eBusiness Weekly
Tapiwanashe Mangwiro
OK Zimbabwe, one of the country’s retail giants, said volume rose by a marginal 1 percent in the first quarter to end of June 2022.
Consumers are hard pressed as higher inflation, above the level of earnings, eats into their spending power.
Month-on-month inflation for June 2022 rose substantially to 30,7 percent from 21 percent in May 2022, indicating that inflationary pressures that gained traction at the close of the previous fiscal year remained.
At 191,6 percent year-on-year in June 2022, inflation was significantly higher than the 72,7 percent reported at the conclusion of the previous fiscal year.
Like any other business, the ability to pass on the full cost increase to the consumer is hampered by declining disposable incomes.
The changes and volatility of the Zimbabwean currency make operating in this market extremely difficult, OK Zimbabwe said.
“The willing buyer willing seller interbank market exchange rate against which formal businesses are required to benchmark pricing is not as attractive as the rates offered in alternative unregulated markets.
“This continues to impact the competitiveness of our USD prices, impacting foreign currency collections,” the company said in a trading update.
To eliminate the arbitrage, the RBZ policy rate was revised from 80 percent to 200 percent per annum, bringing the cost of borrowing closer to the inflation experience.
“This has made borrowing costs excessive, resulting in liquidity pressures across the entire supply chain,” said the company.
Sales values for OK Zimbabwe increased by 237 percent from the prior year in historical terms and grew 40 percent in inflation-adjusted terms.
“Our stores are reasonably stocked, although we continue to experience temporary supply gaps on some key volume drivers.”
However, profit margins are consistent with the prior year and in line with plans for the current year.
While the trading environment is poised to be dominated in the near future by headwinds from inflation, the retail giant said the market is in dire need of a stable and market-determined framework for pricing foreign exchange.
“Despite market-wide liquidity challenges, the business remains on sound footing and has in place measures to cover not only all working capital needs but also planned capital expenditure in line with our G.R.O.W.T.H strategy.
“The business continues to engage authorities on the adverse effects of the IMT tax on formal businesses,” it said.
In the outlook, the business said it will upgrade more stores and also implement strategies to increase its footprint and grow market share during the year.
