Trust is gold in business

Source: Trust is gold in business | The Sunday Mail May 22, 2016

THE recent announcement by the Reserve Bank of Zimbabwe that it will introduce bond notes has set the market ablaze.

There is anxiety that bond notes — just like the traveller’s cheques and bearers cheques before them — will largely be a precursor to a much deeper economic crisis.

The fear, it might seem, is justifiable. However, monetary authorities say present cash shortages are driven by individuals and companies externalising money.

But the underlying factor to all these vices is simply the lack of trust, particularly in the banking sector, that the transacting public have.

By the RBZ’s own admission last week, the rate of savings in Zimbabwe at -1,5 percent in 2015 is way below regional averages.

Ideally, the rate is supposed to be at least 30 percent of GDP to support economic growth.

Over the years, international experts have been able to produce well-documented cases that prove companies – especially those in the mining sector — have been externalising money from resource-rich countries for a long time. Be that as it may, there is a section of businesspeople that prefer to bank offshore and move their assets overseas because they live in real fear that their assets might be seized by the central bank.

Well, they cannot be faulted because this has happened before. But times have changed.

There are new administrators at the RBZ that are begging the market for the opportunity to be trusted.

It is paramount for policymakers to ensure that policies are predictable. In an environment where policies often change, it is not uncommon for investors to develop a “grab-and-go” mentality. It goes without saying that Government has to invest in trust to attract more investment. In business, trust is gold.

It is encouraging that there are already measures that have been put in place to improve the ease of doing business.

The queues that are beginning to surface in local banks are not in the least encouraging for a market that already mistrusts the banking sector.

Urgent corrective measures should therefore be a priority.

Even though RBZ has reassured the market that bond notes will not be disruptive in the market as they will be backed by a facility from Cairo-based Afreximbank, the public is still skeptical.

It’s not going to be easy for the central bank to woo the market, but they really need to acknowledge the fact that the market is indeed worried and redouble their efforts to restore both the trust and reputation of the financial services sector.

To acknowledge this will be a sign of real humility from the authorities.

For those who unceremoniously lost their savings, investment and holdings in banks, it will take quite an effort to convince them to trust the local financial markets. So, there is more to do for the RBZ.

A starting point will be a vigorous PR campaign to educate the market of how the new system of bond coins will operate, including convincing them into accepting their reasons as to why the cash shortages will be any different this time around.

Such campaigns should not be targeted at the local market only, but at other overseas markets, for the country’s brand is paramount. However, it is not only about fire-fighting.

Policy makers must endeavour to put in place early warning systems that are supposed to detect potential crisis before they happen.

This is why analysts believe that we only got to realise how bad the situation was when we were already in a crisis.

Systems and checks are therefore very important.

Bureaucrats need to abandon the laggard manner they go about Government business and attend to pressing national matters with the urgency they deserve. Suffice to say, key Government institutions have to be more efficient.

The work has to begin now.

According to Dr Graham Dietz, a senior lecturer at Durham Business School, trustworthiness consists of three main characteristics: technical competence to perform a task reliably (ability), having benign motives (benevolence), and acting according to acceptable ethical principles such as fairness and honesty (integrity).

If all these attributes are exercised consistently and credibly, trust can be earned even from the most paranoid of people.

Conversely, if any of the principles are not applied carefully, then one risks making their reputation suffer.

Trust is remade, strengthened or undermined in every encounter. As with individuals, so with organisations.

A trustworthy organisation is one that operates effectively, acts with due concern for the interests of its stakeholders and conducts itself with integrity.

Support for trust and trustworthy employee conduct needs to be reinforced throughout the country: by its leaders (role-modelling), its culture (values and beliefs), its policies and procedures (task design, checks and balances, HR), and management practices (targets, incentives, supervision).

Organisational trustworthiness can also be achieved through external regulation.

Zimbabwe has a very rich history and once trust is restored it is very simple to do business in Zimbabwe. The country’s trade deficit is appalling, and as long as we keep importing, we will always have challenges.

It is crucially important to revamp the local agriculture and manufacturing sector in order to generate the much-needed currency and revenues.

Taurai Changwa is an articled accountant with vast experience in tax, accounting, audit and corporate governance issues. He is MD of SAFIC Consultancy and writes in his personal capacity. Feedback:, Facebook page SAFIC Consultancy, and WhatsApp +263772374784.