OK Zim struggles as compliance hurts sales

OK Zimbabwe, one of the country’s leading supermarket chains, is facing challenges due to strict adherence to currency regulations, as evidenced by a significant drop in sales volume for the third quarter ending December 2023.

Regulations mandate businesses to price goods using the official exchange rate with a 10 percent mark up.

However, the thriving informal sector often operates outside these rules, offering lower prices and attracting customers.

This has resulted in “high in store prices and loss of competitiveness” for OK Zimbabwe, according to the company’s trading update.

The impact is stark: a 32 percent decline in sales volume for the quarter and a 28 percent drop for the nine months to December 2023. Further compounding the issue, stringent supplier payment terms and limited access to foreign currency credit affected stock availability and pricing dynamics.

Despite these challenges, OK Zimbabwe’s revenue showed significant growth. Group revenue increased by 50 percent year-on-year to $568 billion in inflation-adjusted terms, and a staggering 535 percent to $490,5 billion in historical cost terms.

Group revenue for the nine (9) months ended December 31, 2023 grew by 57 percent to $1,6 trillion in inflation-adjusted terms and by 501 percent to $1 trillion in historical cost terms.

This growth, however, is likely attributable to inflationary adjustments rather than increased sales volume.

The company acknowledges the challenges and is “engaging amicably with regulatory authorities to enhance macroeconomic stability and support the sustainable growth of formal retail business”.

Additionally, it is implementing “volume growth strategies to stabilise business performance”.

Looking ahead, OK Zimbabwe remains optimistic, stating their need to “adapt to the changing operating environment”.

However, navigating currency regulations and competing with the informal sector remain key hurdles to overcome for sustained success.-ebusinessweeklt