Tuesday, February 19, 2013

(SUNDAY MAIL ZW) ‘Let’s do away with financial imperialism

‘Let’s do away with financial imperialism
Sunday, 17 February 2013 00:00

Wholesalers and retailers in the beverages sector seem to have a lot of reservations about the way big manufacturers and suppliers are treating them. So bad has been the situation that an association representing the interests of the sector is considering approaching the Competition and Tariff Commission to look at some alleged unfair business practices that are believed to be threatening the businesses of many in the sector.

In order to get further insight into what exactly is happening, The Sunday Mail Business Editor DARLINGTON MUSARURWA (DM) last week spoke to the president of the Beverage Wholesalers and Retailers’ Association of Zimbabwe, Mr Petros Kanjera (PK)

DM: As a point of departure, we just want to understand what kind of animal is the Beverage and Retailers’ Association of Zimbabwe and what informed its formation?

PK: Beverage Wholesalers and Retailers’ Association of Zimbabwe has been formed by wholesalers and retailers in the beverage industry and our main supplier here is Delta Beverages. This (association) has also been prompted by the actions of Delta who revised the discounts that we used to enjoy from 5 percent to 2,6 percent.

There was also a “voiceless” situation where sector members used to complain about ill treatment or being shortchanged by some of these big companies. Our analysis as an association is that no one in this business has amounted to anything. Why? Because for any business person to remain in business, they should be an economic person.

Every person in business spends money to get money through a profit, which is only possible through a return on investment. So we believe that some of these big manufacturers have been abusing the market, in the sense that every time the margins of the wholesalers and retailers are going down.

By virtue of that now we have a situation whereby people are being made poorer and poorer and poorer.

For example, retailers used to make a gross profit of US$10 per crate, which has, however, since been reduced to $3,85 per crate. So, where is the difference going and who is pocketing it?

At the moment, there are some sector members who do not know that they have the right to sell beverages at a price they feel is economic to them because of the monopoly and power exercised by some of these big manufacturers.

As a result, some of the wholesalers and retailers are closing.
We have since realised that we will hardly go anywhere if our voices are not heard.

DM: So, when was this organisation formed?
PK: In July last year.
DM: And your membership?
PK: Well, we have a membership around the country; we are currently busy forming provincial structures. I think we have one or two provinces where we are not represented.
DM: What do you hope to achieve as an association?
PK: We want to create an environment where we have a level playing field for people in the beverages industry. That is what we feel we should achieve. We really need co-operative understanding from manufacturers.

Currently we have a problem in that even if retailers can determine prices of their products, there are some big manufacturers that believe they have the power to determine what to give and to whom. And they determine what type of brand they should produce and they also determine what it is they want done.

What we are saying as an association is that while we are talking about indigenisation, there are some companies whose policies seem to be parallel to indigenisation, because the ordinary retailer is seeing his working capital decline everyday.

If the working capital is reduced, it means that someone can hardly stay in business.

We have seen a situation where some of these manufacturers come to dictate the price at which you should sell your beverages. They ignore other things like costs that are incurred in retailing that product.

So, in such circumstances, how can someone stay in business?
One can only stay in business when he is making money.
We want to achieve a situation where these powerful manufacturers do not manage other people’s businesses.

DM: It seems that this is your main grievance?
PK: Yes, we are saying they (manufacturers) are managing our businesses from their bedrooms. They even go to the extent of supplying retailers with their own refrigerators because they know full well that they cannot afford them. Why then do they continue to squeeze our margins?
In any case, how does someone get to dictate what you have to sell and at what price in someone’s shop?

It is fair to say that in this case we don’t have the assets; we only have the liabilities.

DM: In your opinion, do you think you will be successful in lobbying against such monopolies in the market?
PK: Yes! Why not? We are talking of a situation where we are saying people should be empowered and not disempowered. We believe we will have Government’s support to get that done. These big manufacturers will always argue that anyone is free to enter into the market as a competitor, but, believe me, they don’t mean it.

Unfair business practices cannot be of any benefit for those in business, but some people take advantage of their muscle in the market. So, they usually dictate what the market should want.

In essence, the formation of this association was to enhance business processes — so that we have a clear connection between the association and the producers or manufacturers or any other people involved in the distribution chain.

At the end of the day, the person who suffers is the consumer.
DM: Are you saying that your main grievance is to have the freedom to determine your own prices?

PK: No! It’s (the freedom) there already, but some wholesalers are retailers don’t know that. What disturbs us the most is that some of these big manufacturers are five-in-one: they are manufacturers, they are suppliers, they are wholesalers, they are retailers and they are distributors. Where should other people fit in then?

We want them to remain in their core business of manufacturing beverages and give a chance to other businesses or investors who might want to venture into such kind of business.

DM: But if you are given the freedom, or if you have the freedom to adjust the prices as you want ostensibly because of your cost structures, will that not make the consumer the ultimate victim?

PK: What difficulties are you talking about? Let me tell you something: when you are structuring a fair price you first consider your internal cost structure. What we are saying is that whenever manufacturers intend to increase their prices, they must first sit down with us as an association and discuss the pricing model.

The association is a platform to create a situation whereby we communicate with the manufacturers.

We are all in business; we want each other. This is not a confrontational situation we are creating here. We want to create a situation where we have good relationship between ourselves and the manufacturers, including everyone else in the business.

In fact, we also envisage a situation where our association will have shares in those companies. We want to do away with financial imperialism, which is a situation where some people just invest in this country to take money from us. They are not even interested in how we live.

DM: What role do you envisage will be played by the Beverages Wholesalers and Retailers’ Association of Zimbabwe in five years’ time?
PK: Well, our future plans are very clear. We are saying if all goes well we will be in a position to lobby our grievance through the Competition and Tariff Competition. We are saying if our problems are going to be attended to; if our playing field is ever going to be level, we will see our people begin to believe that they are really in business. Currently, people are closing down.

Our members should be empowered.

As long as there is no mutual relationship between the manufacturer and our members, there is no way we can grow.
DM: What makes you hopeful that you will achieve all these goals that you have set out for the association?

PK: We will only achieve if we have support from our members, which is there already.
DM: Have you tried to engage these big manufacturers or lobby through the Government?

PK: At the moment, we are still trying to line up several meetings with the authorities, but, yes, we have done that. Last year, we had a meeting on the 27th of January with one of the manufacturers. Again, on May 14 2012 we engaged some of the directors, and on September 27, we had a meeting with the chief executive officer of Delta Beverages, Mr Pearson Gowero. We didn’t want to jump the gun.

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