By Rama Isibo African economies have had varying degrees of success in adapting to the modern business world. During the Cold War, when billions of dollars were propping up dictatorships, there was little need for internal competition. Our economies were centrally planned with fixed exchange rates, prices and state-run monopolies given free reign. November 1989 and the fall of the Berlin Wall changed that. African nations went from being erstwhile allies to being a drain on resources of their previous patrons. All the aid was cut, our massive debts were called in and the true state of our financial dependence came to light. Suddenly the West trumpeted two things; DEMOCRACY and FREE TRADE.
All African nations, without exception, went through turmoil for the next decade as the previous system was replaced with a more progressive one. Privatization, liberalization, deregulation, and diversification were all policies promoted by the IMF and World Bank but were not entirely understood by the governments implementing them. They were seen as a necessary evil or a precondition for aid, therefore the bitter pill of restructuring was just swallowed without realizing the benefits of liberal trade.
In Africa, and Rwanda in particular, competition is sometimes taken as a personal affront. In a country where monopolies ruled until very recently, business rivalry extends to personal enmity. However, competition is a central pillar of capitalism. It encourages efficiency, innovation, high productivity, lower costs and, according to microfinance experts, it is the best way to distribute resources.
The monopolies of old gave way to oligopolies with just a handful of players determining the structure and costs of a given industry. This can lead to a cartel situation with price-fixing. A cartel is an unofficial agreement between rival firms to create and maintain a status quo, the exact opposite of competition, and the customer is effectively held hostage to the whims of the cartel. The basic rule of competition is the more players the better, but there has to be a balance in market share, for example if MTN wanted to take over Rwandatel it would have an unfair advantage in the telecom industry and the customer would be subject to monopoly.
Rwanda needs to develop competition in 3 main categories.
Direct competition – this is where similar products compete against each other, such as Coke and Pepsi, Huye and Nil water, Primus and Bell Lager. The variety of similar products and brands means better choices for the consumer.
Indirect competition – this is where different products perform similar functions but are in competition. For example, when a consumer has a choice between a soda or tea. These two products both quench thirst but are different. In China during the launch of Coca-cola it was noted that traditional Chinese tea was the main rival for consumers and not other colas.
Budget competition – this is when products compete on price and a share of the budget. For example, someone with an income of RWF 300,000 can have a choice of buying a car or a computer or spending it on socializing. Here, three different products and activities compete for the same money.
These are all forms of competition that Rwandans sometimes dislike, despite it being the key to success. Talking to Rwandans, you hear the same story every day, of how they came up with a brilliant idea and somebody came along and stole it. Rwanda is still a virgin land with enough room for everybody, and the fact that someone is doing something similar should not discourage an investor. Imagine competing in a 100 meter dash without competition to spur you on. You could crawl to the finish line the next day and still win. However if there is a cash prize and several hungry rivals, then you would have to put your best foot forward. Alternatively, if you were racing against fit athletes then you would have to get yourself into shape.
Competition spurs innovation as companies try to stand out from the crowd. Better services and competitive pricing are results of this but competition in supply is equally important. In the field of manufacture and export, it is important to have multiple sources of supply.
When the opening up of the East African Community is fully realized, a number of Rwandan companies will struggle to compete with their more dynamic and experienced rivals. The fact that few Rwandan companies look outside of Rwanda does not bode well for the future. When Kenyan, Ugandan and Tanzanian firms enter our free-market we will be swamped. Rwandan firms have to devise strategies to tap into neighboring markets or face extinction.
We need external as well as internal competition, as both are important. This idea was first introduced at General Motors in the 1920’s by Alfred Sloane. At a time when Henry Ford had cornered the car market with his mass-produced and affordable cars, few firms could compete with Ford’s assembly line and efficiency. General Motors went ahead and introduced internal competition to bring up the standards. Departments within the company were in competition with themselves. This happens in Rwanda too. Primus and Mutzig are made by Bralirwa but are competing for market share. The world of sales is based on this idea. Performance is based on the number of sales made.
Competition needs proper systems analysis, with adequate data collection and analysis to determine performance weak spots. Key performance indicators are important in quantifying and qualifying success. For example, a baker could see a rival baker doing better so he would have to ask the following:
- How many loaves is he baking? CAPACITY
- How much does it cost per loaf? COST
- How much time does it take to bake a loaf? EFFICIENCY
- What is the quality of the loaf, can he increase it? QUALITY CONTROL
- What is he doing to market his loaves better? MARKETING
- What does the rival baker have that he does not? COMPETITION
- What other products can he make to supplement his revenue? INNOVATION
- How many people is he using? PRODUCTIVITY
All these apply to any business, be it IT or baking. The service sector in Rwanda is lagging behind all others due to lack of competition. My favorite Kinyarwanda saying is “Ushaka’ inka aryama nkazo”: “If you like your cow, you sleep like it does”. Which essentially means you would do anything necessary if you really need something.
Rwanda needs to get competitive to survive in the global economy. If we really want to succeed, then we have to get competitive, with each other and within ourselves. We should emulate that with profits. Striving for perfection is an endless pursuit and staying in the comfort zone will not help us achieve that. Competition is the way forward, so let’s move forward.