The announcement by South African retailer Pepkor that they would be exiting the Zimbabwean didn’t come as a surprise but it did have many talking. With ranging views such as the idea that Pepkor were simply mercenaries who were here for easy US dollars to the view that this is the proof that Zimbabwe is not in fact open for business emerged. Of course, the truth is usually found somewhere in the middle.
Pepkor bought into Zimbabwe through Powersales 20 outlets and has found the going tough, of late at least. The challenges are many with high inflation, critical factor shortages and a currency that knows no rock bottom. The currency factor may be the straw that broke the camels back. While the government introduced an official currency market in February and subsequently outlawed transacting in any foreign currency this has not made access to foreign currency any easier.
10 years after pulling itself out of a dire economic crisis Zimbabwe seems to have managed the unthinkable act of taking itself right back to where it started. However, conditions are worse the infrastructure that was old and inadequate in 2009 is still in place in 2019. This is the crux of the current power crisis, when Zimbabwe tried to look at alternative energy we got a shed for our troubles. No forward movement has been made.
While the Pepkor exit has grabbed the headlines, there were signs something of the like was coming. Edcon, South African parent of retailer Edgar’s divested from Edgars Zimbabwe earlier in the year. They technically restructured their shareholding to insulate the parent from the Zimbabwean unit. The signs are not just present in foreign-owned concerns. While the state media chose to report on results from companies from inflation buoyed financial perspective the real news was in the retail volumes being down around 40% year on year for most.
The reduction in aggregate demand can be traced back to the departure from the multicurrency era. In simple language, as the currency devalues your money buys less, almost everything is valued in US dollars so it becomes more expensive in Zimbabwean dollars. People cannot buy as much as they used to buy. There is simply less business being done. The picture is consistent from manufacturers to retailers and even our imports have slowed to narrow the trade deficit.
With no sign of policy that addresses the real issues on the horizon, Zimbabweans will end the decade worse off than they started it. Minor improvements in the ease of doing business in areas we were already doing well in will not be enough to sway the tide. 2020 beckons and may be a very tough year if things persist as they are.