Ingenuity buoys Econet, Delta

HARARE - Mobile telecommunications group Econet Wireless Zimbabwe (Econet) and beverages maker Delta Corporation (Delta) capped 2013 with a fine performance buoyed by innovations at a time most companies in the country are struggling to stay afloat.

Econet — the country’s largest mobile network operator by subscriber base ? said traditional voice revenues were maturing and the introduction of a mobile-based money transfer system, EcoCash, and data services on the market “helped register significant revenue growth.”

“We are very excited by the 61 percent growth on data revenues and the more than 550 percent increase of EcoCash revenues which have been underpinned by a strong development of our financial services through EcoCash and Steward Bank and also the level of capitalisation that we put into the business,” said Roy Chimanikire, Econet’s deputy financial director.

The introduction of EcoCashSave — an interest bearing mobile savings account riding on the back of mobile money transfer service EcoCash — propelled the group’s banking arm Steward Bank operations with over half a million of mobile money account holders, making it the largest bank in the country by number of accounts.

“In the past voice (calls) was the biggest contributor of revenue but right now we see data and EcoCash fast approaching levels whereby their contribution is increasing.

“In fact, we have seen that the contribution as a proportion of total revenues growing from five to 10 percent in the non-traditional revenue streams that we were used to,” he said.

In the period under review, EcoCash processed almost $1,2 billion worth of transactions while its subscribers increased by 76 percent to close at 3 million.

“The growth in the volume of transactions was anchored by the exponential growth of agency network, which grew by 338 percent to close at over 7 000 agents,” Chimanikire said.

Econet’s chief executive Douglas Mboweni said although EcoCash was still not that much profitable due to high investment costs, he however predicted that it will eventually account for at least 10 percent of revenue of the group within 18 months.

In the half year to August 2013, Econet recorded an 11 percent increase in revenue to $377 million, spurred by non-traditional innovative products.

On the other hand, Delta, Zimbabwe’s largest brewer, introduced Chibuku Super, which became an instant hit with customers.

The group also localised the production of Maheu, a traditional beverage for most people in Zimbabwe, and the product has done wonders recording a 50 percent increase in revenue to $11 million in the 2013 financial year — its first year of local production.

The brewer, a local unit of the London- headquartered SABMiller, had $153 million in total revenue for the first quarter to June.

Total beverage volumes grew four percent for the second quarter and the half year compared to the same period last year. Industry experts contend that the rapid expansion of Delta products soon after dollarisation also played a very critical role in allowing the group to consolidate its market share.

Over the years, the company has also continued to improve its product packaging as well as hold promotional activities that help highlight its products to the market.

“To that effect, Delta remains one of the most sort after companies on the ZSE and you will agree that what has been key is its ability to deliver value to the customer with the right product at the right price and quality,” noted advisory firm Lynton-Edwards Stockbrokers (Les).

The success stories by Econet and Delta come at a time most firms in the country are collapsing due to outdated business models and lack of capital for retooling.

A recent report by the National Social Security Authority (Nssa) revealed that at least 700 companies have closed shop in the country since dollarisation of the economy in 2009.

Charles Msipa, the Confederation of Zimbabwe Industries president said local companies are heavily affected by power cuts and outmoded infrastructure, increased wage demands that do not correspond with productivity meaning that their productivity is severely reduced. Les noted that local companies need to change their business models if they are to survive the current challenging environment.

“In our opinion the work that businesses must do is already cut out for them.

“The key is to master what customers want and how they want it. No matter how many times the operating environment change enterprises must organize their structures to best meet those needs, get paid for doing so, and make a profit,” said Les.

Les argued that the business models of companies such as AICO, Art Corporation, CFI Holdings, Hunyani Holdings, Interfresh, Medtech, PG Industries, Phoenix, Star Africa and Zeco have failed to withstand the test of time and need to be remodelled in line with international trends.

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