national elections, at the cost of ignoring Zambia’s economic and social development challenges in this crucial year.

The country will have to strike a balance between national focus on considering and strategizing on the economic challenges on the one hand, and the rhetoric and campaigning in preparation for the elections next year on the other hand.

The much touted Public Private Partnerships is now being put to the test. The difference though is that it goes beyond public and private, but extends to every NGO, every religious organization, and every political party.

The need for teaming up this year cuts across all levels of the economy. It also cuts across all political party interests. In fact the need to team up affects all the people of Zambia irrespective of their activities and station in life.

Published 2 March 2010