Zim retailers face up to the challenge of economy

The retail sector in Zimbabwe has borne the brunt of the economic crisis that has affected the country since the beginning of October. The turmoil in the markets was spurred on by foreign currency shortages, rising running costs, price instability and artificial shortages of commodities.

AN ACUTE foreign currency deficit has led to manufacturers and retailers turning to an unstable parallel market. The shrinking availability of foreign currency, coupled with fuel shortages, forced the government to take bold measures in an attempt to arrest the crisis.

The Minister of Finance and Economic Development, Prof Mthuli Ncube, introduced a raft of measures as part of an economic stabilisation programme. In an attempt to tame fiscal indiscipline and to tap from a largely informal economy, Government levied a tax on mobile money and electronic transfers, unfortunately resulting in the adverse effect of hitting the pockets of ordinary Zimbabweans.

Electronic and mobile money transactions account for an average 80% via the formal retail and wholesale sector, with a very small remainder attributed to cash purchases. The tax has therefore had a negative impact on the performance of the retail sector in the short term.

Zimbabwean consumers who feared the return of the dark days of 2008, when basic commodities literally disappeared from the shelves, rushed to stock up which compounded products beginning to empty from shop shelves.

As a result of the panic buying, retailers were finding it difficult to restock, especially imported items and product from manufacturers who had stopped supplies, and some were even forced to shut their doors to avoid further haemorrhage of their stocks.

Mr Denford Mutashu, the president of the Confederation of Zimbabwe Retailers, was quoted as saying that the parallel market rates were unsustainably high, leading to rising prices and the erosion of margins. Manufacturers and producers were being forced to resort to the black market to source scarce foreign currency needed to sustain production and keep them in business.

The 75 percent shelf space dominance by locally produced products, began to shrink considerably because of a high dependence on import for raw materials in the manufacturing industry.

However, suppliers have also been accused of being part of the problem by refusing to release products to the market yet diverting them to the black market, while passing the blame of shortages on retailers.

A corresponding shortage of fuel and the rising costs of production added to the pressures that nudged prices upwards, leaving retailers little choice but to pass them on to the consumers. This is a reaction that is purely based on business sense and not on greed as portrayed in certain quarters.

The reaction of retailers also differed according to the business models each operates with. For instance, the large retailers, who had huge stocks of most products were able to absorb some of the rising costs, enabling them to them increase prices marginally and keep their doors open.

Smaller retailers such as the family-owned businesses housed under the SPAR Zimbabwe license do not have the competitive advantage and economies of scale enjoyed by the larger retail chains, and they reacted accordingly.

In a statement, SPAR Zimbabwe, a group of 35 independent, family-owned supermarkets, acknowledged the impact economic challenges had on their loyal customers. These challenges, SPAR said, had also negatively impacted their day-to-day store operations, creating considerable strain on the business.

“We have faced hurdles that may be less significant for our larger competitors. However, we believe we have a role to play in our communities, serving our customers sustainably and providing support for our employees,” they said.

The suspension of Statutory Instrument 122 of 2017 which placed restrictions on the importation of basic commodities, has allowed retailers to restock after panic and speculative buying had left some shelves empty. This and other measures, that have included the stabilisation of fuel supplies and rocketing wholesale prices, as well as the much maligned three-tier pricing system by some suppliers, is sure to bring sanity to the market.

The Confederation of Zimbabwe Retailers and other stakeholders have implored government to consult the sector on any deliberations that would proffer solutions to the issues that affect their members.

An inclusive approach, that will also include manufacturers and suppliers, will allow for a more holistic approach to finding lasting solutions that are a win-win for all, and cushion consumers from resultant price shocks and shortages.