Skip to main content

“The economy”, a convenient excuse for unimaginative Zimbabwean company executives





Glance through the chairperson`s report accompanying the financial results of most listed companies, and it has become commonplace for blame to be partitioned on low aggregate demand and suppressed economic challenges prevailing in the country for the less than satisfactory company results. Justifiably so one might say, after all, the macro-economic challenges prevailing in the country have significantly weighed down on the earnings capabilities of companies.

But could this line that seems to now be used with near-reckless abandon, be simply an excuse of convenience for c-suite company executives?  Consider this, companies rise or fall largely due to the nature of their leadership. While, the external economic environment plays a part in affecting the fortunes of a company, without solid leadership steering a company in the right direction, it is very much possible for a company to be run to the ground even in a flourishing economy. Local company executives earn, for lack of a better word, “boatloads” of dollars together with other pecks, and in return they are asked to maximize shareholder value. Essentially, they are hired to keep companies afloat, by exercising their care, skill and judgment.

Contrary to what most local company executives would have us believe; the economy does not kill any business, but poor leadership certainly does! If depressed macro-economic conditions would cause a business to fare poorly, then it was never much of a business to start with. Prior to dollarization in 2008, businesses used the crutch of foreign currency shortages to explain away the poor business performance experienced in those years. Post 2009, after a brief period of resurgence, liquidity challenges are now being cited as the source of everything that is bad in corporate Zimbabwe. Whilst these factors undoubtedly contributed in part to the adverse fortunes of businesses in Zimbabwe, to lay the blame squarely on these external factors, would be a gross dereliction of duties by company executives. They have to own a significant part of the blame for the poor performances over the companies they are presiding over.





Good leadership does not become bad in a struggling economy, but poor leadership is revealed in such an economy, as weak business models and poor decision making will not be covered up for by a stronger economy. As the saying goes, “a rising tide lifts up all the boats, and it’s not until it goes, that those who have been swimming naked will be exposed.” Just to illustrate this point, when an economy is characterized by high unemployment, wide-scale retrenchments, would that not be a good time to attract the top talent in the market? When competition is being overly cautious and scaling down operations, would that not present the most opportune time to aggressively increase sales and market share? In fact, several studies have found out that companies that focus on growth strategies in times of economic decline do considerably better than their peers who choose to see out the bust years whilst on the sidelines.

Circuit City, which used to be the 2nd largest electronics retailer in the United States, provides perhaps the best example of poor decision making by management in times of economic slowdown. During the global economic meltdown of 2008, the company’s executives initiated a ‘wage management initiative’, which essentially was a plan to fire the most talented and experienced workers in favour of inexperienced young workers, who would earn much less. As you might imagine, the customer satisfaction levels across its stores dropped and customers took their business elsewhere as they were not getting satisfactory service. Hardly a year after this decision was made, the company filed for bankruptcy. This just shows that more than, a poorly performing economy, bad leadership can actually do more harm to a business.


In the Zimbabwean context, c-suite executives should just grow a back-bone and knuckle down to get things done and achieve results instead of redirecting the blame on the economy. Company executives would do well to dismiss the hunkered fallacy that no business can do well when the economy is performing poor. This is just a convenient excuse that simply does not cut it. Recessions have traditionally created new market leaders as companies which are more aggressive and are underpinned by solid leadership do well and also position themselves for the coming growth cycles. This is a wake-up call to Zimbabwean company executives – lead or get out of the way!

Comments

Popular posts from this blog

Black Friday 1997: How the Zimbabwe dollar crashed and tipped the economy over the brink

14 November 1997 – dubbed “Black Friday”-  is a day that will forever be etched in Zimbabwe`s economic history as the cataclysmic point that triggered Zimbabwe`s economic free-fall. Below is a brief chronicle of the events leading up to this seminal day, and what ensued in the aftermaths of Black Friday. In the second decade of its independence, the Zimbabwean government launched an economic reform programme essential in liberalizing the economy and dealing with the structural impediments to growth. However, fiscal policy was weak and monetary policy unsteady during the time period; and the country suffered from two serious droughts (in 1992 and 1995), which affected Zimbabwe’s agriculture, its primary economic industry. A land reform had been a highly contentious issue since independence, as the majority of prime agricultural land was owned by about 4,000 white commercial farmers; while the indigenous population continued to engage in subsistence farming. In the first five y...

The story behind the iconic Meikles Hotel and its founder Thomas Meikle

Old Meikles Hotel Buidling 1924: Credit - Meikles Hotel Twitter Feed The 15 th of November marks the 102 nd anniversary of Meikles hotel, a hotel founded by Thomas Meikle, following on a vision he shared with his brother Stewart, of establishing a hotel on the influential site overlooking Cecil Square (now called Africa Unity Square, in the heart of then Rhodesia`s capital city, Salisbury. Meikles hotel was officially opened on November 15, 1915, on the site which now houses ZB Life Towers, along Jason Moyo avenue in Harare and currently has a capacity of over 535 bedrooms. Meikles hotel holds the honour of being the first Zimbabwean hotel to attain the coveted 5-star rating, a feat it achieved in August 1983. Hotel grading was introduced in Zimbabwe in 1968, and the first results were announced in 1969. At the time, no local hotels received 4-stars, however the Ambassador Hotel, Jameson Hotel and Park Lane Hotel (now the GMB Headquarters) received 3 stars each. Interes...

Securitising Zimbabwe`s Minerals: A Case Study

Abstract Following the dollarization of the Zimbabwean economy in 2009, the country has seen its economic fundamentals improve. Inflation has been reigned in, and the Gross Domestic Product (GDP) growth has been on an upward trajectory. However, Zimbabwe`s total external debt overhang continues to stifle the recovery of the country`s economy, as investors are not willing to lend to the country, and this has had adverse effects on the country`s Foreign Direct Investment (FDI) flows. Zimbabwe`s external debt overhang is currently estimated at around US$10.7 billion, which is a gigantic, 111% of the country`s GDP. IMF Report, (2012) To circumvent the problem of external debt, which continues to be a major impediment to the economic recovery of the country, various scholars have put forward several solutions which include, declaring Zimbabwe as a Highly Indebted Poor Country (HIPC), and securitisation of the country`s mineral resources. This study looks at securitisation of...