Are Zimbabwean companies geared to attract investors for sustainable growth?

Conversation with Courage Matsa CA(Z), Baker Tilly Central Africa chief executive

What structural transformations are you seeing in African businesses that will have a positive impact, post Covid-19?
A: African businesses that have done well in adapting to and surviving the Covid-19 pandemic challenges have deliberately transformed their approach to business.
Re-engineering business processes especially in aggressive digitisation of processes which allows remote work, shared services such as call-centres, automation of accounting and e-commerce. Virtual business engagements are encouraging companies to cut on overheads such as moving into small workspaces, optimization of travelling and flexibility of sharing skills across frontiers; businesses that are embracing such transformations are relatively successful.
Rethink on markets has been key. This includes building diversity in accessibility of key markets, developing new markets and introducing other pricing models in order to de-risk disrupted supply chains as well as making new resilient supply chains that survive future disruptions.
We are experiencing and witnessing unprecedented times in which African businesses are not only introducing goods to new regions around the globe but even export of services.
As the world de-risks from regional concentrations African businesses who have transformed and adapted to international standards have been able to take advantage of the new focus on Africa.
Q: What do you see as the major roadblocks hampering the strategies of Zimbabwe companies?
A: Volatile economic environment fueled by local headwinds such as hyper-inflation, devaluation of local currency, droughts and global headwinds such disruptions of supply chains by Russia/Ukraine conflict as well as international demand for skills in some sector as health, construction, logistics and specialized skills.
Q: From your research, what are the critical success factors for growth and development for African businesses in the coming year?
A: Success for African business is likely to be driven by transformation of process and retooling especially in global growth areas such as commodities, supply chains, fintech and TTM (technology, telecommunications and media).
Commodities have been outperforming the markets, the trend is forecast to persist for about 10 to 30 years, by shifting from fossil to cleaner energy, interest in critical metals such as nickel, copper, lithium and other energy transmittal metals. African success in commodities is best unlocked by beneficiation (not just extraction), efficiencies in logistics (reconsider integrated rail infrastructure and marine handling technology). African business in trade enabling sectors such as fintech, TTM and supply chains might need to pursue bold innovative strategy so as to avoid lagging behind the rest of the world.
Grains are also receiving attention as such business in agriculture may need to think investing in genetic engineering, rain mitigation strategies, crop sciences to improve yields and increasing land under crop. Grains are likely to address food security and safety issues not only for African continent.
According to Forbes in 2023, we will see the continuation of innovations and developments in transformative technologies such as artificial intelligence, the internet of things, virtual and augmented reality, cloud computing, block chain, and super-fast network protocols like 5G being implemented more across the continent. What’s more, these transformational digital technologies do not exist in isolation from each other, and we will see the boundaries between them blurring.
New solutions for augmented working, hybrid and remote working, business decision-making, and automation of manual, routine, and creative workloads combine these technologies in ways that enable them to enhance each other.
This brings us closer than ever to the point where we are able to create “intelligent enterprises” where systems and processes support each other to complete menial and mundane tasks in the most efficient way possible.
Sustainability
The world is increasingly waking up to the fact that the climate disaster will pose a much bigger challenge than anything we have experienced in recent decades and will dwarf the challenges faced by the Covid pandemic.
That means investors and consumers prefer businesses with the right environmental and social credentials, and buying trends are increasingly being driven by conscious consumers — those among us who prioritise factors such as ecological impact and sustainability when choosing who to buy from or do business with.
In 2023, companies need to make sure that their environmental, social, and governance (ESG) processes are moved to the center of their strategy.
This should start with measuring the impact any business is having on society and the environment and then move to increasing transparency, reporting, and accountability.
Every business needs a plan with clear goals and timeframes of how to reduce any negative impacts, and then the plan needs to be underpinned by solid action plans.
The assessment and plans should also go beyond the company walls and cover the entire supply chain and the ESG credentials of suppliers.
For example, it is easy to forget the environmental impact of cloud service providers and the impact of data centers on the environment.
Immersive customer
experience
In 2023, customers crave experience above all else. That doesn’t necessarily mean that price point and quality take a back seat, though. Both play a part, to some extent, in the way we experience the process of choosing, purchasing, and enjoying the goods and services we spend our money on.
The role that technology plays here, traditionally, has been to streamline processes and remove hassle from the life of the consumer. Think recommendation engines that help us choose what to buy or online customer service portals that deal with problems and after-sales support.
These will still play a key role in 2023, but the game has evolved, with this year’s keywords being immersion and interactivity.
Q: What barriers currently exist for African companies in terms of trade across the African continent and how is AFCFTA going to address these barriers?
A: AfCFTA aims to bring 55 Africa countries closer at least in terms of trade thus aggregating a marketplace of 1.3 billion people. This is achieved by promoting trade, reducing regulatory barriers and improving access to markets.
Regulatory barriers include unharmonised trade and economic policies to the extent that such policies are inward looking (not taking multi-country perspective), disintegrated trade enabling technologies especially those that track movement of goods across borders, no meaningful steps towards free movement of citizens of member countries with the AfCFTA region and disaggregation of trade infrastructure where each country has its infrastructure development priorities without jointly working on improving connectivity as well as lack of integration of capital markets among the trade block.
Despite these challenges the AfCFTA has been making strides in addressing these challenges especially through elimination tariffs and non-tarrif barriers to trade in goods, corporation on investment/ intellectual property rights and competition policy, a framework for the settlement of disputes concerning member’s rights and obligations and strengthening institutions around trade enhancement and service.
However, it is important to note that the AfCFTA is relatively young and is yet to attain full implementation. It has potential to be one of major trade blocks in the world once full implementation is attained.
Q: Which countries have received the most Foreign Direct Investment this year and what are these countries doing to attract FDI?
A: The most important point is that Africa continues to lag behind other continents as a destination of FDI. The AfCFTA can be a window in which its member states can jointly market opportunities as well as offer expanded markets that attracts more FDI. ]Northern and Southern regions of Africa remain significant destination of FDI, but in the past four years the Eastern region has experienced increase in FDI traffic especially in Kenya and Rwanda. Mauritius remains the major destiny of FDI, as investments are channeled through the country due to its favourable tax policies.
Greenfield FDI has been dominantly in natural resource extraction-related industries, it therefore, follows those countries with high natural resource potential received more FDI. There has been notable increase in greenfield FDI in Africa’s food and beverages especially grains, oilseeds and sugar with origins mainly from UAE, Ukraine and USA
Q: From your experience, what KPIs set FDI attractive companies apart from those that find it hard to attract local and global investors?
A: Return on investment — Companies that offer at least the risk-adjusted required rate of return do well in attracting FDI. This is the most important KPI followed by providers of FDI.
This can also be further distinguished by other characteristics of the return such as maturity of cash flows, real growth potential and real options.
Sustainability — A sustainable business, or a green business, is an enterprise that has minimal negative impact or potentially a positive effect on the global or local environment, community, society, or economy — a business that targets the triple bottom line will attract FDI better than one that doesn’t.
Q: How are corporate governance and accountability important for investors?
A: Corporate governance is the arrangement of rules, practices, and processes used to direct and manage a company. A company’s board of directors is the principal force influencing corporate governance.
Strong corporate governance attracts investment and increases the odds of profitability. The basic principles of corporate governance are accountability, transparency, fairness, responsibility, and risk management.
Companies pay attention to corporate governance and accountability in order to manage the agency conflict as they pursue maximising shareholder wealth at least in the long-run. This imperative, companies that neglect accountability and strong governance are set to fail and certainly erode the value of shareholders.
Paying attention implies instituting a strong board of directors and external auditor with proper attributes of term limits, continuity, independence, competence and oversight
Q: Do you believe that Zimbabwe businesses are ready for the business sustainability, ESGs conversation and its implementation?
A: There can never be a straight answer on readiness to ESG and sustainability transformations. What we have experienced is transformation in regulations such as Statutory Instrument 134 of 2019 (Zimbabwe Stock Exchange Listing Rules), which makes it mandatory for all companies listed on the Zimbabwe Stock Exchange to disclose ESG information as part of their sustainability reporting. All social and environmental issues should be dealt with and disclosed.
However, transformation on ESG matters is deeper and extensive. It involves multi-stakeholders. Companies and providers of capital have to address ESG transformation agenda together with stakeholders such as government, workers, communities and multi-lateral institutions.
Questions such as who takes the cost of moving from cheaper fossils to generally more expensive but vulnerable hydro and solar energy, how effective are incentives and disincentives around ESG so that the whole economy attains minimum to zero harm on ESG.
Priorities such as creation of employment or quality of jobs, food security or food safety, sustainability or affordability and disease/extreme poverty eradication or exclusive high quality of life. In my opinion, Africa in general and Zimbabwe in particular, has a journey to walk considering its circumstances and vulnerability to climate change.
Q: What is Baker Tilly Zimbabwe doing to drive the business growth agenda for companies going forward?
A: As Baker Tilly, we provide business enabling services that ultimately support business growth agenda. Our services include assurance (external and internal audit, forensic examination), which strengthens accountability and business systems, advisory (includes HR, tax, corporate finance, corporate secretarial and financial management), which supports various corporate actions, and digital, which includes cyber security and other digital solutions for business. These services drive business growth.
Q: As an executive working for a global company, what key lessons can you give on how Zimbabwe companies can competitively grow their business ecosystems for local and global markets including investor readiness?
A: I have learnt a lot of invaluable lessons and some of them include; Always invest in deeper customer relationships, communication lines should always be open — there is never over-communication, keep your business reputation with sanctity, engage in increased corporate social responsibility, pursue profits but never overlook the greater good, and employ the right people in terms of character, potential and skill.
The brand of any company, is seen in its people

This article was first published in The Executive Magazine.