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Thursday, 20 October 2011

Struggling to compete

“Business has not been favourable, because of the stiff competition from the phones being dumped on the market from China which are heavily subsided. This has resulted in us failing to fully penetrate the local market"
Mobile phone assembling plant M-Tech chairperson Mohamed Seedat says the increasing number of imported mobile phones on the market has impacted negatively on the firm’s growth. M-Tech mobile handsets are in the range K140,000 - K150,000 but the market is flooded with cheaper handsets with some costing as less as K50,000. Little surprise therefore that Mr Seedata is calling on Government to come up with "policies that will protect the local industries". A particular problem he has flagged up is the tendency for "handsets allegedly being imported duty-free".

I understand his argument but this would be the wrong industry to impose restrictions on. Low costs of communication regardless of how such costs are driven down is good for country because they drive down transaction costs and improve market discovery especially in rural areas. We need more cheap mobiles. There's really no point having local industries which are not built on lasting or unique advantages. 

3 comments:

  1. There is need to protect local industries and I know the Commerce Minister would come up such measures to support what President Sata said in his address to Parliament last week.

    M-Tech is just one the companies. Cement factories, textile and many agro companies have faced this problem since the open and liberal market become part of the Zambian economy after 1991. Introduction of trade quotas would be a good point. Allow the imported materials to such an extent where they can fill up the void.

    Kunda MK.

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  2. Wouldn't it be nice if a "commission of inquiry" could be set up to find the reasons why some phones land cheaply in Zambia. My guess is that competitive products can be produced by cost leaders(assuming the products are not subsidized) and cost leaders are a product of good technology and low workers' wages. So lets go ahead with putting more money in more pockets without having the most efficient technologies.... I get the feeling we are condemned to being suppliers of raw materials without the ability to add value..

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  3. Can we look at doing something about lowering the costs of doing business in Zambia?
    What percentage of the phone cost is tax, rentals, business licence, factory licence, etc etc. How much of the cost is labour and how much of the labour cost is the extra unworked time every employee is entitled to like leave pay, sick pay, holiday pay, transport allowance, lunch allowance etc?
    Alternatively we have to tax all imported finished products. The easiest way to do this is devalue the kwacha....

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