HARARE: OK Zimbabwe, the country’s biggest retail operator that competes with Pick n Pay, is soaring despite a reclining economy, raising after-tax profits by 87 percent to $2.3 million (R31m) in the half-year period to end September at a time when other businesses in the country are seeing worse days.

The Zimbabwe stores have also sparkled for Pick n Pay, which has a partnership with TM Supermarkets. Pick n Pay’s chief executive, Richard Brasher, said last month that “TM Supermarkets... delivered a strong result in a difficult trading environment”.

The South African grocer’s share of half year earnings from TM growing by 81.5 percent to R28.5m compared with the same interim period last year. But for OK Zimbabwe, cost containment, procurement efficiencies and other measures helped boost its earnings from retail operations.

“In this period, the group recorded an increase both in revenue and profitability. Gross margins improved due to efficient procurement, while operating costs were managed down to achieve improved profitability,” said David Lake, the chairman of OK Zimbabwe.

This helped propel the company to a 2.3 percent rise in half-year revenues to $218.6m while the after tax profit position was $2.3m after it rebounded by 87.1 percent from the previous contrasting period.

The higher profit position was strengthened by a decline in overhead costs from $34.2m to $33m as “initiatives to contain costs” and shrinkage containment bore fruit.

Dividend

Despite the positive growth in financial performance, OK Zimbabwe did not declare a dividend for the interim period, choosing instead to preserve cash resources for re-investment into the business. Most businesses in Zimbabwe are struggling for capital while others have started to default on loans and advances owing to the current dollar crunch.

Supermarkets in Zimbabwe are, however, facing supply constraints after the government introduced import restrictions that have affected shipment of most of retail stock that is sourced from South Africa.

Zimbabwean businesses have continued to complain of “weak and declining macroeconomic performance” in the country characterised by low manufacturing productivity, increasing unemployment, depressed consumer spending and limited access to cash.

As a result of this, OK Zimbabwe said, prices of goods and commodities in the retail sector had continued to decrease. By the end of September, negative inflation of minus 1.33 was recorded by the Zimbabwe Central Statistics Office compared to 3.11 percent last year.

Zimbabwe was also dependent on importation of goods mainly from South Africa and retailers had started to experience “delays in making international settlements” for most of this year.

“This situation, coupled with the import restrictions... started to impact the supply of products. Despite these challenges, the group has managed to secure reasonable supply of goods for the period under review,” Lake added.

During the half year period, OK Zimbabwe expanded, opening two new stores in Gweru and Victoria Falls.

Two new and larger outlets will be opened in Harare and Chipinge, in eastern Zimbabwe, growing evidence of the lucrative nature of the retail sector in the country at a time when other businesses are struggling.

Restrictions

John Moxon, the chairman of Meikles, which is the Zimbabwean partner for Pick n Pay in TM Supermarkets, recently said grocery shoppers were “spending more in our stores with competitive prices” despite curtailed supply chains and import restrictions as well as calls from the government for retailers to pick about 50 percent of their stock from local suppliers.

The import restrictions are said to have been discussed at a meeting attended by President Jacob Zuma and President Robert Mugabe in Harare last Thursday.

“South Africa wants Zimbabwe to improve the ease of doing business for its companies and this was among issues discussed in the closed door meeting on Thursday.

“Other issues that were deliberated on include restrictions on imports and outstanding issues in movement of pharmaceutical products from SA although there was no settlement,” said an official.