Supermarkets suffer another blow as big supplier shuns them over late payments
In a clear display of massive challenges likely to be faced by Zimbabwe’s formal retailers and consumers, Distributed Group Africa (DGA), one of the largest distributors of consumer goods in the country, has stopped supplying formal retailers because they pay late.
DGA is a unit of Axia Corporation, the VFEX-listed company which also runs TV Sales & Home (TVSH), a leading furniture and electronic appliance retailer and Transerv, retailing automotive spares.
According to the NewzWire, DGA has exclusive distribution arrangements with brands such as Colgate Palmolive, Nestle, Johnson & Johnson, Tiger Brands, and Unilever.
It supplies supermarkets with a broad range of popular household brands, such as Vaseline, Nescafe, Kellogg’s, Stork, Maq as well as some Innscor commodities.
In the year to June, Axia says DGA recorded losses due to exchange losses gained from delays in payments by supermarkets. The company prefers supplying the informal sector.
“Volumes for the year were 29% below the prior year and this resulted in a decline in revenue. This was due to weaker demand in the formal sector. The business incurred losses during the year due to exchange losses arising from delays in payments from its major customers.
“This led to management’s decision to stop supplying to some customers as a way to manage the risk on debtors.
“Management are continuously working with all parties to build demand in the formal sector. The business remains poised to exploit growth opportunities from economic activities in the informal business sector that will not require extended credit terms,” Axia says.
Zimbabwe’s retail and wholesale sector is recording losses due to the worsening hyperinflation and unequal competition they are receiving from the informal sector.
After recording 8% loss from last year till March, OK Zimbabwe management last month said formal retailers were operating in an uneven environment.
The management said informal retailers were dominating, causing “forced death” on the formal retailer.
Last week, 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.
