Zimbabwe’s economic turmoil: fast food customers spend more, visit less

Victoria Falls Stock Exchange listed Simbisa Brands, the operator of fast-food chains across Africa, saw its revenue grow 7% in the first half of 2024, despite facing a challenging economic environment characterised by power outages and exchange rate disparities in Zimbabwe, its largest market.

While the company achieved 10% revenue growth in Zimbabwe, this was primarily driven by increased average spending, not customer count growth. This suggests that Zimbabweans are spending more per visit but visiting less frequently, likely due to economic pressures.

The unaudited abridged Financial Results for the half year ended 31 December 2023 highlight the ongoing challenges in Zimbabwe, including exchange rate disparities and inflation.

The weakening of the official exchange rate and growing disparity with the parallel market rate, coupled with rising inflation, are putting pressure on businesses and consumers alike.

“Following persistent challenges and instability in the Zimbabwean operating landscape, the period under review opened on an optimistic note, seeing a short reprieve in which the official exchange rate stabilised and inflation dropped ahead of the August 2023 elections.

“The market responded with cautious optimism, resulting in accelerated foreign currency inflows and businesses increasing borrowings; the extension of the multicurrency regime until 2030 further bolstered businesses planning horizons.

“A good 2022/23 agricultural season and increased mining output and diaspora remittances boosted economic activity.

“From September onwards, however, progress was haltered with a weakening in the official exchange rates and a growing disparity between the official and parallel market rates, fuelling inflation.

“The cost of water and electricity was increased by 23% and 38%, respectively, in November 2023.

“More frequent power outages experienced in 1H FY 2024 further pushed costs up through increased generator usage and affected trading hours through stoppages due to increased servicing intervals, resting periods and generator breakdowns,” Simbisa said.

The company further noted the rising utility costs citing increases in the cost of water and electricity by 23% and 38%, respectively, in November 2023, further squeezing profit margins and household budgets.

Simbisa mentioned that more frequent power cuts force businesses to rely on generators, increasing operational costs and impacting trading hours.

Despite these challenges, Simbisa’s Zimbabwe operations managed to improve profitability through cost-saving measures, including negotiating with suppliers and landlords, and aligning staffing levels with store size.

The company also plans to expand its delivery channels and launch new brand apps to boost sales.

Simbisa said it remains optimistic about the future of its Zimbabwe operations, but acknowledges the need for the authorities to take steps to stabilise the currency and control inflation in order to create a more sustainable business environment.