Analysis of Barter trade as a Mode of Transacting in the Manicaland Timber Industry: A Case of allied Timbers

Abstract

Many African countries have faced economic crisis associated with liquidity crisis. A liquidity crisis is the negative financial situation characterized by a sudden and prolonged evaporation of both market and funding liquidity, lack of cash flow, with potentially serious consequences for the stability of the financial system such as shortage of physical cash, lending funds, banks could be running out of cash, defaults, layoffs, bankruptcies and failing financial institutions among others. This research used the case of Allied Timbers to analyse effects of using barter trade as a way to steer around the restrictions imposed by cash and credit guided by Karl Marx's Capitalist Theory. The research determined whether the barter trade activities being conducted at Allied timbers aligned to the set preconditions of Marx's commodification theory of barter trade. The challenges faced when using barter trade were identified by the research. The research also looked at whether barter trade can be used as a liquidity solution. Research data was collected through telephone interview questions where a sample of 50 contractors out of 80 was chosen using convenient sampling. By using Allied timbers as a case study it was evident that timber is a commodity which can be used for barter trade and the preconditions that were set by Marx's commodification for barter trade were being met. The research also uncovered that barter trade enhances the ease of doing business through steering around restrictions caused by liquidity challenges of cash and credit shortages. It was also evident that Allied timbers was able to deal with the problem of liquidity because trade enabled business continuity between allied timbers and its contractors. The research also found out that one of the major problems the contractors faced as a result of practicing barter trade was low profitability after they sold the timber, barter trade made contractors incurred additional costs. The research also found out that the turnaround times between when the contractors got the timber until to when they sold the timber was affecting their business as their money will be held in stock of timber. The research concluded that when adopting barter trade one has to meet the preconditions set by Marx's commodification theory in order to make their product a tradable commodity and fully meets most of the preconditions. The research also concluded that using product or good for barter trade improves the liquidity position and deals with problems associated with liquidity issues such as outstanding payments thereby enabling business continuity. Also the research found out that potential problems associated with practicing barter trade were low profitability, and additional costs incurred in the acquisition and selling the product acquired from bartering. The research concluded that for barter trade to work harmoniously terms must be reviewed on a regular basis so as to rectify any un-favourable terms to either parties involved thereby further strengthening their business relationship. Future research was recommended where research on how other organisations in different sectors can adopt barter trade.