How did entrepreneurs in Zambia handle this crisis, and what lessons can we learn from them on How to adapt a business in an ever-changing market economy.
My Guest Monica Musonda who has held several positions and has received many awards, but is best known for founding, and leading the Zambian Food processing company Java Foods, shares her insights into How Your Business Can Adapt in a Crisis.
How is this crisis affecting the manufacturing industry and your business in particular?
The coronavirus pandemic presented a very tricky situation around sales, inputs, and safety for staff.
- A lot of manufacturers import inputs to make a final product but because of the lockdown in neighboring countries, there was a huge panic in terms of how the inputs would be imported into Zambia.
- The second thing, which seemed to have happened overnight is the depreciation of the Kwacha. The Kwacha lost its value by about 25% in a few days. Prices of both locally manufactured and imported goods skyrocketed. The price of inputs now costs two or three times more than they did. It also meant that manufacturers needed to increase their prices, but it hurt consumers whose salaries were not increasing.
- Though the government recommended that people work from home, for manufacturers, this was difficult because you can’t move your manufacturing business to your house.
How has this crisis impacted your leadership style and what changes have you had to make to adapt to this new environment?
It’s challenged me on a personal level, not knowing where and what to do and also how to motivate my team. It’s very scary on the health side and you’re demanding for them to continue working, but they are fearful for their families.
You have to find the leadership to govern in a crisis. I have a board of directors and they have been very supportive. We have held meetings to discuss new events, cos every month there is something caused by Covid.
The board has also encouraged me to get a professional coach because I don’t have all the answers. I would never know how to deal with this kind of crisis. There are all sorts of crises, business-related and risk-related, but this one is new and is changing every day. And I relied on my management team to find out;
- what can we do?
- What can we not do?
- Do we need to speak to our customers much more to say that maybe we’re going to delay or the prices going up, or we won’t continue the product?
We need to continue talking to our employees about benefits and how we can continue keeping the lights on because it’s a real conversation. In the food sector perhaps we are a little bit more fortunate but you can imagine in hospitality and tourism, that conversation must be very hard for a CEO. But it’s been good to lean on a professional coach and a very experienced board and that has helped.
What measures or steps can entrepreneurs take to survive this crisis?
You need to understand how the pandemic is impacting your business. If you can, conduct an assessment every two weeks about what the current situation is, you can’t manage the situation if you don’t understand this.
- Are your customers still taking the product?
- Are they affected?
- Are you affected by slow payments?
- Do you have power? Power has now become an issue. Maybe it’s not Covid, but power is an issue. Should we operate at night instead? What does this mean?
You have to dissect the impact of these shifts or challenges and understand what it’s doing to the business and only then can you start handling the issues one by one.
So a perfect example, let’s talk about the supply chain. For us, we import inputs from South Africa and they closed their borders in March.
We had to talk to our supplies and we couldn’t get to them. So we began very quickly to speak to people in the industry here in Zambia. We needed to solve this issue right away and if we weren’t going to solve it by the tenth, we knew we needed to write to customers and say that we will not have this product due to a supply chain issue. Fortunately, South Africa operated for essential services such as food and so we were still able to move inputs into Zambia.
This is the kind of thinking we were going through. Dissecting problem to problem and seeing how we could then solve it. And it’s continuous, so while we had a crisis in April, it is not the same as the crisis in August. So you have to do this weekly if you can or at least monthly.
In April the banks were not necessarily, trying to back down on interest rates. And it was really scary because we were not selling as much but my bank still expected me to pay at the same rate.
What does this mean? Do I need to discuss with my bank to change that? But fortunately, the dynamics changed when the Bank of Zambia (BOZ) stepped in and reduced the MPC and also made available some funding. We were then able to say to the bank, now you have no excuse you have to reduce your rate and we have to discuss how I can pay. So dynamics change week to week, month to month. But you’ve got to keep on dissecting issues.
In terms of the offering from the Bank of Zambia to SMEs, is this something you are aware of, did you apply to take part in this or how is it going with you?
When the ten billion funds were announced, it all sounded very nice. And this money was going through banks but I think the process was a bit complicated and BOZ realized that it was not necessarily targeted at SMEs or the bulk of businesses in Zambia. The banks were not as flexible on how they were going to lend the money. They were still going to use the same yardstick as they normally do.
So if you want to borrow 100,000 Kwacha, they expected you to bring security, fixed assets worth 150,000 Kwacha to borrow 100,000. And then you had to pay all the fees. Interest rates were still quite high, making it hard for many to access this.
There’s another fund coming up that SMEs can now access. However, the disbursement is too slow. Right now we are in our 4th or almost 5th month of Covid, you can imagine for someone who was an events planner, who has had no events from April. How she going to pay her workers. How will she pay her debt? You know her rent, so I think we would have wanted a much quicker action on softer terms because it’s a crisis which businesses haven’t caused.
So everyone must come to the party to protect the economy to protect the SMEs, to protect jobs. And I just think that it could have been quicker and a little bit more discussion on what was needed.
What opportunities are available now, that you didn’t have before COVID-19 that you are now embracing and taking advantage of?
You know my biggest sales are to school children on the instant noodles side. Schools closed on the 18th of March 2020. We began to see that our leading product was not moving off the shelves quickly.
This made us rethink what else we do and then put in action different things going on at the same time and not rely on one thing. So if I only had noodles, I can tell you we would be very stuck. Well, what happened is that we were able to pivot the business slightly. As a result of the coronavirus pandemic, there was a lot of discussion among NGOs looking out for the vulnerable communities around nutrition and eating. And therefore we thought, this could be an opportunity for us. We produce a fortified cereal called Super cereal, it’s relatively new. We also looked for opportunities with NGO’s who are feeding children at home during this pandemic or helping some vulnerable people. This is something we didn’t do earlier and we saw an opportunity to engage with those who are supporting the vulnerable and see how we could work with them.
This has changed the business slightly. We are now manufacturing more HEPS, which is a high energy protein cereal to support these NGOs. These NGOs range from organizations like Plan International to several organizations that are working in this space. We continue speaking with them to understand what is it that they are doing and how we can support them. Those are the kinds of opportunities you want to see.
Are you able to pivot the business? For example, if you are an events planner, what can you do now, given the resources that you have, because there are very few events happening during this pandemic. People are using online platforms to organize conferences now, is it possible for you to pivot the business now to an online platform and charge a small fee. You have to see where the market is going.
And we’re seeing online platforms take the stage for events during this period. I haven’t been to a conference in God knows how long, but I’ve been to a conference online so it’s understanding where the market is shifting.
Even on the retail side, people are now getting deliveries at home. Should I as Java now be speaking to delivery service to put some of my products on their website so that they can deliver directly to their customers? So it’s around again understanding the market, what the market is shifting to, and moving with it because surely you’ll be left behind.
What’s your advice to business owners who are waiting for Covid 19 to end?
How long are you going to wait? That’s what I ask, because can you see what we’re going through now? If you remember in April, everyone was at home and quiet and we thought we had managed the crisis. But now we are in August and the numbers are rising every day and we don’t know when there’s going to be a vaccine. We don’t know when it’s going to end. So what does that mean for business? If you are a real entrepreneur, I hope you’re not waiting. Real entrepreneurs don’t wait for things to come to them, entrepreneurs go out.
If your business is not working out the way you want it, you can leave it for now and start a different business. This happens all the time, some businesses don’t work at a specific time, but start something else.
Yesterday I was speaking to a young lady and I was saying to her but you got a degree and you write very well, why don’t you go to some of these universities? There’s a lot of people who are writing theses and who need someone to edit or to proofread for a fee. Some people are writing books, editors, publishers, reports, strategic plans, etc. These are big documents you could proofread in your house for a fee, but you have to think differently about what you’re offering.
I hope small business owners and entrepreneurs can start looking at other opportunities in addition to what they are already offering. We have to figure out what customers need right now.
In a crisis there are so many things that need attention, what is the one thing you advise entrepreneurs to focus on during this pandemic?
There are a couple of things and not just one. The first thing I have focused on is health. It’ll be terrible for us to ask people to come to work, and we’re just a Covid mess. So our first focus was really to ensure the health and safety of our workers and their families. Educating our team is also important because, for a little while, there was a lot of disbelief about this illness.
The second is cash flow management, about making sure you’re still able to survive, to keep the lights. In April, people were unable to pay for products supplied to them in March. Immediately we decided on what was going to happen.
- What does that mean for the business?
- What do I need to be doing?
- Do I need to be speaking to my customer, do I need to get the product back?
- Do I need to make a payment plan for the customer?
- Do I need to speak to my bank?
- Do I need to cut off certain services such as newspaper service?
It’s also about understanding daily, how much money we have in our bank account. What are my payables and managing those payables?
The third thing is speaking to my customer. I need to understand if my customers are closing down. What’s going to happen if they have our stock? What happens to that area which used to receive easy noodles and now the shop has closed? How do I make sure my consumers can still get the product? I found that those are three key things that we have continuously focused on.
- The key to adapting to an ever-changing environment is making sure you’re constantly assessing situations. Continuously assess where you are and see how you need to change the business if it’s a case of changing it.
- If it’s a case of completely moving on from a business and starting something else, then that’s possible as well. This is the time to see different opportunities and to be courageous and brave.