While the government continues to spread the propaganda that the economy is on its revival path, Zimbabwe’s retail and wholesale sector is recording losses due to the worsening hyperinflation that has gripped the nation.
The retail and wholesale sector is the largest contributor to tax through VAT and 2% electronic transfer tax. But the sector is now struggling with buyers opting for cheap goods being offered by informal traders, mostly tuck-shops which are mushrooming in towns and cities.
In its results for the half-year period to August, Pick n Pay noted that its share of earnings from Zimbabwe fell by 55.8% in the past six months due to the hyperinflation which has left the mainstream business struggling.
The South African company owns 49% of TM Pick n Pay, with its partner Meikles Holdings the majority stake. The company has 73 outlets in Zimbabwe.
“The Group’s share of TM’s earnings, before any hyperinflation net monetary adjustments, declined 55.8% year-on-year to R44.1 million. A hyperinflation net monetary loss adjustment of R43.0 million resulted in the group’s share of TM’s reported earnings declining to just R1.1 million,” Pick n Pay said.
After recording 8% loss from last year till March, OK Zimbabwe management last month said formal retailers were operating in an uneven environment where informal retailers are dominating, causing “forced death” on the formal retailer.
Max Karombo, the CEO of the group, was blasted by the Finance Ministry permanent secretary George Guvamatanga who went on to say he would fire him if he was the company’s board.
“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.”
Pick n Pay’s latest results are, however, enough to show that it is not only the OK Zimbabwe group which is facing the difficult operating environment but the majority of mainstream retail companies.
The volatility of the Zimbabwe dollar affected the company’s accounts when profits were translated into Rand. Dividends have therefore fallen by more than half while the value of the 49% stake has also taken a big hit.
“The Group received a R6.6 million dividend from TM in this period (R16 million in H1 FY23). The investment is currently valued at R33.1 million (R72.4 million at February 2023),” the group said.
Before being castigated by the government, Max Karombo was very clear and bold that challenges were emanating from the currency framework which is unstable.
“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,” he said.
