Tuckshops shake OK as profits tumble by 36%
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GARIKAI MAFIRAKUREVA
HARARE – OK Zimbabwe, the country’s largest supermarket group is facing formidable challenges from the informal sector including unregistered tuckshop resulting in a 36% knock in profits for the financial year ending March 31 2023.
Exchange rate disparities in the market threaten to shut out the entire retail formal market with Metro Peech being the first major casuality.
OK chairman, Herbert Nkala said in the company’s annual report only released this week that the problem largely stems from suppliers who have shortened their trading terms to formal retail resulting in the loss of volumes to the informal sector (tuckshops and others).
The report said that the informal sector which does not pay taxes and even rentals was growing fast at the expense of established supermarkets.
“The informal sector continued to expand at the expense of the formal retail sector as a result of exchange rate distortions in the market. Volumes for the year declined by 7,7% over the comparative period,” reads the report.
Power outages also had a significant knock as the use of generators caused a sharp increase in power cost, added the report.
Nkala said that the informal sector which is not bound by foreign currency regulations is offering competitive pricing in foreign currency to suppliers. The Mirror has during a survey established that many goods are no longer found in supermarkets including OK as suppliers are delivering to tuckshops that pays for goods upfront.
The survey also established that Delta goods are no longer readily available in OK supermarket. For example Coca cola and other soft drinks and beer are some of the Delta goods disappearing from the shelves.
An appeal by the formal sector was recently made to the Ministry of Finance but the Finance secretary George Guvamatanga told them including OK to be innovative. The Mirror understands that a warning has been sent to Government in terms of the imminent collapse of the formal retail sector. Metro Peech Wholesalers has since shut down some of its branches.
It seems big players in all sectors including mining are finding no place in the Zimbabwe economy as there is a big drive for informalisation.
According to the report, after tax profit for OK dropped from ZWL$8,1 billion to ZWL$5,1 billion in the year under review. Volumes for the chain store dropped by 7,7% also attributable to currency liquidity shortages and depressed consumer spending power.
OK’s revenue grew by 33,3% to ZWL$311,3 billion compared to ZWL$233,6 billion the previous year.
OK has hence declared a dividend of 0.02 US$ cents per share.
“Our key suppliers shortened their trading terms to formal retail resulting in the loss of volumes to the informal sector and were offering competitive pricing in foreign currency as they do not face the regulatory limitations that are placed on formal retailers,” reads the report.