Impact on the National Economy

In this posting I discuss the beneficial impact of entrepreneurship on the national economy. Your business has impact on the national economy. You are adding value. So keep dreaming and working on the business.

1. Diversify Economic Base

    Entrepreneurial banking activity in Zimbabwe created a profitable industry that became the beacon and pride of the nation at that time. This helped diversify the nation’s economic base. Indirectly, as bankers competed they made financing structures available to different entrepreneurs from different sectors. This improved access to funding and financing structures for both management buy outs/ins and green field ventures.  New industries that sprang up due to the availability of funding played a prominent role in the diversification of the national economic base.  For example Shingai Mutasa of TA Holdings once stated that his company’s entrance into the Botswana market was funded by Kingdom Bank and ABC Bank. His contention was that the local Botswana banks would not fund his venture but fellow Zimbabwean institutions came to his rescue. Entrepreneurial organisations enhance the diversity of a nation’s economic base while providing it with the opportunity to respond to a variety of global market conditions. Consequently entrepreneurship increases the nation’s global competitiveness. Zimbabwean banking became the envy of the region as it outbid even RSA based banks on major regional projects.  This validation is evident when one considers that most bankers who left the country were absorbed into the neighbouring countries’ financial sectors.

    2. Engine for Economic Growth

      The success of entrepreneurial banks inspired the entrepreneurial spirit in other sectors of the economy. Other entrepreneurs emerged. The economic growth generated by entrepreneurial bankers became the core engine for a virtual cycle.  The success of the initial pack of bankers created more growth as other bankers and entrepreneurs flexed their entrepreneurial muscles. The bankers made access to capital finance easier at the time when the hyperinflationary environment made borrowing fashionable, due to negative real interest rates prevailing on the market.  The successful bankers in turn invested portions of their newly acquired wealth in other entrepreneurial ventures, as either informal and angel investors to business concerns run by close family and friends, or as venture capitalists as they sought equity in green field investments from other industries.  A number of bankers have re- invested part of their wealth into other sectors of the economy, e.g. horticulture, hotel and leisure etc.

      3. Employment Creation

      During the period 1995-2005, the economy was in turmoil and a significant number of  large companies were rationalising and restructuring. Other companies closed down due to viability challenges while numerous multinational conglomerates either trans-located to neighbouring countries or moved a significant portion of their productive capacity outside Zimbabwe. This led to massive retrenchments and the unemployment rate rose past 70%.  The entrance of entrepreneurial bankers led to a fast growing financial sector, which created jobs. At a time when most industries were shrinking, the financial sector contributed to the reduction of unemployment.  Another effect of this was the retention of critical banking skills in the country. Some bankers who had left the country returned and used their skills to help develop the economy. This was at a time when the country suffered a huge haemorrhage of its skills as professional and skilled people left the country. However the blooming banking sector, driven by entrepreneurs, had drawn people back to the country. Due to intense competition for critical staff, banks offered incredible benefits to key employees e.g. significantly reduced financial loans for purchases of houses and vehicles. This in turn improved the demand for rental properties and vehicles, resulting in an explosion of vehicle sales, construction and real estate industries. The downstream benefit was increased employment opportunities in these industries as well. Indirectly, these bankers preserved jobs by providing sources of bridge funding for distressed firms to restore their viability, thus circumventing retrenchments.  Informal sector funding provided home-based businesses for the livelihoods of those who had been retrenched. It can be argued, therefore, that banking entrepreneurship slowed down the rise in the unemployment rate as well as creating secondary wealth (social benefits, housing etc), benefited downstream industries e.g. car dealerships and construction industries, and drove salaries and wages up.

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    1. Reply Barrack Otieno June 11, 2010 at 1:59 pm

      This is inspiring. This is certainly what Africa needs

    2. Reply tb June 29, 2010 at 12:37 pm

      very good indeed.My take up point is that where others saw chaos these men (like Warren Buffet during the Merryill Lynch fall )saw opportunity. Chinese word for problem is ‘opportunity.’great piece Sir.

      • Reply nurturingchampions June 29, 2010 at 12:48 pm

        Thanks. In essence entrepreneurship rests on the ability to see value out of chaos, seeing an opportunity where others do not see anything. Its true every crisis has embedded within it a seed of great opportunity to the ones who seek to solve the issues around the crisis. If you think about it even someone’s tooth crisis is an opportunity for the dentist to solve the pain problem for the person profitably. So opportunities abound when one seeks to solve problems and crises that surround our world.

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