Page 57 - Countertrade

Sources of Finance:

a) Investment in equipment was absorbed into costs

b) Profit was ploughed back into the business

c) Credit from VOS or banks

Virtually all the profits made had been directed towards development and
the purchase of raw materials. Wage were suppressed.

In 1994 the financial group within the enterprise was given the status of a
department. Its basic functions were:

1 : Credit Control

2 : Inter Payments (barter or counter trade)

3 : Analysis of future plans and activities

The department used manual methods to process data and, with a large
information flow, found it difficult to analyse the data coming to it. This was
particularly serious when the rules on taxation were changing daily and
there were 1,500 suppliers and 2.000 customers.

Seventy per cent of transactions were conducted on counter trade basis.
These included payments for raw materials, electricity, transport and
containers for transport. Transport costs alone accounted for ten per cent
of total cost.

The enterprise obtains its energy requirements from the neighbouring
copper smelting factory in exchange for which they barter or pay the
factory’s debut to others by barter with whatever goods they themselves
have acquired. A consequence of this system was that the enterprise
opened seven retail shops in the urban areas to sell the goods they had
bartered as well as those manufactured.

The enterprise started to acquire its own raw materials. With no
restrictions on its choice it found its own suppliers. The major problem was
that every supplier wanted payment in advance. In 1994 the enterprise