Of Middlemen and Sourcing and Supply agents
I have noticed that the debate on the issue of Zesco contracting foreign companies to supply poles has escalated and now being narrowed down to just that of removing middlemen from the supply chain.
Firstly, who is a middleman? For those who know English, a middleman is simply an intermediary or agent between two parties especially: a dealer, agent, or company intermediate between the producer of goods and the retailer or consumer.
In Zambia, the term middlemen has been popular in regards to supply of petroleum products and fertilizer. Many of us have cried that government need to quickly remove middlemen so that we can have cost reflective prices for these commodities.
In business, however, middlemen can also be referred to as sourcing and supply companies. Their role is to simply identify or look for business from companies that need something and then look for manufacturers or producers to make and supply the needed goods. It is a very acceptable business practice world over. The scenario is not different from that of using an insurance broker instead of going direct to the insurance company. It helps in terms of getting optimal services such as customer service and after sells since a middleman or sourcing and supply company may actually have a presence near the customers.
Unfortunately, for Zambia, the middlemen in the supply of petroleum and fertilizer have been foreigners with a few indigenous Zambians working only as fronts or minor shareholders. This is where the problem comes in. Whatever money these middlemen or sourcing and supply companies have made, has actually left the country leaving no benefits on the ground.
Those of us who have interacted or worked with big manufacturers before will agree that, many of them prefer to concentrate on their core business of manufacturing and therefore depend on business agents, middlemen or sourcing and supply companies to bring business to them. Many intermediary or sourcing companies have a presence in many countries which help them to identify business opportunities, tender and win contracts. Manufacturers on the other hand, do not open up offices all over the world, if they participate in a tender, it is mostly a targeted or an invited tender.
Therefore, in the case of Zesco, all they need to do whenever they want to buy something that is not locally made or manufactured is to work out estimates of how much it can cost them to land whatever they want to buy from abroad, then allow a local indigenous Zambian supplier to add a reasonable markup that they can actually cap not to exceed a certain percentage. This actually helps in terms of customer service and after sells services as Zesco will have someone closer who can interface between them and the manufacturer unlike dealing directly with a manufacturer who may not even have a presence in Zambian making it expensive for Zesco to always pay to have them attend to them locally.