Zimbabwe retailers adopt survival strategies or close
BUYERS’ REMORSE: Zimbabweans shop in a supermarket in Harare. Former finance minister Tendai Biti says: ‘Any housewife, they will tell you that the prices have trebled’ RETAILERS and wholesalers in Zimbabwe — among them Pick n Pay, OK Zimbabwe and Spar — are adopting various strategies to cope with economic hardships afflicting the country, with businesses raising prices, closing shops or trying to clear stock by offering big discounts.
This comes as the government is preparing to introduce local bond notes at month-end, although this has been challenged in court by Zimbabwe Lawyers for Human Rights.
Zimbabwe’s annualised inflation (essentially deflation) rate for October improved by 0.37 percentage points to minus 0.95%.
Some businesses such as wholesalers and petrol stations are offering discounts for cash purchases as the country battles a cash shortage.
“When you want to import, the bank asks you to bring hard cash . . . to deposit before they can make the transfer. Some businesses have resorted to ‘buying’ cash at a premium that is then passed on to consumers [thus pushing up prices],” Denford Mutashu, president of the Confederation of Zimbabwe Industries, said this week.
Former finance minister and People’s Democratic Party leader Tendai Biti, however, said that although Zimbabwe would not immediately return to the dark days of hyperinflation last experienced in 2008, the recent hikes in the prices of basic goods put it firmly back in inflation territory.
Retailers and wholesalers have been demanding cash upfront for some products, such as cooking oil and fuel. The preference for cash is due to delays in facilitating international payments by the central bank.
Fuel shortages in some parts of Harare have been experienced, as petrol station owners blame pressure from their suppliers for cash if they are to continue supplying fuel.
“Any housewife, they will tell you that the prices have trebled,” said Biti. “All that is happening is a sign of the lack of confidence in the market, so the retailers and wholesalers are preparing themselves . . . the shops can’t refuse the bond notes.”
Month on month, prices were up 0.09% after a 0.26% decline, according to Zimstats, the statistics agency.
The Consumer Council of Zimbabwe has noted an increase in the cost of living in its most recent data. It said the cost of a monthly basket of groceries for a family of six had increased to $571.02 (R8 137) from $569.26 last month.
Despite an increase in prices in some categories, retailers and wholesalers have also been cutting prices to encourage consumers to buy in large volumes.
Others, such as the Spar Group, have been closing shops as a survival strategy. Spar Group chief executive Graham O’Connor told Reuters this week: “The economy was just too tough . . . payment issues, infrastructure issues, so it was better that we exited.”
Spar announced the closure of its distribution centre in Zimbabwe and said it would supply independent stores from South Africa.
The Spar Joina City in Harare has closed and Innscor has closed the Spar shops it was running in Zimbabwe.
OK Zimbabwe has closed its new electronics shops and is offering discounts of up to 50% at its flagship wholesale store, OK Mart, formerly Makro, in Harare.
Willard Zireva, chairman of OK Zimbabwe, said it would embark on “store rationalisation” to survive the turbulent environment. This strategy would start with the “closing of OK Herbert Chitepo supermarket this month”.
Mutashu said: “Margins have gone down to below 3% in the retail sector and this is forcing most operators to turn to smaller packages.
“It has become a survival issue in retail and we have been saying to the government we want a currency that is tradable and acceptable as a medium of exchange.”
A manager at a retail outlet said: “We will take each month as it comes.” Executives in the retail and distribution service industries said offering “promotions to increase sales generation” was a key strategy.
The discounts were in line with the deflationary pressures that had dogged Zimbabwe for the past two years, some economists said. They explained that discounts were evidence of “de-stocking”. Some said the situation would worsen when bond notes were introduced and would lead to commodity shortages.
Economist John Robertson said there was a real risk that the bond notes would be “devalued quickly”. He said the informal sector would determine the actual exchange rate of the bond notes against the dollar.
President Robert Mugabe this month decreed a 1:1 exchange rate between the notes and the dollar.
“We are heading for higher prices also because of a stronger rand,” said Robertson.
“Zimbabwe imports most of its products from South Africa . . . Naturally this has been passed on to consumers.”
The economy was just too tough . . . it was better that we exited