eBusiness Weekly
Business Writer
Zimbabwe Stock Exchange-listed diversified retailer, OK Zimbabwe, will this year focus on making sure its shelves are well stocked but the prevailing economic challenges will not make the task easier, chief executive officer Alex Siyavora told Business Weekly.
Zimbabwe was hit by drought last year, worsening an already dire situation where local manufacturers could not produce enough to meet demand from retailers. Naturally, retailers would turn to imported products but that again has not been an easy task amid limited availability of foreign currency to pay suppliers.
This slowed down the importation of goods and resulted in grocery retailers running out of products such as maize meal, flour and cooking oil among others.
“In the prevailing environment of supply challenges, the company has to focus on having products on the shelf. This is a challenge given the foreign currency shortages and the effect of the drought on supplies,” Siyavora said.
Another phenomenon, which has had a negative impact on the consumer spending power, has been rampant price increases that has seen official month-on-month inflation average 19 percent for the six months to September 2019.
While annual inflation hasn’t been published since June 2019, available current and historical figures puts December 2019 year-on-year inflation figures at 521 percent. The Zimbabwe dollar has also depreciated markedly since its introduction and contributed significantly to price increases in the country.
Coupled with almost static wages and salaries, this has seriously eroded consumer purchasing power and has reflected in falling sales volume.
For OK Zimbabwe, the first half to September 2019 saw sales volume decline by 23 percent compared to the same period in 2018. But the retail giant is determined to offer value to its customers, according to Siyavora.
“This is a challenge in the hyperinflationary environment, but our efforts are directed at offering competitive prices to consumers,” he said.
This will, however, come at a cost as profit margins might come off. It’s a sacrifice Siyavora and team are prepared to take and retain market share instead.
“While we plan to operate profitably, to us profit today is less important than market share tomorrow.”
Siyavora said the current unstable environment has also made it difficult for an all-out expansion drive.
“Project costs have become more difficult to estimate and contain,” he said.
For the six months to September 2019 capex spend jumped to $51,5 million, up from $7,5 million for the comparative period.
Eyes will, however, be open for good sites in locations where the retailer is not represented.
“Part of the strategy is to seize good store sites when they come up in locations where we are not represented,” Siyavora said.
Later this year, OK will open a new store in Karoi.
Commenting on the overall economic outlook, Siyavora sees aggregate demand softening, which will lead to business shrink in many areas of the economy.
He expects companies to continue dealing with the risk of declining business volume and softening revenue. He said revenues are not accruing at the rate of the currency depreciation or cost inflation.
“Wages have lagged currency depreciation and inflation so workers will be pushing for improved earnings. Wage negotiations could thus be difficult.”
As a result, Siyavora expects turbulent industrial relations and a situation where some companies downsize or close down, leading to increased unemployment in formal organisations.
If this is to happen then pressure on sales volume will remain elevated.
