High rentals affect business
Published On December 23, 2015 » 1520 Views» By Bennet Simbeye » Business, Columns
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SMEs coener -  newOne of the trouble shooting expenses in running a business is rent, an expense for most of the businesses that do not own premises to operate from.
I remember in one of the articles I wrote previously, I talked about how troublesome this expense is together with salaries.
Today I continue to view this expense especially in the wake of the unstable exchange rate the Kwacha is passing through.
When business analysts talk about the cost of doing business in this country as being high, what they do is to aggregate the cost of doing business, categorically looking at them and collectively seeing how conducive it is to do business in one particular area in this case, a country like Zambia.
It is out of this situation that analysts compare the cost of doing business to other similar areas.
In this way they compare areas using similar conditions.
Doing business in Zambia today has even become more costly in the sense that property owners peg their rental charges in United States dollars.
Because of this, small businesses are busy closing up or trimming adjustable expenses such as salary bills to survive. This also entails cutting down the labour force.
So far, I have met three business entrepreneurs who have closed their entities because rentals have gone out of reach as property owners are adjusting them in accordance to the exchange rate.
For them to achieve this in which property owners always adjust rentals each time the rate goes up, they  simply demand dollars and if you do not have them, it is up to a person to pay using local currency at the ruling rate.
A rental charge of US$2,000 per month, which was at K6,000 when the dollar exchange rate was at K3, today is at K22,000, representing an increase of K16,000 in rentals. Do you expect the business owner to continue to be in business especially if the revenue has not increased at the same rate in the same period?
The answer is No.
I passed through the area which I am not going to mention and found about six shops and warehouses in a row unoccupied and deserted not because business executives do not  want to occupy them but it is  due to the fear of high rental charges.
One business executive of Asian origin who had occupied part of the premises for 18 years, who has now surrendered one shop and a warehouse, told me that the property owners do not care at all.
We know that the Kwacha is no match to a dollar because of the combination of factors but honestly, should this be the reason for property owners to be pushing the Small and Medium Enterprises  (SMEs) out of businesses?
After all, the construction of shops and warehouses used three quarters of local building materials.
Even if we are operating in a free market economy, other practices are damaging and need the Government to intervene and put in place control measures.
While the property owner is not caring about this, SMEs are busy closing their businesses and sending employees on the streets.
Government should stop those business executives who are pegging rental charges in dollars to save this skyrocketting expense which is now throwing small businesses out of operation at will.
You know what the property owners do when you ask about rental charges, they simply tell you that it is $2,000. It is up to you to calculate the Kwacha equivalent involved or alternatively give them the dollars and they go to obtain the Kwacha using the current exchange rate. Very tricky indeed!
However they are other property owners who have continued to charge rental charges in Kwacha despite of the volatile exchange rate and I call these patriotic Zambians with hearts for SMEs and very concerned for that matter.
Government should step in to even the ground or else the amount of sufferings emanating from this ground will increase because SMEs have no power to control these property owners who are now forming cartels to punish innocent small businesses.
For comments contact 0950458228 or wklpublications699@gmail.com

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