A recession, defined as two consecutive quarters of negative economic growth, can be caused by economic shocks (such as a spike in oil prices), financial panics (like the one that preceded the Great Recession), rapid changes in economic expectations (the so-called "animal spirits"). Winter is coming this year for the third time in Zimbabwe after the 2019 national recession and 2020 global downturn

The global economy may spill back into a recession in 2023 as a result of tighter monetary policy and cutbacks on the government's COVID-19 stimulus spending. In the wake of COVID-19, governments moved in to cushion economies through stimulus spending as output and aggregate demand declined. Sustained stimulus meant higher leverage levels for most countries and consequently the build-up to an inflationary outlook. Higher liquidity levels spontaneously inflated asset prices as evidenced by record equity market surges in 2021. The NYSE, LSE and JSE all reached record-high levels during the respective periods. The US pumped US$5.2 trillion in stimulus packages while the Federal Reserve cut the benchmark rate to encourage borrowing and also bought back its securities in a motion known as quantitative easing.

Referencing the "Roaring Out of Recession" article by Ranjay Gulati, Nitin Nohria, and Franz Wohlgezogen, 17% of the public companies after the recession either go bankrupt, private or become subject to takeovers. However, 9% of the companies can flourish beyond the competition line and outperform the industry of operation if they strategically align their operations. A more recent analysis by Bain using data from the Great Recession of 2008 reinforced that finding. The top 10% of companies in Bain's analysis saw their earnings climb steadily throughout the period and continue to rise afterwards. A third study, by McKinsey, found similar results.

This article delivers an amicable panacea for the wholesalers and retailers in the Zimbabwean markets. This comes at a time when the important sector players have been competitively delivering unpleasing financial results. This has been the opportunity cost from the government playing restore legacy to the lost price stability.

The road map for the wholesale and retail sector

Firstly, businesses need to analyse their current situation and identify ways in which they can reduce their operating expenses. This could include cutting wages or reducing stock levels. The company that delivers lower expenses maintains a good revenue base which will sail the company through the economic downturn. Empirical evidence suggests that a company's expense management should extend beyond workforce retrenchment. Bain's research suggests focusing more on hour reductions, furloughs, and performance pay.

Companies should also consider increasing their liquidity, by either increasing their savings or obtaining additional funding from external sources. According to Rebecca Henderson, the rule when moving towards recession is to maintain enough liquidity to fund operations during the downturn. Funding options have to be explicitly not debt related. An example of recession preparation was realised in the actions of Amazon during the early 2000 crisis. The bookseller sold $680 million in convertible which sustained and sailed the company through the dot-com bubble burst

Additionally, companies should use this time to diversify their sources of revenue and consider new marketing strategies. Diversification is an important element of a company's financial strategy as it helps protect against the risk of higher inflation. By spreading investments across a variety of markets and asset classes, a company can reduce its exposure to a single market or asset class that could be affected by higher inflation. Diversification also gives companies access to different investment options that can be used to achieve the company's desired return.

It is also important for Zimbabwean businesses to look for ways to reduce their overhead costs, such as electricity and labour. Additionally, it is important to focus on customer service as customer loyalty can help businesses survive a recession. Finally, businesses should also review their pricing and consider either lowering their prices or offering promotions and discounts to attract more customers.

Shedding more light on Ok Zimbabwe operations

Ok, Zimbabwe has been racing to outstrip competition in the retail market despite the prevailing harsh economic environment for its operations. This is on the back of its recent acquisition of the majority stake in Food Lover's Market, a popular Zimbabwean grocery chain, which is seen as a major step towards consolidating the retail sector in Zimbabwe and creating economies of scale. This has been one step forward in preparing a striking a punch-back from the anticipated economic downturn.

However, the company is still miles behind from winning the match as it needs to thoroughly look into its labour relations, customer relations and its capital structure. The recently published 2023 half-year financials show a liquidity ratio of 1.14 which is close to the bench-marked ratio of 1:1. Looking forward into at least 6 months period of low sales volumes the group requires working towards expanding its cash base. 

Companies like Walmart, Apple, and Amazon have increased their liquidity ahead of the 2023 recession. These companies have increased their cash reserves and investments to minimize the financial risks associated with the recession.

Recently, the online bookseller, Amazon is reported to have increased their spending on product development, recruiting, and building new fulfilment centres. This strategy allowed them to capitalize on the resulting growth in the e-commerce sector, which helped them remain successful during the economic downturn.

Ok, Zimbabwe should also look into technological advancement, an expansion from the till operating system to self-service machines to minimise the opportunity cost than in a non-recession period.  When the economy is in great shape, a company has every incentive to produce as much as it can; if it diverts resources to invest in new technologies, it may be leaving money on the table.  A successful recession-prepared company was IBM in the 1980s. The technology-based company invested heavily in new technology, research and development, and employee incentives, anticipating a potential downturn. As a result, the company saw their profits more than double in the 1980s, while the industry as a whole struggled.

In conclusion, Ok Zimbabwe should consider a variety of policies when preparing for the macroeconomic environment. These policies should be tailored to the company's individual needs, considering its objectives and resources. Strategies that the company could consider include diversifying its income sources, seeking new opportunities, budgeting to manage cash flow, improving organizational efficiency, and investing in technology to strengthen its operations.

Based on research, successful companies during recessions typically utilize a few common practices and strategies. One of the most common policy strategies is to maintain a tight grip on liquidity management, this means having cash on hand and keeping debt levels low. Companies also often prioritize cash flow and cost-cutting.

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