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When doing business locally rewards…

NO doubt this week the biggest news in the Zimbabwean investment circles has been the recently published financial results from Econet Wireless Zimbabwe.

The results probably exceeded the expectations of most analysts while also raising the bar for most of corporate Zimbabwe that indeed with the right conditions the unimaginable can be achieved.
So large was Econet’s profitability that it even surpassed total earnings of all the companies listed on the Zimbabwe Stock Exchange. At US$113 million, it is hard to imagine any other company being able to surpass that this year or even in the next few years.  What is fascinating is not that anyone expected Zimbabwe’s largest mobile operator to declare a loss or even a modest profit but rather the amount compared to what others are earning or losing.
This should highlight one not so obvious (but perhaps should be) proposition; that for most companies’ success can be achieved by those that are best able to consolidate their hold on the local market with exports only coming in to top-up.  Hate it or love it, the fact that Econet Wireless Zimbabwe for example, has over 70% of the mobile services market by number of users means that their profitability was almost guaranteed.
With over 4 million subscribers already, one expects this trend to continue for some time to come as positive feedback effects kick in. Because of the benefits accruing to subscribers of the same network, one would expect even more subscribers to be drawn to Econet even more.
The point here is not to compare the largest company in the mobile communications sector with all other sectors of the economy because there are fundamental differences. Instead the idea is that in this case, it just so happens that by the nature of their business, virtually all of Econet’s revenue relies strongly on its hold on the local market. One can complain about seemingly skewed practices in its favour, such as a lack of per-second billing, the reality is that it is an industry-wide practice that does not necessarily give Econet an advantage over its competitors. 
One can hardly imagine other mobile operators being able to match the published results. Taking that out, the company’s success stems from its hold over the local market.
More and more, it seems, that any success story will need a comprehensive presence in the local markets.
With about 40 days to go before the kick-off of the 2010 Fifa World Cup, organisers can for the first time have the full confidence that most games in all likelihood will be well-attended. The initial strategy had been to concentrate on foreign markets using a ticket purchase system which apparently did not suit the needs of the local population. A few weeks ago, ticket sales to the global showcase remained sluggish with the initially targeted markets of Europe and the Americas not meeting the expectations of the organisers.
Reports of tour operators reducing their accommodation and transport rates began to raise concerns on whether South Africa could pull it off. However, as soon as World Cup ticket sales moved to the over the counter phase, the response from the South African market led to an almost immediate surge which even surprised the organising committee. Fifas head even reportedly commented that more focus should have been placed, and earlier, to make it more accessible for South Africans to participate in this historic event.  I am sure, the organisers of the games will finally agree that indeed local is lekker.
In the same vein, over the past few weeks European markets have been reeling under pressure from the sovereign debt crises some of the Euro Zone governments faced. Portugal, Ireland, Greece and Spain, cunningly quipped as the PIGS, have been under the spotlight in terms of the respective governments’ ability to repay debt as and when it falls due.  Greece made headlines first, causing the Euro to plummet against most major currencies. 
Now this week, Portugal and Spain had their sovereign debt ratings downgraded to junk status renewing fear of a contagion effect that more European governments could face the same fate. Taking the Euro Zone as one economic block, part of the solution lies with the larger economies, such as Germany and France, rallying up resources to support the troubled economies. While not intending to create precedence, financial support to Greece and now Spain would in the process renew confidence that the Euro system can work. And again this will for the large part be locally-generated assistance.
While not reducing the effects of a globalised economy, firms and governments alike need to consolidate support from within first then look outward and not necessarily the
other way around.  It is no wonder
then that the most impressive post dollarisation corporate results came from a company that has safely secured its hold on the local market, that World Cup organisers can finally say with confidence that the stadiums will be filled and the bigger European economies will need to come out with a bailout package for their struggling neighbours.

 

Tich Pasi

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