Harare, (New Ziana) – Sub-economic pricing arising out of exchange rate distortions are behind the stock outs experienced by OK Zimbabwe Limited, a senior official has said.
The retail and wholesale sectors in Zimbabwe are in the grip of a crisis after the closure of several branches of OK Zimbabwe and N. Richards Wholesale groups around the country, forcing the government to intervene.
In a trading update for the third quarter ended December 31, 2024, OK Zimbabwe Limited group company secretary, Margaret Munyuru said the retailer experienced episodes of stock outs during the quarter under review as evidenced by daily availability levels of around 50 percent of normal stocking levels.
“These stockouts arose from restricted supplies from manufacturers and distributors. The group had outstanding and overdue creditors’ balances which were predominantly denominated in US Dollars against a backdrop of low US Dollar sales collection, at times reaching as low as 20% of sales revenue,” she said, adding that the low stocking levels are a direct manifestation of sub-economic pricing arising out of exchange rate distortions and suppliers’ need for foreign currency invoicing to cover their operational and raw material needs.
Munyuru said suppliers continued to insist on shorter trading terms and in some cases prepayments for supplies invoiced in local currency, exerting pressure on the business’ working capital, thereby necessitating need to access funding.
Power outages worsened during the trading period, resulting in disruptions in business operations and increases in operating costs as the business relied more on alternative sources of power, she said. As a result, the group resolved to close four branches in Glen Norah, Kuwadzana 5, Chitungwiza Town Centre and Robson Manyika Street, all in Harare.
Munyuru said review and consideration of the future of branches saddled with the stifling impact of unsustainable operating cost structures and costly licensing requirements continues.
She said the operating environment was largely subdued due to lower than expected consumer spending in the quarter under review. “The local currency unit, ZWG, experienced a sharp devaluation at the end of September 2024 as monetary authorities sought to improve the viability of the exchange rate system for the broader economy,” said Munyuru.
“Invariably, the devaluation had the net effect of nearly doubling existing US Dollar denominated obligations in loans and creditors’ balances.” “Volumes decreased by 36% in comparison to the same period last year.
However, on a year-to-date basis the Group recorded volume growth of 10% over the same period. The reduction in volumes recorded during the quarter translated to a decline in revenue of 36% as compared to the prior period.” Munyuru said the business has begun restocking units in operation with support from supplier partners and some financial institutions while new procurement models have been developed.
These include a structured stock supply arrangement with a third party for supplier assurance purposes as the business works to restore critical supply relationships with both local and foreign suppliers. She said the group is confident of restoring normal stocking levels before the closure of the current financial year. “The fortunes of the country’s formal retail sector hinge on the stability of our exchange rate regime. Consultations with both Fiscal and Monetary Authorities have led to a relaxation of the very strict policing of applicable in-store exchange rates.
The Group welcomes the recently announced Monetary Policy Statement measures which removed a number of limitations and introduced some level of flexibility within the foreign exchange market.
“However, there is a need for absolute clarity on the roadmap towards a full market determined exchange rate system. Such a liberalized system will go a long way in restoring the competitiveness of the formal retail sector,” said Munyuru.
New Ziana
