THE Zimbabwean economy has had its challenges for a while. These have been exacerbated by the Covid-19 pandemic and directors had a mammoth task steering the ship. Institute of Directors Zimbabwe (IoDZ) chairperson Mike Juru (MJ, shares directors’ experiences during the pandemic in a recent interview with Zimbabwe Independent chief business writer Taurai Mangudhla (TM) . Below are the excerpts of the interview;
TM: Based on your interaction with fellow directors, what challenges are they facing in terms of their strategic planning role in Zimbabwe under the prevailing economic circumstance where inflation, currency problems and some policy inconsistency make it difficult to plan?
MJ: I wish to commend those who are working tirelessly to bring about stability to our national economy. Things can only get better, if we sustain that stability. Coming back to your question, the main challenge faced by directors in our operating environment is how to keep the business afloat and create value for its stakeholders, more so in the wake of Covid-19. The first two months of the year saw the majority of corporates not being exempted from the lockdown, yet they still had overheads to pay, which included employee salaries and rentals, to mention but a few.
The responsibility to meet financial obligations without revenues coming in, these, among other pressing issues, are at the centre of strategic discussions for many boards and fellow directors. While economic challenges will always be with us, how government, business, labour and the civic society foster inclusivity in confronting socio-economic headwinds is what matters in the final analysis. I can attest to you that Zimbabwe has some of the best corporate directors in the world, capable of guiding their organisations to success, even under the most difficult economic circumstances — leveraging on their key traits of agility, relentless innovations and passion for growth.
TM: Are they planning for the nation or an individual organisation, from a strategic point of view?
MJ: What we do at the micro level impacts on the macro level. In situations involving individual organisations, scenario planning is the best approach. While flux economic situations make it difficult to plan, out of hardships emerge opportunities for astute directors. How organisations react to such an environment makes the difference, which brings into question issues of how the organisation is structured for sustainability and agility with the leadership demonstrating capacity to understand turbulence and strategically steering their institutions to safety.
This explains why some organisations thrive in difficult environments, while others wilt away. When planning for the nation, we need to do so from a bigger plan that addresses challenges that arise from a turbulent environment. Looking at the National Development Strategy 1, this sufficiently addresses the challenges in our economy, with the monetary policy framework buttressing that position.
TM: There has been some general concern in the market about recycling board members and having executives at the helm of corporates for too long, even for 15 plus years in the case of some entities, including those that are listed. In your view, is this a healthy situation and why?
MJ: They can never be a one-size-fits all solution to how organisations are run. The boards and their management have a fiduciary responsibility to superintend over the affairs of their organisations in the best interest of their stakeholders, especially shareholders. If the directors and their management teams are ticking all the right boxes, then those concerns will not arise. It only becomes an issue if key performance indicators start going south. The primary duty of a director is to guide the company to long-term prosperity. This often requires the individual to be able to assess the long-term consequences of decisions taken.
It is from this onerous view that directors are appointed, replaced, redeployed and/or reappointed. All the other duties play second fiddle to this fiduciary responsibility. Therefore, if a director is a best-fit to the organisation’s desired goals, the length of their tenure in office, as well as their reappointments, become affirmations to the stakeholders’ prosperity cause. What becomes critical under such circumstances is the organisation’s grooming and succession plans.
TM: In my view we have not had decent start-ups in Zimbabwe lately and I believe it is not the absence of ideas, but capital. What is your take on this looking at access to capital, loans from banks to fund business ideas?
MJ: Perhaps, we need to do more to assist our start-ups to be attractive enough to attract suitors. In the past few years, we have seen the setting up of incubation hubs for Zimbabwean start-ups by leading conglomerates and financial behemoths, which is a good corporate social investment strategy with potential financial rewards. With continued support from the government through policy incentives, it will increasingly become easier for start-ups with bankable ideas to attract local funding.
TM: The public sector has its code on corporate governance. To what extent do you think it addresses the fundamentals in terms of directors’ roles and corporate governance?
MJ: Good corporate governance is as critical to public entities or State-owned enterprises as it is to private companies and non-profit organisations because they all operate in an integrated economy. Because charity begins at home, the public sector can set a good example by establishing foundational principles of good corporate governance practices to contribute positively towards economic efficiency and effectiveness.
The code on corporate governance therefore comes in handy as it largely addresses the fundamentals in terms of directors’ roles and corporate governance in the public sector. The devil is, however, in implementation. This requires continuous training and development, which IoDZ offers, as well as stringent and consequential monitoring mechanisms at institutional level, and at a national level. IoDZ with its partners are working on upgrading the National Code on Corporate Governance and further working on upgrading the Director Handbook.
TM: Corruption has been rampant across the economy and especially in the public sector where controls seem to be rather weak. What is IoDZ doing to help deal with this?
MJ: We have taken the initiative of championing the development of sustainable institutions in Zimbabwe through the implementation of corporate governance principles, mindful of the fact that directors play an oversight role in policy formulation and implementation. This is why as corporate governance champions, IoDZ’s advocacy against corruption is not restricted to the public sector alone, but also covers the private sector and the NGO community.
Besides its private sector director training initiatives, IoDZ is entering partnerships with government arms to help fight corruption through churning out relevant director training and development modules. We all have a role to play in the fight against corruption.
TM: IoDZ recently signed an MoU with Zacc. What is the role of IoDZ in the fight against corruption and what are the key result areas for the institute under the MoU
MJ: The partnership is one of the many collaborations we are pursuing with the government as part of our national investment towards inculcating a national culture of responsibility and good governance. This national culture aligns to our Sustainable Development Goals (SDGs) as enshrined in Vision 2030. Through this collaborative initiative, we will ensure that corporate governance practices are engraved across sectors through training, research and development. IoDZ’s strategic goals remain aligned to Zimbabwe’s national objectives.
TM: In your view, has the current policy environment solved reporting challenges (in terms of accounting reporting standards) or corporates?
MJ: Reporting standards aim to ensure that financial statements are a correct reflection of the true health of the business. To that extent, the standards are serving their purpose. For example, in October 2019 the Public Accountants and Auditors Board issued a pronouncement to the effect that our economy had met all conditions necessary to be classified as a hyper-inflationary economy.
This led to the preparation of financial statements by directors using hyper-inflationary accounting to achieve fair presentation on their full year results for 2019, and their half year results for the year 2020. However, pronouncements by the government in 2020 on the reintroduction of a multi-currency regime created teething challenges as corporates tried to adapt to dual pricing and financial reporting in a multi-currency economy.
The stabilisation of the exchange rate and the subsiding inflationary pressures have however, brought relief to financial directors. It is my hope that the 2021 financial reporting season will likely be less hectic than the preceding year.
TM: Finance Minister Mthuli Ncube projects the economy will grow by 7,4% this year, is this attainable in your opinion?
MJ: In making the projections which were echoed by the Central Bank recently, Treasury assumed that the economy would recover from Covid-19 pandemic, leading to the resumption of global economic activity. It was also assumed that the nation would achieve a good agricultural season; enhanced revenue collection; sustainability of the auction system; tourism and trade resumption; firming international mineral prices and further control of wasteful expenditures and value of money on all expenditures.
These assumptions appear valid. We however need to take cognisance of the fact that we have already lost two months due to Covid-19 second wave induced lockdown, this will have its own impact as such, while the outturn may turn out not to be the exact 7,4% growth, we will certainly register some growth this year. On the basis of these assumptions and subsequent policy interventions through the NDS1, the National Budget Framework and the Monetary Policy Framework, these present a better outlook for 2021 at the very basic level.
TM: The authorities are targeting inflation to decline to two-digit levels by December 2021; is this attainable and why?
MJ: With a shared vision on the part of both the private and public sectors, and discipline by monetary and fiscal authorities, we can end the year with two-digit inflation. The world over, governments play a pivotal role in building market confidence through fostering economic policy predictability, and the steadying of prices of goods and services that are within its purview.
We are already seeing the deceleration in headline inflation on the back of exchange rate stability and tight monetary policy as implemented since mid–2020. Inflation could decelerate further, if current economic policy measures are sustained in the outlook period.
TM: One of the toughest decisions for directors since the pandemic was to make a call on whether or not to let go of some employees or completely shut down. How has been the journey for directors so far under the pandemic?
MJ: It has not been an easy journey for directors. Employee retrenchments always come as a last resort strategy for directors, having tried every trick in the book to avoid redundancy. It has, however, been a mixed bag whereby others are expanding their staff complements while some are downsizing. It has thus been a torrid time for those directors whose organisations are going through a rough patch, while the opposite is true for those who are basking in glory. Astute directors have embraced working from home thereby managing the rentals overheads and further, realigned job responsibilities to enhance organisational productivity.
TM: We have lately seen the emergence of so many Corporate Governance bodies in Zimbabwe, what does it mean for IoDZ?
MJ: IoDZ was established to raise standards and levels of good corporate governance in 1958 as a membership-based not-for-profit organisation. We welcome the initiatives as we believe the governance space needs more players to complement each other as there is great need for corporate governance articulation.
More than half of our challenges in the country are to do with corporate governance and if that is addressed, the nation will be in a better position. IoDZ remains committed to its purpose as it distinguishes itself with its trademark offering of Training, Developing, Placing, Evaluating and Awarding directors based on the internationally acclaimed director competency framework to make Zimbabwe a more attractive destination for investment.