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INVESTMENT AND BUSINESS PLANNERS
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BUSINESS IN AFRICA™
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Businessafrica.net Newsletter
ISSN 1563-4108
INVESTMENT AND BUSINESS PLANNERS Fax: +1 202 478 0432 Click here for contact & support console | ||
| WE
TAKE CARE OF BUSINESS IN AFRICA™ | |||
| ECONOMIC ANALYSIS | |||
TRUE CAUSES BEHIND THE COLLAPSE
OF MOZAMBIQUE'S CASHEW NUT
INDUSTRY
(Part 3 )
TO SURVIVE AND THRIVE
IN THE CUTTHROAT
COMPETITION OF THE MARKETPLACE
A COMPANY
NEEDS A SEASONED FINANCIAL MANAGER
This delivery is the continuation
to these preliminaries
It is also a continuation to:
"Strategy
for an African Country"
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| | |
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In this
final delivery of the series (1
- 2 - 3)
on the collapse of Mozambique's cashew nut industry, the importance of the presence
of a seasoned Financial Manager in the organization chart of a company dealing
in the commodities business is highlighted. His contributions to profit making
economic decisions are discussed. | 
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| |
To
find out the real causes behind the collapsing Mozambique's cashew nut industry
as per May 2001 we considered in two previous parts of the current delivery:
| - The global market
and pricing structure of Cashew nut Click
here for more. - The accuracy and soundness of the proposals and recommendations made by an engineering company for the transition of the cashew nut industry of a African country from raw nut selling to finished products marketing. Click here for more. |
Now, based on the findings revealed in these preliminaries, we can move a step
further to demonstrating the importance of a Financial Manager's contributions
for the success, prosperity and survival of a company in the cutthroat competition
of the marketplace whatever may be the line of business considered.
Sure, any department manager in a company's administrative chart is important.
The outputs and inputs coming from all managerial positions contribute to efficient
decision making process in the company. However some managers' contributions are
more crucial; namely the Head of Sales and the financial manager ones.
The Head of Sales is responsible for the sales of company's production and services.
If there is no sales, there is no revenues, no cash-flow and the company is heading
for financial disaster and bankruptcy.
If the production level is not
sufficient; or if product quality is not competitive; if production costs are
too high and therefore selling prices non competitive on the marketplace, the
Head of Sales, in spite of all his efforts and dedication, cannot make miracles.
He will sell nada in spite of his selling stamina.
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We are then confronted with the problem of who, at management level, is capable
of better accessing and analyzing production costs. Who better assists the company
in deciding for the best selling price for the production in order to be a winning
competitor on the marketplace.
The Head of Sales provides data and
relevant information on competitors' pricing. But is that enough? Is knowing competition
prices enough for the company to produce at less cost and beat the competition?
Is selling cheaper than the competition sufficient to assure revenues and a profitable
bottom line. We have seen already
that all that is not enough
Implementing a systematic discounting
policy may just send the company - sooner or later - crashing against the wall
of bankruptcy.
Sure, a dumping policy staged by a company, which
assumes the leadership in its economic sector may help that company - with a deep
safety cash net and hefty cash flow - destroy and eliminate competitors from the
marketplace.
African commercial and industrial companies are not financially
strong enough to using such a bulldozer' strategy. In the contrary they are often
cash hungry and on tight financial ropes. Particularly those involved in commodities
trading or processing. Their revenues heavily depend on the highs and lows fluctuations
of the international selling prices of their products. Dramatic fluctuations on
which they have absolutely no say as decision-centers are a continent away in
Paris, London, Chicago, Singapore. Etc. Sometimes a minor nose dive of the international
selling prices of tropical mineral or agricultural commodities triggers painful
tightening of belt or final closing of shops.
-
It is then an absolute necessity for any company involved in commodities trading
and which objective is to beef up its bottom line to know exactly its production
costs.
That is where the financial manager's
contribution is paramount.
If the management of a company takes these recommendations
on good faith and relies on data and inputs of such kind of feasibility study
to take investment decisions it is surely heading sooner or later for financial
disaster.
An additional screening of these facts, data and recommendations
by a competent financial manager would have disclosed hidden and vital economic
data and information.
The financial manager would have been therefore
in the position to providing the company's decision making body with an accurate
and documented financial control panel. Investment decisions would have been more
elaborated and profit making oriented. The right selling price of the production
would have been setup and therefore the company would have competed more efficiently
on the local and international marketplaces.
-
With the efficient and vital job performed by the financial manager, the company
would have been in good position:
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These above mentioned observations clearly show the importance for any company
- particularly for a company dealing in highly and volatile competitive business
- to have a good financial management system; forecasted prospective plans and
a constantly updated Business Plan.
-
With a good Business Plan in hands, a company - whatever maybe its line of business
- have more chance to survive in the cutthroat competition atmosphere prevailing
in today business world; where only those prepared and equipped to tackle the
tinniest detail linked to their production costs are
sure to survive and thrive in prosperity.
-
You say that all that is obvious? No need to make so much fuss about it?
Yes good financial management theory and practice are taught at all business
schools. However it is not effectively implemented by managers particularly in
African countries. That way of managing companies without proper and frequently
revised and updated financial tools is one of the fundamental reason why all industrialization
efforts had not yielded good results in most of sub-Saharan African countries.
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Just one anecdote to make you fully realize what we are talking about.
When Yves-Michel Fosto, Cameroon's
business tycoon, was appointed by Cameroon's government to take over the driving
seat of CAMAIR - Cameroon Airlines; the national flag carrier -
to avoid its foreseen crash and total disintegration, he found himself sitting
in the cockpit without any control system.
You won't believe it!
The cockpit was completely without navigation instruments. CAMAIR was flying
since years (five actually) without "security tools". That is to
say not a single balance sheet had been established for five years running.
Yves-Michel Fosto is now doing the good and painful job of having all backlog
of financial data in order. He had till now, despite a lot of banana slips, live
up to his reputation of efficient manager and performed a good job. He will certainly
avoid the crash.
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CAMAIR is not peculiar in Africa's industrial landscape.
Many African countries public companies had been carelessly managed during 1965-1990's
period as CAMAIR was before the arrival of Yves-Michel Fosto. Hence the financial
and budgetary difficulties experienced by African government, which triggered
the controversial interventions
of IMF and World Bank Structural Adjustment Program throughout the continent.
| |
After a thorough review of the cashew nut
industry - worldwide production level, pricing structure - and the
analysis of a case study - the transition from raw nut selling to finished
products marketing - we reached the conclusion that the IMF and the World Bank
cannot be the only entities to be blamed for the collapse of Mozambique's cashew
nut industry as per May 2001.
-
We would be delighted to reviewing the famous
Secret Report these institutions waived in front of Mozambique's authorities
to pressure for the devastating policy of integrally selling raw nut on the marketplace
instead of processed finished cashew almond.
Does that Secret Report
covered the price comparison between raw nut and finished products? Does that
report envisaged investment to improving productivity in the existing processing
plants? Does that report made management and organizational recommendations to
increasing production and management efficiency? As we exposed here?
Yes? Then the IMF and the World Bank can be considered guilty for withholding
vital information from Mozambique's authorities just to enforce their credo of
strict free entrepreneurship or liberalism. No? Then the IMF and the World Bank
can be considered guilty for blatant incompetence.
-
One way or another the IMF and the World Bank shot in the air the goose that is
the second budgetary hard currency provider to Mozambique's national budget.
The least these institutions can do now to correct their mistake is to provide
substantial funds to Mozambique to rejuvenating and boosting up the cashew nut
industry.
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To a certain extent, Mozambique's authorities also are guilty for blindly accepting
the IMF and the World Bank's wrong recommendations to sell raw nut instead of
processed products to the marketplace. They should have made alternative propositions
to salvage their vital cashew nut industry. The lack of economic data and feedback
between the then public companies in charge of the cashew nut industry and the
Mozambique's authorities proved to be suicidal.
-
The management of the then public companies operating the cashew nut industry
is the guiltiest. They performed poorly; and, certainly
like CAMAIR - before Yves-Michel Fosto's management era - managed without
proper financial tools.
Most
of the time, in Africa, particularly during the 1965-1990's period, management
positions were granted to non trained people. No job description drafted; and
hierarchical positioning of staff member not clearly defined, which also contributed
to the mismanagement of many industrial concerns throughout Africa; and certainly
helped dragging down the cashew nut industry in Mozambique to the dramatic standstill
as per May 2001.
This political game of appointing
(or should we say squeezing) the wrong person into the bad position is
frequent and persisting in many African countries, and is one of the main reason
of the failure of the industrialization policies undertaken throughout the continent.
©
Dr. B.M. QUENUM
Investment and Business
Planner
Click here
for Part -2 and here for Part 1
©2001
Dr. Bienvenu-Magloire Quenum. All rights reserved
TOP
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The drain on scarce and vital financial resources would have been less drastic.