Zimbabwe retail battling low manufacturing levels

This points to growing competition for Pick n Pay‚ which has invested in Zimbabwe's TM Supermarkets in which the SA retailer now controls 49% following a US$13m investment.

Despite looking bullish‚ prospects for the Zimbabwean retail sector have been dented by a crippled industry and manufacturing sector that continues to be affected by power outages and low liquidity.

OK Zimbabwe on Thursday reported its interim revenue grew by 24.6% to $231m while after tax profits amounted to $4.86m‚ compared to the previous period's profitability of $3.86m.

Operating expenses also quickened by 22.5% to $32.75m‚ said OK Zimbabwe chairman‚ David Lake.

The increase in overheads has been attributed to increased employee costs after the group opened two new stores.

Lake‚ said the challenges that were affecting Zimbabwean industry‚ whose capacity utilisation had fallen to about 44% according to the Confederation of Zimbabwe Industries (CZI)‚ had forced the company to resort to imported products for stocking.

"The group continued to import most of the products sold in stores as the local manufacturing base remained inadequate‚" said Lake. He added that further growth prospects were dented by licensing restraints to import other goods such as poultry and dairy products.

Analysts have previously said "OK Zimbabwe will remain the market leader for at least the next 18 months" unless Meikles Holdings - the Zimbabwean joint venture partner in TM Supermarkets - undertakes a "significant corporate action".

This is mainly because "the erosion of OK Zimbabwe's market share is likely to be slow ... (as) TM Supermarkets are holding significant debt‚ likely to divert any internally generated funds" away from re-investment into refurbishment.

"Capital expenditure was $7.35m compared to $6.96m in the prior year and was mainly in respect of store refurbishments and replacement of plant and equipment‚" said Lake.