The local economy has been turbulent all throughout this year and still is. This year has seen the enactment of numerous statutory instruments – something that has become sort of a norm. We have seen unprecedented government decisions such as the revocation of the multicurrency regime amongst many other things. We have been witnessing somewhat weekly fuel price hikes and a very unstable parallel market. Incomes of the majority of Zimbabweans have been extremely eroded leaving people in dire straits. Virtually all facets of society have been and still are being affected as the economy continues on a downward spiral. It is no wonder why some reputable South African retailers have decided to throw in the towel.
PEP to Close Down Locally
PEP had become a notable player in the retail space locally but unfortunately, they could not stay in business. It has emerged that they incurred losses in the 2019 financial year. Owing to that, Pepkor Holdings Limited (PEP’s parent company) decided to close down PEP locally. An official statement was actually issued part of which read as follows: “A decision was made to exit operations in Zimbabwe as a result of the continued macroeconomic challenges in the country and on-going devaluation of the local currency. Discontinued operations, therefore, include the results from PEP Africa’s operations in Zimbabwe, amounting to a total loss for the year (after tax) of R70 million, which includes the full impairment of the disposal of the group’s assets.”
The Sales Volumes Plunge – Now A Common Feature In Zimbabwe
Generally, across the board, there have been declines in sales volumes realized by companies or businesses. For instance, Dairibord Holdings suffered a 40% decline in sales volumes for the period of July to September this year. This was after juxtaposing that period with the same period last year. Earlier on this year, Pretoria Portland Cement (PPC) reported that sales volumes had plummeted by as much as 30%. Again the causes were economic instability, fuel and power shortages – plus a general inflationary environment.
OK Zimbabwe Limited’s 2019 half-year financial results showed a 23% decrease in sales volumes in comparison to the same period in 2018. Foreign currency shortages which ultimately culminated in high prices for consumers led to decreased spending. Much earlier in the year, Delta Corporation Limited reported sometime end of June that lager beer sales volumes had gone by 57%. The major reason cited for such a decline was an inability by most prospective consumers to afford.
MedTech Holdings Limited which is a manufacturing, retail, distribution and services company locally also suffered huge declines in sales volumes. Its July to September period saw sales volumes going down by 62%. An uncertain operating environment and decreased consumer spending were some of the reasons that led to decreased sales. So it is safe to say most companies or businesses have been experiencing sharp decreases in sales volumes realized.
Common Causes For Local Business Challenges
There have been a string of factors affecting businesses operating locally. Dairibord attributed some of their challenges to economic instability, foreign currency shortages, water, and power shortages. These are universal factors that have affected businesses in the food processing domain. The highlighted challenges have a dual impact in that they have affected not only the businesses but also the consumers. Consumers’ income levels have dwindled or their income’s value has been severely eroded. This has, in turn, incapacitated them from buying food products and that has led to low sales volumes. On the businesses’ side, it has mainly been about a marked decrease in production capacities. Economic and monetary policies have been ill-informed, incoherent and inconsistent and that has led to a very mercurial operating environment. All these factors and more have been the centre stage for why most businesses or companies have been ailing – particularly sales-wise.
Some have managed to stay in business. Most businesses have failed to stay afloat and have closed shop altogether. Big brands have been most affected because of the many cost elements that they have to contend with daily. Interestingly, we have also been witnessing a steady surge in people venturing into small scale businesses. However, it has not necessarily been a walk in the park because the local currency is relentlessly losing its grip against the US dollar. It now takes unconventional thinking to figure out ways to stay afloat in business locally.