Havard Business Review on Zimbabwe published an article on business opportunities in Zimbabwe after Robert Mugabe left office. The article shows that there is an improvement on the Zimbabwean business side. The following is what Havard states about Zimbabwe after Mugabe.
As H.E President Emmerson Mnangagwa’s reforms begin to gradually stabilize the economy, significant opportunities will emerge across an array of sectors and segments – both formal and informal – for companies hoping to expand in this relatively under-served, but high-potential market. Zimbabwe still holds an attractive class of relatively wealthy consumers, including civil servants who have benefited from the Mugabe regime.
On a recent research trip to Harare, we were struck by the business opportunities that still exist in the economy despite the difficulties the country faced in the past several years.
Consumer-facing businesses: Any company that enters the market offering lifestyle and consumer goods products could benefit from a demand that has been unmet for years. For example, after opening its first store in 2014, fast-food chain KFC recently opened its fifth branch in the country. South African restaurant chain Ocean Basket also opened in Harare in 2015 to serve the wealthy urban elite. If the middle-class benefits from improving economic conditions and better access to cash, consumer demand is likely to increase.
Lower-income consumers also present a lucrative opportunity. For example, as the country’s formal retail shops were closing down after the political and economic crisis in 2013, and more transactions were taking place in small, informal street shops and stalls, Unilever set up a manufacturing facility in Zimbabwe. The firm told us that, at the time, Zimbabwe was one of the best-performing countries for the firm in Southern Africa. Unilever thrives in informal environments by selling smaller package sizes at low unit costs (but higher margins).
An influx of capital could also result in a revival in the formal retail sector (e.g., supermarkets, shopping malls) over the next several years since the infrastructure does not need to be built from scratch. This means it would be fairly easy for consumer-facing industries to get access to consumers.
Technology: Providers of mobile banking and cash transfer solutions are doing particularly well in the economy due to the country’s multi-currency exchange regime and low availability of U.S. dollars. Recently, Bitcoin has become popular in the country with the digital currency trading at $13,000 USD in October (at the time about 50% higher than Bitcoin’s global price). Consumers use bitcoins to pay for imported cars, among other purchases.
Zimbabwe’s largest telecommunication company Econet Wireless has found success with its online payment platform that helps Zimbabweans manage the challenges of its multi-currency system. Econet makes it easier to get cash change for items cheaper than 1 USD by allowing customers to make small transactions electronically via their mobile phone.
Technology solutions that help accelerate improvements of Zimbabwe’s decaying infrastructure will also be in high demand. By now, Zimbabweans are well versed in using technology innovations to solve their daily life challenges, and any company able to provide them with practical solutions to access financing, rebuild infrastructure, and ease distribution will likely benefit in this environment.
Talent: Zimbabwe has one of Africa’s strongest education systems, and consequently boasts an abundance of high-caliber talent, which means it is relatively easy for companies to find locals to run their operations. For example, Deloitte expanded its Harare office into a central Africa hub due to the strong talent pool. However, in recent years many high-skilled Zimbabweans have emigrated to neighboring South Africa. Given South Africa’s stagnating economy, skilled and experienced Zimbabweans could return home as the political environment stabilizes and employment opportunities for them expand with an improving economy.
Agriculture: A mainstay of the economy, the agriculture sector will be a major priority given its importance as an export sector that brings in foreign currency. Recently introduced reforms to give agricultural firms better access to finance aim to help farmers buy and import equipment to increase their output – and this could be a boon to global manufacturers. Machinery, seeds and irrigation systems will likely witness a surge in demand.
Looking to the longer-term, President Mnangagwa’s administration will look to upgrade areas such as the country’s degraded infrastructure and poorly equipped public health system, which have both suffered due to lack of funds. When this occurs, it will drive considerable opportunities for healthcare and construction firms. However, the government’s immediate priorities are paying down its debts and providing basic services.
For companies willing to take on some risks, now is the time to buy local assets, which, though priced in USD, are still fairly cheap because of the associated risk. This is also a good time to look for the best possible potential business partners – they are eager for investment but may not be available for long if interest in the market picks up.
However, companies should stay clear of sectors with high levels of political interference, such as mining. It is not yet clear which direction the new government will take. President Manangagwa, even though more pragmatic than Mugabe, has nevertheless worked with Mugabe for years and is operating within a largely similar political system.
Most importantly, executives have to follow developments closely. They have to monitor changes in the market on an ongoing basis and adjust their strategies when developments in the market demand change.
Source: Havard Business Review