Retail giant Truworths succumbs to informal trade, enters corporate rescue

The influx of cheap imports into the informal sector has taken a significant toll on retail supermarkets in Zimbabwe, with Truworths Zimbabwe Ltd being the latest casualty.

The clothing retailer has been placed under corporate rescue, citing the negative effects of cheap imports on its business.

Truworths, which operates several stores across the country, with subsidiaries, Topic Stores (Private) Limited and Bravette Manufacturing Company (Private) Limited, has been struggling to compete with informal traders who sell cheap imported goods.

The company’s financial woes have led to its placement under corporate rescue, a process aimed at rehabilitating financially distressed companies.

The rise of informal traders in Zimbabwe has been a major concern for formal retailers who are struggling to compete with the cheap prices offered by these traders.

In October 2023, OK Zimbabwe management complained that the informal sector had monopolised the market, causing “forced death” on the formal retailer.

However, Finance Ministry permanent secretary George Guvamatanga responded sharply to OK Zimbabwe management lambasting them for failing to devise innovative strategies to ensure their in the face of informal market competition.

“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 were the board, I would fire you because you would be useless management. I would fire you.”

The informal sector has grown significantly in recent years, with many traders selling imported goods at prices that are often lower than those offered by formal retailers.

The situation has been exacerbated by the economic challenges facing the country, with many opting for cheaper goods.

Meanwhile, during the corporate rescue process, no legal action can be taken against Truworths or its assets without the approval of the Corporate Rescue Practitioner.

This means that all legal proceedings, including enforcement actions, are put on hold until the corporate rescue process is complete.

“During the Corporate Rescue proceedings as provided by Section 126 of the Act, no legal proceeding, including enforcement action, against the Company, or in relation to any property belonging to the Company, or lawfully in its possession, may be commenced or proceeded with in any form without the authority of the Corporate Rescue Practitioner,” the Victoria Falls Stock Exchange listed clothing retailer said.