By Kumbukilani Phiri
If there is something that I am so passionate about, it’s the development of more indigenous Zambian owned businesses in the country. My argument has always been that only few developed countries I know like the United States of America, Australia, Malaysia, etc has been developed by immigrants. All the other countries have been developed by locals who have owned and directed the economic development of their countries.
The recent years have seen a rise in the number of young Zambians who have taken interest in starting some form of business. This could be as a result of few employment opportunities in the country and perhaps the exposure that has been brought about by the advent of the internet and social media. I personally feel very proud every time I hear about any Zambian who is doing well in business and employing other Zambians.
Unfortunately, the rise in the interest to do business by Zambians more especially the young ones has also brought a debate about why the failure rate is very high. Firstly, if we are to be fair, we can argue that the failure rate looks high because there are now more people trying. However, there seems to also be other reasons that we can perhaps look at as contributing factors to the higher failure rate.
1. Bad economic environment.
Anyone who has been living and doing business in Zambia for the last 10 years will agree that the economic and business environment has been very bad. Firstly the Kwacha has lost value by more than 450% against major foreign currencies just in the last 10 years. The exchange rate moved from K6.70 to 1 dollar to the current K28.50 to 1 dollar. This has made international trade very difficult affecting many cross border traders and suppliers. Things have also been made very worse by the COVID 19 and the recent droughts which affected both the crop production and electricity generation. Many businesses have failed to survive including many owned by foreigners as well as big multinationals.
2. Unrealistic expectations.
As an entrepreneur and businessman myself, I know just how unrealistic many entrepreneurs and businessmen can be, myself included. Many of us forget to do the basic things like taking time to understand market gaps and needs, market size, competition, risks, etc. We focus more on the potential returns to make ourselves rich forgetting everything else. I have seen entrepreneurs promoting their businesses to investors with potential returns of over 1000% in a single year. This is beyond unrealistic and just plain madness. Unfortunately, many only come to realize that their assumptions were very wrong when it’s too late. By that time, the business will have already collapsed and both their money and that of the investors lost.
3. Quick and over diversification.
I have noticed with great sadness at how Zambian entrepreneurs rush to diversify their businesses. Instead of taking time to build one business until it becomes profitable, many rush to open or start many other businesses. They think diversification is growth forgetting that one can do one product and grow both the turnover and profitability. The rule has always been to diversify when your initial business has become stable both in production, sales and profitability. It’s not like today you are doing pigs, tomorrow you are selling airplanes, tomorrow you are opening a bank. It’s also important to diversify in related industries and not into completely unrelated sectors within a short time. This is a big recipe for failure.
4. Focusing on social media appeasement and fame.
On this one, maybe I am just old school and don’t know how things are done in the modern age. I have noticed that many young entrepreneurs focus so much on making people think they are running successful businesses online, yet the opposite is the case in reality. You would find them busy showing how their businesses are expanding today, only to hear that they are shutting down the following day. As an old school, I believe in doing the work in silence and only showing actual and real results to the world online later. You can’t register a business at PACRA today and tomorrow you are already going live on your page teaching other people how to become entrepreneurs and do business. Successful entrepreneurship requires a lot of work behind the scenes to make it work. You need a good product, good team and supportive customers. You shouldn’t rush to boast to the world just because you have a good product or service, you also need to establish a good team and build loyal and supportive customers and clients.
5.Understanding the difference between entrepreneurship and business management.
This one is actually very difficult for many to understand, but it’s important to distinguish between an entrepreneur and a businessman. An entrepreneur is simply an innovator, a strategist or an inventor who comes up with a unique product, service or model of how to deliver value to customers or clients. This person may not necessarily be a good manager themselves. Unfortunately, many entrepreneurs have misunderstood being entrepreneurs and being managers. Many lamentably fail at running businesses they create to sale their innovative products, inventions or models. What is important for them to understand is that their gift or talent ends at the innovation stage and it’s better for them to leave others to manage the business side of things while they focus on innovation and making others buy into their vision.
6. Depending on free money to run (grants, concession loans, etc).
In recent times, I have also noticed a rise in grant and loan funded entrepreneurs. These are entrepreneurs who are very good at putting up proposals for their businesses, unfortunately, once they get the grant or loan money, their businesses only survive as much as the grant or loan money can last. They have no innovative products or services to offer to the market or they are so bad at managing their businesses to generate any value and profit to survive beyond the grants or loans. So their businesses fail once the grant money runs out.
The author an entrepreneur owns Legacy Manufacturers
Solutions?
I am one of many lecturers involved in lecturing Entrepreneurship in Zambia. I like the way you have discussed the reasons for failure of most startup businesses by entrepreneurs. However, I want to say that there a serious contribution to this scage from government in particular related to taxation. A new local investor is made to pay tax yet a foreign investor is accorded tax holiday. After that tax holiday a good number of them melt in thin air.Government should extend tax holiday to local entrepreneur for a certain period to assist them find feet. After all the government can not lose anything because employees of a new local company will pay indirect tax thus offsetting the perceived loss in tax as a result of tax holiday.
Dependence syndrome coupled by an unforgiving cost of doing business.
First Priority smart cars, smart office ,upmarket house Then business interests
The cost of doing business and an economy which over depends on government deals
May I add that the lack of protection for nascent indigenous business models has caused them to die. Brick and pavers manufacturers have had their businesses supplanted by people from Turkey. Our women who used to fly to China to bring goods for sale have been supplanted by Chinese malls. Even taxi businesses of Kudu and Ulendo have been supplanted by Russian owned Yango. Even backyard poultry was almost taken over by Chinese. Certain industries should be preserve of locals especially with such high unemployment
Another drawback is pressure to provide for extended family system. A lack of societal support for each others businesses. We are ready to support foreign businesses but fiercely undermine each another. Why allow chain stores in compounds? Who will buy from tuntembas and small grocery stores?
Regulation!
Also there is a serious lack of disposable income in our communities. Businesses cannot thrive where there is no spending power. The little spending power is spent foreign chain stores, rent, fuel/transport and electricity whichis never there when you need it. The crippling power cuts have decimated commercial initiatives
Lastly we have built ourselves an economy that thrives and feeds off corruption. Look at the traffic police for example. That rot you see on the roads is in every government department, local government councils, schools and even churches. God save us from self destruction.
It’s very expensive to run business in Zambia because of the cost of corruption. A lot of money goes in the pockets of people from the companies that you’re doing business with. They demand a minimum of 10% of your monthly earnings. And unfortunately there’s no political will to fight corruption.
The only secret to success in any business are two hated words DISCIPLINE and SAVING. When you start a business today, always know that ones to reap the benefits shall be your grand children,Who also must then learn discipline and saving……
Now think about this and HATE!!
When we say that Zambia was born with teeth? How many Zambians really understand that statement?
To help you understand, think of how parastatal companies dead out, and where did they come from?
In any business, you need to know your working capital. The Zambian behavior in parastatal companies MUST NEVER be tolerated. Always close books of accounts to know many things about your business performance. It is hard work. Harder than farming! Imagine farming without rains. Also imagine business without clientele?
Be good and honest in business.
Great subject to write on and helpful insights given too. Worth remembering.
I would add:
1. We start businesses with POCKET money. Most cannot separate business from personal funds.
2. Consumers of the goods do not pay or pay in time.
3. We do not know how to calculate profit and loss.
Then how did HH ,Joseph Malanji or GBM make it big in business within the same harsh/unforgiving Zambian environment ?
Stop being drunk on kachasu then may be you’ll learn the secrets.
Do tell us please you expert.
For a very long time, upto the early 2000s thereabouts, conflict of interest was not seen as a criminal offence. People got away with it whilst enriching themselves. Those who thought the could continue with the practice in the 2010s and 2020s are already in jail or awaiting to be sentenced.
Spot on and much appreciated