The drive to Zimbabwe’s capital, Harare, is slippery in light winter rain. The sky is full of rich grey clouds; on the ground, the country is paved with cracked roads, poverty and struggle.
On the way, many businesses are boarded up, their paint peeling and doors closed. As we arrive in Harare, many shops are packed with imported goods, but, in Workington, an industrial suburb in the south west of Harare, there is a stubborn survivor – a factory that has been producing Zimbabwean products since 1978.
Rank, founded by Amish and Ketan Naik’s grandfather, is the leading stationery supplier in Zimbabwe. It also distributes paper and board to the printing industry and manufactures plastic goods. Their grandfather arrived in Zimbabwe, via Zambia, from India in the late 1960s.
Business in Zimbabwe thrived until the country hit hyperinflation in the early 2000s. Although the factory is stacked with goods and 102 employees, like many businesses here, the lack of money in the banks threatens its survival.
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The company has ample money in the bank but it can’t take it out to buy raw materials.
“We are being optimistic because if we are being pessimistic about this whole thing it won’t end well. We have been breaking even for the last six months, last year we were 3.5 percent down. We believe this year we are going to be 20 percent down or probably more,” says Ketan.
The company will cut the number of goods they produce to survive. They say they will try managing their overheads, because their staff is the last cost they want to cut.
“We will work within our means; effectively we will produce what we can in terms of what we can purchase in terms of raw material. It also means we have narrowed our gains down, guided by our industry,” he says.
It’s been a struggle over the last decade to keep the doors open.
“We had to scale down to the minimum. We were down to almost 10 percent, or less than 10 percent, because we were trading simply to pay wages. In the past, during high inflation, it came down to where our staff would just come in to have a meal because by the time they got their money, and went home, it was worthless,” says Amish.
The Naik brothers say their biggest threat is the weak economy. In a way, the recent ban on basic goods imports, which everyone is complaining about, may help companies like them.
“We estimated, for example, that in the exercise book industry, 40 percent was being imported from South Africa and 60 percent bought here. The tariff protection came in August 2015 and there has been a shift, we can say nine to ten percent or so increase, on our manufacturing, and the statistical growth shows it boosted our production,” says Amish.
Another Zimbabwean entrepreneur, Frank Buyanga, with a finger on the pulse, featured in FORBES AFRICA in 2013 when he had an Interpol notice imposed on him by government. He is back in business in Zimbabwe and thinks that the ban on imports is sensible as it protects home-grown industry.
“The advantages of doing business in Zimbabwe are the highly educated and generally honest workforce, good infrastructure and sophisticated business climate, especially when compared to other countries in Africa, except Botswana, Namibia and South Africa. The main disadvantage is the increasing level of corruption,” says Buyanga.
Ketan agrees the ban could work; but not with a weak economy.
“It doesn’t help as much because where there is a shortage created by us not having raw materials, the smugglers start because they now see an opportunity. If there is a shortage in the market of the product, the pricing would mean 50 percent mark-up”.
Even Rank’s suppliers are not happy.
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“Our suppliers are saying to us that, ‘Guys we have supplied the goods you need to pay for those’. We have sort of done a reverse circle where initially we had to pay upfront; we built our relationships so that they provide us with credit facilities. Now we are ok, the credit facilities need to be reduced to zero and start paying upfront because we are not able to sustain them,” says Ketan.
Making a bit of money through exports into neighboring countries is not an option because it is expensive to manufacture products in Zimbabwe.
“A Malawian manufacturer, for example, would buy raw materials from the same places as us. But, we would pay let’s say $300 for a job yet they would pay less than $100 for that same job. How do we compete? Their expenses become lower, therefore their goods are cheaper.”
Rank is not the only Zimbabwean company running a tight ship.
On the other side of Harare, Melissa Mafunga, Managing Director at Hamilton Finance, says 30 to 50 people walk into their offices each day seeking to borrow money, most of these, struggling small business owners.
“Sometimes they come borrow money because they want to buy stock or pay a little bit of salaries. From here, I see that many small businesses are run on credit. Due to the cash challenges the country is facing, the default rate has risen by 75 percent this year. So we make sure we hold collateral before we lend out money,” she says.
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Joyce Nousenga, General Manager at Hamilton Insurance, says business is slow because insurance is at the bottom of the list for companies.
“Even companies are slowing down on their purchase of insurance and most people opt for minimal cover, of which most of it is statutory. Business is tough for everyone, so much that they can’t even protect the little they have through comprehensive insurance,” she says.
We leave Amish and Ketan with hope that they will carry on breaking even in a country that is struggling to do so.

The Breakeven Blues

Before money was invented, before the word entrepreneurship was formulated, people in ancient times traded by offering value. As far back as the Stone Age, people had to transact by exchanging goods that were of equivalent value to what was  to be received.
Today, this concept can be described by two words: value proposition. This has gained currency over time, but some entrepreneurs still miss the mark.
Business is based on the following basic principles; you are either saving your clients time and money, or making them more money. In supply and demand, distribution comes as a value-added product.
Geographic proximity to a product does not mean others have the same advantage. Cocoa is a good example. The product is largely found in West Africa. Any entrepreneur setting up a distribution channel to Singapore will be adding value on two fronts; firstly that area of Asia doesn’t have in the same abundance of cocoa as West Africa, and secondly from the logistics front.
In the knowledge economy, access to rare information elevates the value of those who have it. This is why companies call in consultants and advisors at an inflated cost. It is also why we keep going to conferences, paying international speakers large amounts of money to speak for 30 minutes. It’s all about the value one can bring to the table, and that comes from experience or study.
Scarce skills, like firewall experts, are rewarded handsomely, as cyber security threats rise. A shortage of something increases its value; art collectors can attest to that.
Marketers use this strategy to create a craving for a product and service. You are unlikely to see a Bugatti advertised on billboards and in newspapers. People who can afford the supercar know where to find it.
Entrepreneurs need to reprogram themselves to create value, rather than looking for money. Money chases value. No one holds a monopoly on cash; if you offer customers value, they will gladly give you their money.
Even Albert Einstein, a man of science rather than business, said, “Try not to become a man of success. Rather become a man of value.”
There are survivalist entrepreneurs who keep complaining as if money repels them. We need to be innovative in how we sell our products and services. The market will pay for the value you provide.
Jannie Mouton is well known for creating value. He did something unique through Capitec Bank. They entered a market which had gigantic financial institutions; they added value through two things in particular. They lowered bank charges and demystified the banking system. This related to the general population, most of whom were clients of other banks. Today, Capitec is one of the largest retail banks with four million clients, and they claim to be registering around 100,000 new clients every month.
Adding value is reliant on the industry that the entrepreneurs find themselves in. You need to make promises to clients that differentiate yourself from your competitors. You have to appeal to what they want. The successful execution of this can convert prospects into new customers.
While you are trying to make millions, never forget that at some point almost everyone in Zimbabwe was once a billionaire. It’s not really about the money, it’s about the value that you add through your company. Align yourself with a sense of value, then all these others things will fall in place

Forget Money  Create Value

Kerryne Krause-Neufeldt was on a roll. She founded her first beauty product business at 23 and was turning over $45,000 in the dying months of her company. But she lost it all on her worst day.
“I never thought in my wildest dream that anybody would steal my company from me. Seriously, how would they get that right?” she says.
Born in Pretoria, she was raised by a single mother who ran a hairdressing salon.
Krause-Neufeldt worked odd jobs while paying her way towards an Honours degree in marketing at the University of Pretoria. From working as a sales lady at a small outdoor store, she packed her bags and left for London on a two-year working visa, to toil for a sandwich making store, Pret A Manger. She was training to be a manager for one of the stores the company was going to launch. It was here that she learned how a well-oiled, structured company functioned. But after three months, she returned to South Africa on the promise of a job.
“The difference in having worked for Pret A Manger in London and coming back to work for this company was a culture shock of note and it was a defining moment for me. I realized there was no vision. I was never going to see this marketing position,”
she says.
She resigned after five weeks and decided to start her own business – a distribution company, supplying cheap eye masks that rejuvenated the skin and removed puffiness. She called up the principle office for the eye masks in Switzerland which did not have a market in Africa.
They offered 10,000 eye masks to sell in South Africa but Krause-Neufeldt needed funding to start this business. One of her mother’s customers was a lawyer who dabbled in business from time to time. He wanted to start his own business but Krause-Neufeldt convinced him that her business idea was more viable. But he wanted 51% of the business.
“He knew I was caught between a rock and a hard place. He said, ‘I’ll give you the money but its 50/50 for the business,’ and in that moment I was relieved I could get started on the business but somehow I knew it was the beginning of the end,” remembers Krause-Neufeldt.
The lawyer funded the first 2,000 units. She hired around 12 sales reps and did all the training and focused on the administration. She also hired Peggy, her best friend, who would distribute the units to the sales reps from a factory. The sales reps earned commission on all the stock they sold, while she earned a mere salary of $275, which she felt was too little.
Business picked up and more stock was brought into the country and South Africa became one of the biggest markets for eye masks.
After running the business for close to two years, Krause-Neufeldt told her business partners that they had to inject more money into it to meet their side of the deal. They were reluctant and felt she was becoming a problem.
Then, at peak season during November, three of her sales reps picked up units worth $91,000. Peggy counted the stock and gave it to the sales reps. They should have delivered the products and returned with the cash, but they never came back.
When Krause-Neufeldt approached her business partners about it, they said that the sales reps gave them the money and that they were investigating her for fraud.
“I asked them how much the reps were giving them and they said R30,000 ($2,740). I said they have R1 million ($91,000) worth of stock. I told them they were getting nailed, but I was the enemy,” she says.
Her boyfriend was a director in the company.
“I was fighting with my boyfriend at the time and I told him he can’t be playing golf all day and take a salary. I told him to do something and he said he’d be a sales rep.”
While in a meeting a few days later, the partners asked Krause-Neufeldt’s boyfriend whether he was earning commission. According to the contracts, it was illegal for directors to earn commission as part of their pay package unless the board of directors approved it.
“We went into a meeting and that’s the only dirt they could find on us,” says Krause Neufeldt.
The partners said they were going to open a criminal case against her and the boyfriend unless she signed over her shares and released the company to them. She tried to get lawyers in but had to fork out around $3,600 upfront. Krause Neufeldt couldn’t afford this with her small salary.
“I signed my shares for nothing and handed my company to these people. I didn’t have a choice in the matter,” she says.
Krause-Neufeldt lost everything. She also signed a restraint of trade agreement. She lost her distribution agency and a local market she had personally grown.
“It was the biggest trauma of my life. To be betrayed by everyone and you know I’d get calls from salons that would complain about my reps and I wouldn’t believe them. I lived for my staff. It was devastating.”
Krause-Neufeldt, however, refused to lie down.
“I just believed failure was the inability to get up again. So I resolved to get up the next day and start another company to show them,” she says.
She immediately started working on her next business, I-Slices Manufacturing. She had come across an Italian eye mask but it wasn’t in line with the quality she wanted. So she decided to develope her own product.
She needed the technology that would make the base of her product, Eyeslices. A friend introduced her to the Council of Scientific and Industrial Research (CSIR), a research and development organization. Here she found the department that worked on a hydrogel treatment pad for burn wounds but the idea was shelved in 1993 because it couldn’t be developed further.
One day, Krause-Neufeldt met Avie Kruger, a scientist who had worked in the CSIR polymer department, and helped her to develop her products.
She started her own laboratory in a cottage on a plot in Midrand, outside of Johannesburg, but there were no standard manufacturing methods or equipment available to produce the product she wanted.
Her mentor suggested she look into the food industry and she came across a machine which had oval cut outs, similar to those of Eyeslices. She contacted Ulma Packaging Solutions, a company that packages products such as yoghurts and meat. The next morning, they arrived at the cottage and started to help Krause-Neufeldt customize her machine.
It took about one and a half years to create the perfect Eyeslices products following the seven years of research. Today, Eyeslices is a reusable stable water-based hydrogel eye mask manufactured through a physical process of freezing and thawing.
Instead of placing cucumbers on your eyes, Eyeslices does that job better and it’s a product many beauty salons have stocked on their shelves.
The United States was I-Slices Manufacturing’s first distribution country. Today, the company boasts 19 other export markets including and hopefully followed by Morocco, Kenya and Nigeria.
Krause-Neufeldt says the challenge with exporting products on the continent is that Africans want brands to be successful in the overseas market before they buy. Regulations can also be a problem.
“Every single country in Africa, the regulations are different and they’re very onerous. They’re incredibly expensive,” says Krause-Neufeldt.
But she is not giving up just yet, she plans to grow the product and take it to many countries on the continent. She hopes it will be one in the eye for cucumbers.

Tag: Distribution

FORBES AFRICA SOCIAL MEDIA

The Breakeven Blues

Forget Money Create Value

‘I Never Thought Anybody Would Steal My Company From Me’