I had met him a few times before when he came to officially open training programmes in which my company, Bridges Limited, was involved. However, last week gave me an incredible long encounter with Henk Mulder, Zanaco Managing Director.
At personal level, Mulder is extremely easy to engage; I doubt he has strangers on his mind. He just drills into a subject, engages you warmly and not afraid to express his opinions about nearly everything, from the Konkola Copper Mines, the hottest subject at the moment – and most of us trying to keep away from commenting – to the role of youths in developing Zambia’s economy. If you meet him on your way to catching a flight, I warn you not to engage him on any subject touching on Small and Medium Enterprise or youths otherwise by the time you realise it’s time to board, the plane would be airborne.
With regards to empowering SMEs, he comes out only as the second person, I have ever met, after Andrew Sardanis, with deep and vibrating passion about why and how entrepreneurs in this sector should be nurtured, mentored and supported. Three things emerged during our discussion which I had to cut short because it was time for a training session.
ZAMBIA HAS PROSPECTS – Great entrepreneurs possess a strong positive mindset. They see opportunities where others see failure and doom. Good entrepreneurs thrive in both bad and good times. When communities are thriving economically, entrepreneurs open restaurants, service stations, bakeries and supermarkets. But where communities are facing hunger, entrepreneurs travel distances in search of food so that they sell and feed the hungry.
Mulder does not seem to notice the Zambian economy is undergoing significant recession, high external debt position, weak Kwacha, weak external reserves. His mind is focused on what’s working, ‘The prospects in almost every sector are incredible,’ he said. He was short of saying this is the time to invest. He strongly believes Zambia is at the verge of a significant economic turnaround. I would have doubted his optimism if he was a politician working with government. I took him seriously because he was overseeing a bank that made K184 million profit in 2018, an increase of 61 percent from the previous year. The money was made during the same time the government deficit was glaringly high and both domestic and foreign debts soaring. It means the bank looked into right areas even when the economy was experiencing dire straits. As an entrepreneur myself, the encounter uplifted my own mindset, how to value all opportunities and redirecting energies to areas that will increase corporate value.
DEBT CAN KILL YOU! The most interesting remark was when Mulder warned that financing a business by debt alone can kill your business. Bank managers survive by selling money we call ‘debt’ and it is these advances that account for the large part of the bank’s profits. Mulder believes an entrepreneur will do well finding own money, even from relatives, as initial capital even before seeking a bank loan. He considers bank credit as merely supplementary. He was short of saying, ‘When you put own money first, you tend to manage your business prudently’.
He also believes your debt exposure should not be more than 50 percent of your total assets or capitalization. When a bank manager with tremendous experience provides this kind of advice, your first reaction is to immediately revisit your debt-equity ratios. The higher the debt you entertain in your business, the more your business is at risk of bankruptcy.
SMES ARE KEY TO ECONOMIC GROWTH: It was this part of the discussion that nearly ate into the training session. His appetite for SME support is unquestionably high. SMEs are generally taken to be companies with less than 250 employees though in Zambia, 50 employees is the acceptable benchmark. SMEs are considered the engine of innovation and economic growth. The SMEs deserve national recognition because that’s where nearly all Zambian entrepreneurs are. They are in mmanufacturing – textile products, wood products, light engineering and metal fabrication, food processing, leather products, handicrafts and ceramic.
Zambians are also in the service sector – restaurants, hair salons and barbershops, passenger and goods transport and cleaning services. The majority of Zambians as I travel the country are also found in the trading sector – consumable products, industrial products, and agricultural inputs and produce. Looking at the potential impact of SMEs, one fully understands why a bank manager wants this sector nurtured, mentored and supported.