adminthey adapt their market entry strategies to suit this unique situation.
This is according to Ryan O’ Connor at Step Strategic Venturing, a boutique professional services company, who says it is critical for any business looking to tap into this unique situation to understand how their business model can be adapted to suit the Zimbabwean market.
“There are a number of opportunities available but in order to leverage these optimally, it is crucial to have a tailored business plan and market entry strategy that takes into account the specifics of the Zimbabwean context.”
O’Connor says a middle class with hard assets and no debt emerged as a result of hyperinflation and the consequent dollarisation of the economy.
“Overnight, all individual and business accounts (debt and savings) were zeroed. Those who were highly invested were instantly worth nothing, while those who were highly leveraged by investing in hard assets suddenly became debt free and were also left with hard assets that were paid off,” he said.
He says the result of this was the creation of a debt-free, asset owning middle class, who will be able to borrow against these assets at a future date when confidence returns.
“This segment of the population now offers hope to a number of businesses aiming to operate within the country that will be able to capitalise on this anomaly as the economy continues to recover.”
“When political stability does occur and confidence returns to the market, banks will have both the liquidity and the confidence to lend money to consumers against their assets, which would have grown in value. This increase in disposable income will then result in an increase in appetite by Zimbabweans for consumer goods, thereby igniting an economy with much potential,” he said
This, he added, will present an opportunity for financiers who will be able to extend credit at good coverage ratios.
“Consequently, in a short timeframe, we will see exponential growth, as was seen in South Africa during the early 2000’s, when a boom in house prices enabled consumers to borrow against the increased value of their homes, leading to a rise in disposable income, which helped spur economic growth.
“Essentially, the Zimbabwean scenario is the opposite of what happened in the US. The global financial crisis was precipitated by subprime mortgages in America, sold to consumers who could not afford them.
“Oversupply of property, debt-burdened homeowners and a fall in house prices left many in negative equity, essentially owing more on their homes than the asset is worth.
“Clearly the value of the assets remains dependent on the future success of Zimbabwe and while this debt-free middle class is in a fortunate position, the potential will only be realised when there is an upswing in investor confidence, probably precipitated by political stability,” he said.
However, Mr O’ Connor also notes that with the current debt crisis affecting much of the developed world, as well as emerging markets such as South Africa, a population that is largely debt-free is something that can also be leveraged by a business with the right mindset and strategy. People are sitting with cash buried in the walls of their house.
“When the change does occur in Zimbabwe, and consumers are able to access this cash, it will happen at such a rapid pace that if a company is not already operational in the country they will likely miss much of the boom.”
“As a middle class emerges with wholly-owned assets (and no debt), a situation that is almost unique in the current climate, Zimbabwe offers a great number of opportunities for those who plan and time their market entry strategies correctly but it may be sooner than they think,” concludes Mr O’Connor.
l Step Strategic Venturing is a boutique, professional services company focused on helping companies to build and fuel business growth. Step’s unique business offering in the areas of strategy, capital and incubation is focused on meeting specific needs at various stages of the business cycle. Step has helped to shape the bottom line of numerous blue-chip multinationals as well as emerging entrepreneurs.
Online Reporter