If you are struggling to find some of your favourite brands on supermarket shelves, it is because Distributed Group Africa, one of the largest distributors of consumer goods in Zimbabwe, has stopped supplying formal retailers because they pay late.
DGA is a unit of Axia, the VFEX-listed company that also runs TV Sales & Home and Transerv. DGA has exclusive distribution arrangements with brands such as Colgate Palmolive, Nestle, Johnson & Johnson, Tiger Brands, and Unilever. It supplies supermarkets with a broad range of popular household brands, such as Vaseline, Nescafe, Kellogg’s, Stork, Maq as well as some Innscor commodities.
Axia says DGA suffered losses in the year to June because of low business in formal retail, where some supermarkets insist on paying suppliers after as many as 60 days.
“Volumes for the year were 29% below the prior year and this resulted in a decline in revenue. This was due to weaker demand in the formal sector. The business incurred losses during the year due to exchange losses arising from delays in payments from its major customers. This led to management’s decision to stop supplying to some customers as a way to manage the risk on debtors,” Axia says.
The company, like many other suppliers, says it prefers supplying downtown informal retailers who pay for goods upfront.
“Management are continuously working with all parties to build demand in the formal sector. The business remains poised to exploit growth opportunities from economic activities in the informal business sector that will not require extended credit terms.”
Formal retailers are losing out to informal traders because they are required to use the formal exchange rate, which makes their goods more expensive. They also pay more taxes and are unable to pay upfront, which gives smaller traders an advantage.
Industry Minister Sithembiso Nyoni, touring the informal trading district in Harare recently, said manufacturers’ preference for “tuckshops” had caused an “artificial shortage” of goods in supermarkets. However, the Confederation of Zimbabwe Retailers, which represents many of the informal shops, said “tuckshops are not a scapegoat for policy missteps.”