Will indigenous businesses ever thrive?

A couple of decades ago government decided to move all Asian owned businesses to urban areas. Reasons resonated around giving indigenous Malawians a chance to run business in the rural areas.

Remnants of those businesses are still apparent in some of the rural areas. Call it protecting locally   owned   businesses against competition with investors with a foreign touch. High import taxes have been imposed before on some goods to protect the local producer.

Today, there has been an outcry that Chinese investors are taking over businesses opportunities for local Malawians. Consequently a decision was made by government stopping local assemblies to issue business licenses. The ministry of trade has now taken over the task.

Most of the Chinese investors are now moving out of the rural areas. There has also been violence against Burundi nationals plying various businesses often in the retail sector. This is happening across the country and everyone expects government to address the issue.

We need to look at both sides of the coin, especially what indigenous business owners must do to remain competitive. There are a number of issues that businesses owned by indigenous Malawians need to address to face competition. Government cannot always solve the problems.

Most of the locally owned businesses fail to grow. Two things happen that lead to failures and eventual closure. They fail to grow and eventually close up. A reason is sought to blame someone including foreigners. Everyone wants to do it alone. Such businesses come to an end once the owner is dead or simply can’t cope with competition.

There is power in partnership and no one needs to go alone. The cost of finance remains high. One cannot easily raise capital. We are still stuck in the mind of “this is mine” and “I will do it alone” or someone wants to steal from me. Rational as it sounds, but again it does not help if you cannot pull resources together and compete with a foreign investor that has other   cheaper sources of capital beyond the borders.

Most of our local businesses will bid for contracts on their own in the belief that they will get all the money. It does not work that way. Being small businesses or medium sized ones, there is a lot of gain in partnerships. Besides sharing the cake, it enhances ability to stay alive in a competitive environment given that different skills are shared. Just put in place proper legal framework within a partnership.

One argument that local businesses have put in place is that foreign owned businesses offer low prices. Consequently, it is expected that they will be put out of businesses. Government is therefore expected to put in policies to protect them. It is a logical argument depending on which side one belongs to.

Malawi is a member of the World Trade Organisation (WTO) and has also signed a number of trade agreements. In other words, the government of Malawi has committed itself to free trade and the benefits of trade ought to trickle to both businesses and households. Businesses can’t have it all.

To households, such benefits are reflected through reduced commodity prices. If foreign businesses are offering lower prices, it is rational for any consumer to buy from such outlets. That is how free trade benefits individuals.

While government has a duty to promote the business interests of local entrepreneurs, it     has a similar duty to safeguard rights of consumers. The Competition and Fair Trading Act exists for this very reason.

Getting rich-quick appears to be an obsession of most local businesses. It is often reflected in over-charging. Foreign businesses beat us on this very cardinal rule of business.

By offering lower prices, they build a faithful customer base that becomes blind overtime to price change. Psychologically, they create an image that they are cheap and survive. It is a long-term survival strategy that is combined with a huge risk of losses at inception of business.

You will be surprised that the average business person has strange reasons as to what prompted their decisions. Usually it is because everyone is doing it. Examples abound. We need not dwell on them, but some are identifiable. After liberalization of the transport sector, everyone who had some cash wanted to buy a sixteen-seater   mini-bus with a vague idea of the transport business.

Similarly any reasonable structure in the suburb was turned into a private school because everyone thought it is profitable. And it goes on to stationery suppliers.

A thorough understanding of the business that one is putting their money into remains fundamental. Such is the lesson from the world’s leading investor, Warren Buffet.

Just because everyone is establishing a car hire company, it does not really mean you should simply because you can afford. Do some research and know what you are putting your money in. Who are your target clients? Understand the opportunities, risks and far more important,   know when to quit.. n