Pick n Pay Zimbabwe foray ups competition

PICK n Pay’s entry into Zimbabwe through a $13m investment into local giant retailer TM Supermarkets has pushed competition in the country’s retail sector a notch higher, although long-time competitor OK Zimbabwe is not likely to be pushed over easily.

Analysts say the “significant debt” that is held by TM Supermarkets — in which Pick n Pay now controls 49% following the $13m investment — will divert revenue from shop refurbishments.

The powerhouse South African retailer has moved into Zimbabwe, with one shop already branded as Pick n Pay. Five other TM Supermarkets outlets are expected to be rebranded before the end of this year.

But OK Zimbabwe has moved swiftly to plug any potential loss of market share to its rival, refurbishing some existing shops and opening new ones. This has been eased by a $5m convertible loan facility from Investec Africa Frontier Private Equity Fund.

“Following a $13m injection from Pick n Pay, competitor TM Supermarkets will be refurbished, with some rebranded to Pick and Pay, thereby attracting more customers,” said Dzikamai Danha, lead analyst at IH Securities, in a report released this week.

“This will start to chip away at what has been OK Zimbabwe’s competitive edge over the last 18 months. The erosion of OK Zimbabwe’s market share is likely to be slow … because TM Supermarkets are holding significant debt. (This is) likely to divert any internally generated funds away from refurbishment and it is unlikely that the refurbished TM Supermarkets will outclass the OK Zimbabwe stores significantly. OK Zimbabwe will remain the market leader for at least the next 18 months.”

OK Zimbabwe’s larger retail operation, OK Mart, has been forecast to add significantly to group revenue after contributing 15% to first quarter revenue, compared with 8% in the same quarter last year.