Where Malawian entrepreneurs lose it
Expectedly, local businesses, notably bus operators, cried foul that government opted to hire South African registered buses to ferry Malawians displaced by anti-migrant (xenophobic) attacks in the rainbow nation back home.
Business decisions require business thinking. In the case of hiring the South African registered buses, I felt the Malawi Government, in one of the rare cases, made a decision as a business entity and not a charity.
South African bus operators quoted the Malawi Government K3.3 million per bus for the trip to Malawi. In contrast, our local operators charged K8.8 million per bus for the same trip.
Patriotism aside, one does not need to be an expert or specialist in procurement matters to realise that the K3.3 million deal, not the K8.8 million one, was a better deal.
In business or procurement transactions, pricing matters a great deal. Everyone wants to get the best deal in terms of price. This is where the Malawian transporters lost out.
Interestingly, some of the operators, and expectedly so, accused government of sidelining them by denying them an opportunity to transport their brothers and sisters back home. They argued that if the issue was pricing, they were ready to enter into negotiations and offer a better price. Then, what was the basis of the first quotation of K8.8 million?
The two quotations—K3.3 million for South Africa and Malawians’ K8.8 million—sparked a heated debate on the social networking forum, Facebook. Many who commented on the topic said Malawian entrepreneurs wanted to cash in on the situation. Exploitation, so to speak.
How did the South Africans arrive at K3.3 million which, of course, they also made a profit on? One of the contributors to the debate, James-Mark Fombe, a procurement specialist who has worked with several international agencies, said: “A Man and Scania engine of 24 horsepower on the [South Africa-Malawi] route will use up to 800 litres of diesel on a round trip. Based on the expensive side of diesel [in Malawi] in our case K700 per litre, it will add up to K560 000. If you add border, road charges of up to $600 [K270 000]. Toll fees of the entire 1 800 km is up to $200 [K90 000]. To pay two drivers for a four-day round trip comes to R3 600 [K140 400 or K280 800 for two] each. Wear and tear calculated at five percent of fuel cost.
“Basically, the worst case the trip could cost almost K1.4 million. At K3.1 million, SA bus companies still make a huge profit [normal in logistics 60 percent is net profit for efficient transporter]. Same buses make up to K2.7 million on their own usual or routine business trip on this same route.
In light of these rough estimates, a Malawi sitinadzikonde. We do not love Malawi.”
Besides pricing, other aspects one looks for in procurement is sustainability or capacity. Perhaps with the exception of one or two operators, most of the buses plying the Blantyre-Lilongwe route hardly make it to either destination without a breakdown. Now this is a 320-kilometre distance, could they then have made it to and from South Africa within the acceptable period of travel?
Pricing is where many Malawian entrepreneurs get it wrong.
