Fuel supplies have vanished; unemployment is at 80 percent and inflation has skyrocketed 7,500 percent in a year. This may sound like a cautionary disaster film set in the future, but instead it's the current state of Zimbabwe, a country of 13 million located northeast of South Africa. Niall P. Rooney, managing director of Rooney's Hire Service Ltd. in the capital city Harare, discusses how he keeps his rental business afloat even as resources dry up.
SPECIAL EVENTS MAGAZINE: Please describe the current inflation in Zimbabwe.
NIALL P. ROONEY: Zimbabwe's official inflation rate is 7,500 percent per year, which is being fueled by the acute shortage of foreign currency in the country. Basically you have large amounts of Zimbabwe dollars chasing small amounts of foreign currency. It is a classic case of supply and demand where there is a huge demand for foreign currency and not enough to satisfy the market. This has resulted in the Zimbabwe dollar devaluing from 18 Zimbabwe dollars to one U.S. dollar in 1997, to 250,000,000 Zimbabwe dollars to one U.S. dollar in 2007.
Businesses have had to change prices on a regular basis to keep up with the inflation rate; prices move on a weekly basis between 20 percent and 100 percent. If companies don't move their prices at these rates, they will not be able to replace their product and will be out of business the next month. All easy in theory, but the disposable income of the man on the street continuously erodes, which means there is less money in the market to spend. So companies have had to find a balance between increasing their prices too much and not increasing them enough to survive.
One of the first industries in a depressed economy to get affected is the event industry, due to lack of disposable income.
SPECIAL EVENTS: How has inflation affected how you buy inventory?
ROONEY: With the Zimbabwe dollar devaluing on a weekly basis, having money in the bank is no good! As soon as an order gets paid, we have to spend the money. We invest the money in stock, which should hold its value, therefore our storerooms become our bank!
SPECIAL EVENTS: How has inflation affected how you bill clients?
ROONEY: All clients pay for their orders in full before delivery — debtors/credit terms in this environment will kill a business. With the [Zimbabwe] dollar devaluing so fast, you cannot wait more than five days to get paid — otherwise your money will devalue, and you might as well not have done the job.
SPECIAL EVENTS: Describe a recent party for which you supplied rentals.
ROONEY: Despite this crazy economy we are in, there is still a market for top-of-the-range functions. At this time of year, weddings are big business due to the great weather. One recent wedding was for a couple from the United Kingdom where we supplied everything from the marquee [tent] to the dance floor. It was a typical garden wedding set up for a late lunch — all white fabrics, elegant marquee liners, etc. In the early evening, guests moved into another marquee, which was set up as a Moroccan cafe where cocktails were served, and guests danced the night away!
To reach Rooney's Hire Service Ltd. call 263-4-748 621 / 7 or visit www.rooneys.co.zw.
SINK OR SWIM
When the economy takes a dip, a company leader has to work smart to keep his head above water. Niall Rooney shares how his team maintains a booming business in a tough economy and avoids hitting rock bottom.
Rooney's focuses on a specific section of the market likely to have money in this environment, i.e., blue-chip companies, banks, embassies and non-governmental organizations. Their core business is the corporate market — they have identified the top 30 corporate clients and ensured that they remain close to them through tough periods.
Management stays flexible on pricing to fit clients' budgets in order to maintain long-term relationships.
The company conducts an ongoing marketing campaign.
Rooney's has created a base price in a stable currency, i.e., Zimbabwean dollar prices are based on U.S. dollars.
The company has streamlined its product line to a simpler, more cost-effective inventory that's easy to replace locally.
Due to increasing labor costs, Rooney's is looking at a range of tents that require less labor to install.
Pricing and staff salaries are adjusted on a regular basis to keep up with inflation.