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INFORMATION AND COMMUNICATION UNIVERSITY
NAME:
BANDA MZAMU
SINo#:
1511182777
Subject:
ENTREPRENEURSHIP
PROGRAM:
MBA-FINANCE
ASSIGNMENT:
01
LECTURER: DR. MBETWA
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Zambia and World atlarge is going through economic recession. Economic
recession refers to the economic stagnation or decline of economic activities. This
situation may first affect a single nation and later the entire world and consequently
degenerate into a global crisis. The major reason to this chain-reaction which moves
like bush fire is globalisation. The world has been reduced into a small global village
and what affects one country may directly or indirectly affect the other; more so the
economic depression under review.
According to Mishkrin (2004, P. 656), “The major cause in the investment collapse of
1929-1933 ever recorded was the on-going set of financial crisis during this period.
This culminated into a sharp fall in the aggregate output and real GDP by 330 billion
US-dollars. The economy was at full employment in 1929, the fall in output resulted
in massive unemployment with over 25% of the labour force unemployed by 1933”.
As earlier stated, the world is a global village. It is interlinked through technology,
Multinational corporations, World Financial organisations, the World and regional
governing bodies. These systems are the umbrellas of the world which have been
put in place to foster economic development and oversee peace and stability
especially in war torn nations. Above all and most importantly, powerful world
economies have had their currencies adopted globally as international media for all
transaction globally such as the United States Dollar, the British Pound and the
Japanese Yen. The majority of the World multinational corporations are
headquartered in these powerful countries referred to as the G8.
Cole and Kelly define multinational corporations as, “Corporations headquartered in
one particular country but having operations in other countries”.
These corporations have the capacity to influence the globe economically. Among
the notable multinationals are; Coca cola, Toshiba, Toyota, BMW and many others.
When powerful economies are faced with financial crisis in the domestic economy
probably due to huge expenditure on mitigating catastrophic effects caused by
natural disasters, wars, epidemics, and in some cases due to misappropriation and
incompetent political leadership, the probability of plunging into an economic crisis or
depression is very high.
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When the nation is struggling economically with inflationally pressure, attempts are
made to remedy the situation by raising interest rates, removing subsidies, raising
various duties and taxes. Consequently, individuals and business houses find it very
difficult to borrow from Banks for investment into key sectors of the economy. This
results into huge losses of employment, closure of companies and consequently
reduction in the aggregate output and eventually the downfall of GDP. At this point,
unemployment may have risen to alarming levels resulting into untold sufferings of
people and the breakdown of social and moral fibre and lawlessness. When the
country or the world is experiencing the economic depression; governments fail to
provide public and social services to citizens such as; drugs in hospitals, education,
security, clean water and electricity. In such a situation where government cannot
operate due to economic or financial crisis, it becomes literally impossible for a
company to invest in any sector of the economy. This is what results into an
economic depression.
The effects of the economic depression are extremely ghastly especially if they stem
from the world economic powerful nations. The world economic giants also referred
to as the G8 nations include; America, Britain, Germany, Russia, China, France,
Japan and Portugal. When these nations are economically troubled the likely hood of
the entire world plunging into severe economic downturn are extremely very high.
Consequently the whole world degenerates into an economic global crisis. This is
because every country under the sun depends on these super economies. The
currencies in circulation globally are run and controlled by these nations such as; the
dollar, pound, deutschmark and the Yen. The multinational corporations are also
headquartered in these powerful countries. It is therefore undisputable to state, that
90% of the global economy is shared and controlled by the top eight countries
notably the G8.
The economic recession Zambia is facing is attributed to the syndrome of
overdependence on a single sector as the major economic driver. Zambia for many
years has depended so much on Copper mining as the chief source of revenues to
run the affairs of the country. Unfortunately, the price of copper at the international
metal exchange have been unstable and always going down. The cost of mining is
very high. This has made many mine houses to either prune labour force or
ultimately close down operations. On the Copperbelt province of Zambia, the country
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has once more witnessed huge losses of jobs. Also contractors to the mines have
been adversely affected.
The other factor is that, the copper produced in Zambia is mostly exported as raw
materials in form of plates and concentrates. Lack of value addition to the product is
detrimental to the economy. The only notable company which makes use of the
locally produced copper is the Metal Fabricators of Zambia (ZAMEFA). The quantity
of copper in tonnage ZAMEFA uses for its cable manufacturing is negligible in
comparison to the entire tonnage output. Lack of value addition is a huge loss in
terms of revenues and employment.
The other cause of economic recession is attributable to the high cost of production.
Production of goods and services has much to do with the cost attached in terms of;
fuel, electricity tariffs, interest rates and taxes. In Zambia all these are very high and
far beyond the affordability of a common investor. As such, prospective investors
with brilliant business ideas are discouraged from the onset.
The other factor which is adversely affecting production is the problem of
loadshading. Loadshading is the intermittent supply of power or electricity to
households and business houses. The problem is erratic and is escalating especially
with the ever increasing demand for power. In recent times industries have been
experiencing a lot of idle time which is a huge cost due to power outages.
According to Mushkrin (2004, P.656), Keynes viewed that, “After the Great
Depression, the economy would continue with major output fluctuations because of
the volatility of autonomous spending. Particularly, planned investment spending will
be affected. He was especially worried about sharp declines in autonomous
spending, which would invariably lead to large declines in output and equilibrium with
high unemployment”.
The implication is that, no matter what, it is imperative for every business to incur
autonomous expenditure for any investment it plans to undertake.
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QUESTION B
Zambia in its current state, where copper prices at international metal market have
drastically fallen and as such where the government is crafting policies to diversify
the economy from mining to Agriculture, more businesses are expected in the agroindustry.
Zambia since time immemorial has predominantly depended on copper mining as its
economic driver and chief source of revenue. However, times are no longer
favourable in the copper industry with the drastic reduction in prices against the ever
escalating cost of production. The mining industry is underperforming with many
mines having already closed their operations on the Copperbelt. Unemployment has
doubled but life has to continue. The government has embarked on diversifying the
economy to agriculture. Therefore, agro-businesses are expected to mushroom
across the country as the alternative to unlock the hidden treasures and turnaround
the economy.
The government is expected to formulate favourable policies that are aimed at
promoting the agriculture sector. The government has realised that Agriculture is the
best, viable and sustainable alternative to change the outlook of the economy hence
there will be more investment in the sector. To start with, Zambia has most
favourable climatic conditions. There is also abundant arable land to support the
good yield of any crop and also support the rearing of domesticated animals. The
population size of Zambia is good enough to cultivate enough. Above all and most
importantly, the country is politically stable, peaceful and culturally inclusive to
support this noble cause and attract more investment in the sector. Actually, the
country has all it takes to emerge as the food basket of Africa with enough to export
overseas.
With the intentions to diversify the economy to agriculture, the government and other
co-operating partners is expected to empower farmers with inputs, cattle and
equipment. Mechanised farming is expected to be encouraged in order to achieve
mass production.
Taxes on agro-business are expected to be zero rated.
Thereafter, a robust agro-business is expected to emerge. In the rural areas of the
country and in countryside farming blocks a lot farming activities are expected to
take peak. Also in urban areas a lot of agro-processing plants of these crops are
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going to mushroom. This is because in urban areas it is advantageous to set up an
industry or a plant because of the available power supply to drive machinery.
Processed products have longer life span because they are fortified with
preservatives.
It is time for entrepreneurship to take centre stage in this development.
Entrepreneurs
are expected to identify opportunities in this sector, seize them and
explore their innovative ways by setting up businesses that are hinged on agroproducts. Also businesses which supply inputs such as; fertilisers, seeds and
seedlings are expected to mushroom across the country. The availability of agrocrops are likely to inspire entrepreneurs to set up agro-products processing plants.
By definition, an entrepreneur is a person who creates and manages change by the
recognition of opportunities (needs, wants, opportunities, problems and challenges)
and develop people and manages resources to take the opportunities and create a
venture (profitable business), Eston Kiman, MIT).
Sowdon and Horward (2005, P.8) observe that, “ Frequently, the truth is that in a
situation of high unemployment and other deprivations of a social or economic
nature, people are frequently forced into choosing entrepreneurship as the only
alternative to no job and no income”.
Therefore, entrepreneurship is the best way to go in any economic situation the
country finds itself in. In this economic dimension, entrepreneurs are key to invent,
innovate and accelerate modern ways in farming, irrigation, preservation of crops
and processing crops through value addition. Others are likely to have an ensemble
of equipment such as; tractors, combine harvesters, oxen and many others available
for hire.
Hisrich et al (2013, P.6) confirms that, “Entrepreneurship plays an important role in
the creation and growth of businesses, as Well as in the growth and prosperity of
regions and nations”.
Entrepreneurship is the life line and sustainable alternative to resuscitate the
struggling economies. Mass production of agricultural crops is not enough to
turnaround the economy. More needs to be done, thus value addition should be
encouraged. In an agro-based economy, entrepreneurs are likely to set up agro6
product processing plants. Agro-product processing businesses are those which take
advantage of the available crops which are later processed into secondary
consumable products. Thus; cereal crops such as; maize, sorghum, millet, wheat
and rice can either be consumed directly or ground into meal powder. These are the
major source of staple food in many countries because they are very rich in
carbohydrates. Then the legumes which include; Groundnuts, beans, soya beans,
peanut, sunflower and cashew nuts are the rich source for edible oils, relish, animal
feeds and sumptuous peanut butter. Also, the fruits which include; bananas,
oranges, pineapples, apples, mango and grapes be processed into beverage energy
drinks, alcoholic drinks and other medicinal remedies. Above all and most
importantly, entrepreneurs are expected to spearhead animal husbandly. Cattle,
goats, pigs and sheep are the rich source of meat and milk. An entrepreneur can do
great exploits by keeping animals and foster businesses in restaurants and
butcheries.
To run these businesses and produce these products an entrepreneur employees a
good number of employees and significantly contributes to the aggregate GDP of the
nation. This is through manufacturing, paying of taxes and job creation. Therefore,
exporting agro- products unprocessed or without value addition is a huge loss on the
economy in terms of job creation and tax revenues.
On the other side, the state of affairs in the energy sector is that there is a deficit of
power to satisfy households and businesses. The country is currently experiencing
intermittent power supply a situation called, ‘loadshading’. This is a serious problem
and an inconvenience on both the industry and households.
However, one of the distinguishing virtues of an entrepreneur is to identify an
opportunity where society sees a challenge. An entrepreneur works hard to find a
lasting solution to the problem for personal satisfaction and monetary rewards.
It is therefore prudent that an alternative source of energy in both domestic and
industrial organisation. The most reliable and cheap source of energy is solar. An
entrepreneur in this current energy state of Zambia would venture into supplying of
electric appliances that are designed to be powered by solar energy. Therefore,
setting up solar appliances electric shop is immensely an appropriate and well-timed
business idea. This is likely to be viable and sustainable.
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In Zambia, the majority of urban dwellers use electrical appliances and the source of
power is ZESCO national Hydro power grid. With the crisis of power outages, 95% of
households and business houses are terribly affected. Therefore, an entrepreneur
who opens a solar power appliances shop is likely to enjoy huge market among
households and business houses. Solar energy is more advantages compared to
other forms of energy. It is cheaper and pollution free.
An entrepreneur is adventurous and a risky taker. He wouldn’t mind how these
products would be reaching Zambia. An entrepreneur is creative and would attempt
to engage manufacturing companies in; Japan, America, Germany, United Kingdom,
China and France and work with them as an agent. Infact, orders nowadays are
done online. It is a world of e-commerce. So far, there are stoves, refrigerators, TV
sets, pressing Iron, radios, barber machines and welding machines which are
specifically powered by solar energy.
Solar energy is one of the most sustainable alternatives to minimise pressure on
hydro power grid. This is because the economy is growing with so many coming on
the scene in the mining sector, manufacturing, agriculture and hospitality. Also
consumption at house hold level has increased with the increase in the construction
sector. All these developments have pilled too much pressure on ZESCO Hydro
power grid. Henceforth, more investment in the energy sector such as; solar, thermal
energy and many others is needed.
The case of Dangote Group of Companies situated in Ndola Rural of Masaiti District
on the Copperbelt Province of Zambia which is producing Cement branded,
‘Dangote Cement’. The plant has been called, ‘the state of the art in modern
architecture’. The plan has an inbuilt coal power generation plant. The nation needs
more investments in the self-sustenance energy sources like the one at Dongote.
This has put the company on competitive advantage and the cost of production has
significantly reduced. The company doesn’t pay electricity bills to ZESCO.
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REFERENCES
Cole Gerald and Kelly Phil (2011), Management Theory and Practice, Hampshire,
Thomson Learning
Hisrich D. Robert, Michael P. Peters, Dean A. Sheperd (2013), Enterprenership, 10 th
ed, New York, Mc Graw Hill
Mishkrin Frederic (2004), the economics of Money, Banking and Financial Markets,
7th ed, New York, Pearson Education
Investopedia 2014, multinationals, available on: http//….analcorporation/2014.o3
Snowdon Brian and Howard R Vane (2005), Morden Macroeconomics, Cheltenham,
Edward Elgar Publishing Limited
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