Tag Archives: zimbabwe banking

Entrepreneurial Principles from Institutional Investors Perspective


Entrepreneurial Principles
1. It’s important to have a credible business plan and model.
2. Who you are is more important than your business idea. The substance and integrity of the promoters is critical because investors invest in people and not business plans.
3. Be prepared to lose control in order to grow the business. 30% of a bigger pie is better than 100% of a miniature pie. Promoters are sometimes shortsighted and once successful become greedy and want institutional investors to exit. They forget that these supported them when no one else would.
4. Give the investor a level of comfort so that he believes that he has a competent and capable steward over his investment. Investors take calculated risks.
5. Your past matters. Where have you been? What have you accomplished or done? How faithful and successful where you, wherever you have been? How did you relate to others? Can you be trusted? These character issues are more important than competence. The Bible teaches that faithfulness in another’s business qualifies you for your own.
6. Investors are comfortable in the credibility of a pool of resources and competences in a team of promoters rather than risking their money on one person’s skills. Whenever there is a team the robustness of the internal relationships among promoters is critical. Compare the Unibank and Century scenarios to solid teams like Trust, NMB,
Kingdom, ReNaissance, Royal etc.
7. Demonstrate to investors that you are also putting your own resources at risk for the business idea.
8. To build transgenerational businesses one needs stability of shareholder base. However depending completely on institutional investors may be unwise as these tend to quickly change their positions and offload their equity. Most institutional investors think short term. It follows that once a business is established efforts should be made to replace short term investors with some stable long term friendly investors e.g. Econet Wireless Capital and Meikles in Kingdom Financial Holdings.
9. Entrepreneurs in the banking sector coming from a poverty mentality failed to convert to an abundance mindset. Consequently some focused more on personal success than the success of the business that would create transgenerational legacies.
10. Have a clear perspective of the purpose for wealth creation agenda. Why are you creating wealth and for whose benefit?
11. You can not build a structure without solid foundations. Success is about principles and values rather than gifting.
12. Do not be a copycat. Understand the business and the rules of the game you want to play.
13. Refrain from being greedy and selfish. As you share the cake, your piece grows.
14. Be transparent with, and communicate with clarity to investors and customers.
15. When faced with challenges persist. Persistence pays. There is need to sacrifice in order to create long term wealth. Immediate gratification and consumptive patterns rob the future.

“The one thing people and nations must understand is that in order to prosper they must be willing to sacrifice. I am willing to sacrifice now – knowing that the benefits will manifest in the future.” Founder of Daewoo.

Entrepreneurial Principles from ReNaissance Financial Holdings


Editor: I have left this post exactly as it is in Entrepreneurship On Trial which I penned in 2010 for a purpose.

Entrepreneurial Principles

This case study shows how an entrepreneur was formed, how each decision led to new doors and greater opportunities. It’s too early to adequately evaluate the FML foray. So far so good! But what events could cause this to become an albatross? How might Timba
avoid those vulnerabilities? What are the likely scenarios of how this investment will proceed from here? How might Timba proceed more effectively? What risks should he avoid taking? Answering these questions is the challenge of strategy.

The learning points for entrepreneurs from this case study are:

1. An entrepreneurial business is built on a solid business model and philosophy. The business model can be remodelled, as Prof. Mitchell argues so powerfully in his books.

2. In entrepreneurial investments sometimes one does not have to own the asset if he can control and derive benefit from it. For example using Econet Wireless Capital’s resources when his had run out, Timba managed to acquire control of FML.

3. A keen concern for the human resources of the entrepreneurial venture and delivering value to them increases the value of the business.

4. Cultivating and protecting a network of relationships is critical for an entrepreneur. Timba’s relationships with Strive Masiyiwa, Shingai Mutasa and Gideon Gono, for example, have proved beneficial to him.

5. Business challenges can be converted to opportunities, depending on how one views them. It all depends on one’s mindset. The threat that FML posed to RFHL was successfully converted to an immense opportunity.

6. Decisiveness is critical to entrepreneurs but this does not imply risk-taking without counsel. Surrounding oneself with strong leaders who can offer counsel is beneficial in the high stakes game of business.

7. A strong and supportive family environment is crucial to business success.

8. At times, fortuitous decisions define an entrepreneur’s path. Strategy is not only planned but can also emerge. There is an unseen hand directing the steps of humanity. At times it is important align to oneself with that direction.

9. Prior experiences enable an entrepreneur to face more challenging tasks. Entrepreneurs analyse their experiences to derive learning points. Timba gained critical experience in being faithful and diligent in handling other people’s business and this qualified him for his own.

10. Entrepreneurs are very deliberate in their strategic thought processes.

Leadership versus Management


As an enterprise grows there should be a change from a leadership focus
to a management focus. In other words, dependent on the size, complexity and
diversity of the organisation, the dominant leadership profile needs to change.
The enterprise leader stops being the management and manages through
delegation. At inception the entrepreneurial venture is led by the visionary
who in most cases embodies strong leadership competences. However leaders
thrive on change and conquering new ground. They are forward looking and are
spurred by the thrill of the hunt more than the maintenance of what has been
acquired. The entrepreneurial bankers grew their organisations to levels where
there was a need for strong managerial competences, which most of them lacked. At
this stage it was observed that systems were inadequate and cases of serious
fraud were unearthed within some of the banks.

Nigel Chanakira observed, with the wisdom of hindsight, that the move
into commercial banking for Kingdom was premature as there were no managerial
competences to handle it. This situation was rife in the banking sector as most
of the banks converted from merchant banks into commercial banks with
inadequate management competences. Commercial banking is complex and risky as
compared to merchant banking which requires a small staff complement and fewer
people having access to cash transactions.

Some banks, e.g. NMB and Kingdom, worked hard at creating and acquiring management systems. NMB had a deputy managing director who had been an auditing partner with a chartered accounting firm and was good at systems. He effectively acted as the Chief Operating Officer. Because of this, even when the bank had an aggressive run on deposits and an assault from predators after the forced exit
of the founding directors, it remained stable because of strong managerial
systems. It survived where many others could not stand. Kingdom benefited from
a decision to acquire managerial skills through a management agreement with a
Holland-based bank which provided seasoned bankers to complement its skills
base. These helped create systems for the bank. Unfortunately this agreement
seemed to have lapsed by the time it entered into the commercial banking project
when it needed it most. The shortage of foreign currency in the country could explain
why Kingdom did not renew the contract or find a replacement, as the service fees
would have to be paid out in foreign currency.

Other entrepreneurial bankers were hesitant to delegate management
functions as this would have meant the risk of entrusting their hard earned
investments into the hands of others who might make mistakes with them. For
many entrepreneurs, delegation is not easy as it implies that they have to:

  • · manage and coach people instead of
    just making the decisions. This is particularly hard as leaders pride
    themselves on their decisiveness.
  • · Stand by and watch people make
    mistakes with their money.

The governor of the Reserve Bank correctly diagnosed the need to
separate the leadership from the managerial role. However what is disputed is
whether this was the right time in the life span of these businesses to move
them into the hands of professional managers and whether it necessarily implied
an expulsion of entrepreneurial bankers from their own investments.

This raises an issue of conflicts in leadership theory on the role of
managers and leaders. In my view, managers are concerned with the stewardship
of resources whether material, financial or human. Consequently they tend to
exhibit a more conservative approach.

This in no way makes them subservient to leaders in importance. They
play a critical role of maintaining and conserving what would have been gained
through the entrepreneurial activities of leaders. They build the capacity to
contain and grow what leaders acquire and exercise innovation and originality
in their sphere of influence. Managers thus are creators of structure and
systems that enable consistent performance while reducing chaos and risks in
the work place.

Leadership experts, Kotter and Buckingham both contend that strong
leadership and strong management are needed in large organisations. Kotter argues
that strong management alone discourages risk taking and enthusiasm while
strong leadership alone disrupts an orderly planning system and undermines the
management hierarchy.

It is my view that with start- ups there is more leadership first and as
they grow into complex organisations, one needs to have strong management
coming on board to bring order and create systems. A failure to appreciate this
has adversely affected the Zimbabwean banking industry. Since 1998, when the
financial services were deregulated, there has been explosive growth of
financial institutions with new banks being born as entrepreneurial bankers
exploited the opportunities. However as these new banks grew, the
entrepreneurial founders continued to create innovative products and assume
risks without strong managers to create order and structure to the increasingly
complex organisations. This led to a major crisis that resulted in some of
these banks collapsing.

This is a case of entrepreneurial organisations which were “over-led and
undermanaged”, contrary to the situation in developed countries wherein
companies are mostly over- managed and under- led.

The decision for the delegation to professional managers is dictated by
the entrepreneurial life cycle stage of the businesses. In the growth stage one
still requires a strong leadership role. However in the maturity phase there is
urgent need for strong managerial competences.

In retrospect, although the RBZ’s view that banks needed strong
managerial competences was correct, the decision to force strong
entrepreneurial leaders out of management was unfortunate. The industry had not
reached maturity stage at that time. It was in a strong growth mode within a
high risk and highly competitive environment which necessitated strong
leadership roles. The sector needed both strong leadership and strong
managerial roles within banking organisations. Strong managers and strong
leaders are not mutually exclusive. It can be argued that the positions of both
the bankers and the central bank were faulty because they were largely based on
an either/or perspective. Strong entrepreneurial leadership would have
benefited from strong managerial competences at this critical stage in the
growth of the financial services. We needed banks which were both well led and
well managed.

Extracts from Entreprenurship On Trial by Dr T. A. Makoni

Understanding Your Operating Environment


Entrepreneurial Principles extracted from Entrepreneurship On Trial Dr T. A. Makoni

Entrepreneurs build their business within the context of an environment which they sometimes may not be able to control. The robustness of an entrepreneurial venture is tried and tested by the vicissitudes of the environment. Within the environment are forces that may serve as great opportunities or menacing threats to the survival of the entrepreneurial venture. Entrepreneurs need to understand the environment within which they operate so as to exploit emerging opportunities and mitigate against potential threats.
There is critical need for entrepreneurs to appreciate and understand the salient issues in the operating environment. It also demonstrates how the regulatory environment opened an opportunity for entrepreneurs. Some banks failed because they did not recognise the potential impact of the changes in the environment. This underlines the susceptibility of entrepreneurs in volatile environments to policy changes and reversals. The effect of the macro-environment on banking was highlighted. The underlying forces in the industry were revealed by the industry analysis.
The change in the regulatory environment brought in by the new governor resulted in the collapse of about ten financial institutions. Some of these had been deemed to be strong and thriving. In one year the financial services moved from the greatest growth industry in Zimbabwe to a virtual collapse.
The lesson learnt is that entrepreneurs need to scan the environment regularly and position their businesses appropriately. Entrepreneurs should to understand that the environment is always in a state of flux and hence has to be monitored to enable their businesses to exploit opportunities while mitigating against potential threats.
It is critical for entrepreneurs to recognise that the rules of the game in business are not cast in stone, these can change dramatically overnight to the detriment of the entrepreneurial venture. It is therefore imperative for entrepreneurs in volatile environments to maintain strategic flexibility.
Within each industry there are differing market penetration strategies open to entrepreneurs.
Another important principle is the need to analyse and understand the underlying forces driving the industry in which one does business. Banking entrepreneurs could have benefited from this analysis. In high flux environments it is important to recognise the presence of key uncertainties both “known unknowns” (things we know that we do not know) and “unknown unknowns” (things we do not know that we do not know)24.

Ensure that you seek to understand the underlying forces at work in the environment in which your business will operate. The environment can provide either great opportunities or send some threats to your survival. Continue scanning your environment. Entrepreneurs become astute at managing their environment to exploit opportunities and reduce risks. Entrepreneurs learn to handle what ever hand they are dealt with by the environment. Manage your environment. Stop crying foul. Entrepreneurs are not cry babies.