Guvamatanga calls OK Zimbabwe management ‘useless, needs to be fired’
A war of words between the Finance Ministry and formal retailers over the operating environment which the latter believe has been monopolized by the informal retailers, has emerged.
In their latest financial update, OK Zimbabwe management said formal retailers were operating in an uneven environment where informal retailers are dominating, causing “forced death” on the formal retailer.
The group said it suffered an 8% drop in sales volumes from last year till March also due to the impact of the informal traders and low disposable income.
“In instances where some are paying taxes, some are not. Where some are using the regulated bank exchange rate, some are not, hence causing artificial or distorted price points in the stores,” OK Zimbabwe said.
“The informal retailer is infamously using the black-market rate and marks the same products downwards causing ‘forced death’ on the formal retailer.”
Max Karombo, the CEO of the group went on to say: “Our major issue is the currency framework. With the passing of the elections and a new Cabinet being set, we really look forward to resolving this issue for the country to put us on a footing of assured stability.”
But Finance Ministry permanent secretary George Guvamatanga has brazenly clapped back at Karombo accusing him of being “useless” for failing to come up with innovative measures which ensure that the company and other formal retailers survive the age of informal markets.
Guvamatanga went on to savagely claim that if he was the OK Zimbabwe board, “I would fire you because you will be useless management”.
“How do you complain about a tuck shop which pays five times more per square meter rent, does not have access to credit, and buys all the goods in cash right, because they do not have any access to credit.
“Possibly they do not have better systems than what you have. And they do not have access to the cheaper foreign currency, they have to go to the parallel market,” the former banker said.
“You then come and say that you’re not able to compete because you have been taken out of business by informal tuck shops. If I was the board, I would fire you because you will be useless management. I would fire you.”
He gave an example of the South African informal sector characterised by the spaza shops, saying that they control a huge stake of the economy but the formal retailers like Shoprite and Pick n Pay are still surviving.
“The spaza market in South Africa is R178 billion, almost US$10 billion. But I have never heard Shoprite, Pick n Pay complaining that they are out of business because of the spaza shops. They have innovated around them.
“So, as new economies emerge, things change. But again you’re dealing with management who only knew one thing, that the rate will go up and every Monday they meet and change prices. They are used to that.
“So, we have lots of these financial and managing directors running these companies today who don’t know what to do when an exchange rate appreciates.
“I have mentioned it before, if you walk into most treasuries today and ask these guys if they know what a stop loss is, they don’t know about it. All they know is that the rate will go up and you sit and re-price everyday,” he added.
Commenting on Guvamatanga’s statements, economist Tinashe Murapata said the treasury was promoting cannibalisation of formal businesses.
“The perm sec, in his apoplectic misfiring, was invariably accusing himself and treasury of mis-managing the economy. Worse, instead of protecting the guys who believed in his policies to the letter, he threw them under the bus,” Murapata said.
“Retail and wholesale sector is the largest contributor to tax through VAT and 2% electronic transfer tax. They act as legal agents to the treasury. Yet, today, there are clandestine operations that avoid paying VAT at all.
“What then does it say about the Treasury promoting the cannibalisation of formal businesses? Businesses which on cue have followed what the President wants?
“The banking sector has been reduced to a miserable US$1.2bn lending activity. 25% of its GNU highs. US$2bn deposits outside the banking sector.
“The truth is that the Perm sec is diverting attention. Government of Zimbabwe’s policy prescriptions told the patient to jump off a bridge. Unfortunately the patient followed instructions.”