Timely payment of suppliers defines your business reputation

In 2017, a couple of months after my arrival from my assignment at the International Monetary Fund, Steven Din, the Chief Executive Officer of Konkola Copper Mines at the time, invited me for a meeting at the company’s Lusaka office. He had wanted me to be on the advisory team for his office, helping him manage the company’s engagement strategies with stakeholders.

I thought the idea of having an advisory team, not a Board, was necessary for KCM. For many years, the company has not enjoyed a good reputation from among Zambians. They took over the mines from a team of Zambians who, going by their strategic actions during that short stint, had offered hope for a turnaround. Jordan Soko and team had put together a rescue package for the mine that many believe would have attracted significant international capital. That is as far as we were told and the coming in of KCM, with the famous US $25-million-dollar purchase price instead of the sale price of US$400 million, received mixed feelings. The real damage was the leakage of a YouTube video that allegedly showed Vedanta chairperson Anil Agarwal boasting that ‘KCM was bought for a song’.

As at 2014, KCM’s total liabilities of US$1.567 billion exceeded current assets by US$123million and the picture may be worse today. These liabilities included bank loans, deferred taxes, dues to local and foreign suppliers and contractors. The real pain for the country has been liabilities involving suppliers. This is where the upward-downward linkages and multiplier effects of any foreign investment happens. Even where statutory obligations are not honoured, many of us will still support an investment that pays local contractors on time.

My young company, Bridges Limited, has a policy: those who supply to us, be it printers of our training materials, designers of our brochures, auditors of our books, hotels where training takes place, should be paid with the first income. We are fully aware this is where our social license lies. These companies, some of them one-man outfits, have to survive and pay their employees. Paying them on time sustains livelihoods and supports one of our company pillars- transform other businesses.

Your reputation before a crisis will take you out of a crisis.

It is not right to enjoy services offered by suppliers, some of them surviving on bank overdrafts, but fail to pay them on time. I once told my commercial team in the company, ‘By delaying to pay suppliers, we are in effect borrowing from them without a contract defining payment terms, including interest. If we cannot pay suppliers, we are as good as closed’.

During the discussion with Mr. Din, he asked me a question about what Zambians thought of KCM. Before I could answer the question, he chipped in, ‘I have heard people say Indians can just run a shop and not a mine.’ I had heard that too but encouraged him to look at the bigger picture of the KCM, its social dynamics and why reputation was everything for any business. If I were to be an advisor to him (something that did not take off), I was going to help KCM have a critical look at some of its reputational drivers. My work at the IMF was on this same issue (leading to the IMF Global Opinion Survey, 2014):

The questions any business should ask are: What drives people’s trust about you? Why do people think you deserve a license to operate? Is your business focused on the real issues that relate to your mandate and stakeholder expectations? How much time does the Board dedicate discussing reputational drivers, issues that mostly sit with the Corporate Affairs office?

SABMiller for example, had defined its reputational drivers in a very interesting matrix that helped us seek to do the right things all the time. No international company (even local ones) would want to lose the social license to trade on issues that can easily be managed. The SABMiller adage goes, ‘Your reputation before a crisis will take you out of a crisis.’ In other words, a proactive approach to reputation management, investing seriously in the lives of people who matter such as suppliers and local economy, will be your insurance when threatened to close shop.

I always like playing the devil’s advocate and have tried, against my conscious, to give a benefit of doubt to the KCM case, that it should be given a chance to operate. Unfortunately, public sentiment against the mine is extremely strong. It is so strong that when I had a conference call with global fund managers on the perceived policy reversal governing the mines, I told the investors the KCM issue was a lost battle because nearly every Zambian, NGOs, political parties, were unhappy with the mine (and possibly others too!).

Can the KCM fortunes be salvaged now that the President has voiced out his concern, that KCM has not been an honest partner? If someone calls me a liar, I will dig in; seek to correct the impression at all cost. It will take a huge new level of commitment for KCM to regain its social license. I, however, wish the company well.

         

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