Mega Market, one of Zimbabwe’s biggest food manufacturers and distributors, wants government to “level the playing field” to support formal retailers under pressure from policies that give untaxed traders an advantage.
The company recently completed a new flour mill and churns out over 300 tonnes of wheat-based products per day. Mega Market plans to produce new lines, such as noodles and breakfast cereals. It distributes home brands such as d’lite cooking oil, Brilliant detergents and a range of basics such as salt and rice. According to MD Shiraan Ahmed, Mega Market would rather distribute its brands via established retailers, but operators in that space are facing a liquidity crisis.
Ahmed told government officials during a recent tour of his plant: “We must grow the formal base, and the tax revenues will grow automatically. It’s important to level the playing field, reduce taxes, reduce compliance costs.”
Formal retailers, such as OK Zimbabwe and Pick n Pay, are forced to charge goods at the formal exchange rate, making their goods more expensive than in tuckshops, which dodge taxes and often sell smuggled goods. According to Ahmed, manufacturers would prefer using formal retail, which gives them stronger brand presence and cuts out the risks in informal retail, such as having its brands mixed with fake goods.
“Our big retailers, Pick and Pay, your OK, your N Richards and Gain; these have always been our traditional route to markets,” Ahmed says. “We like that market because it gives us a good shelf presence. We avoid counterfeit products. We are very pro the formal market.”
OK Zimbabwe, the country’s biggest retailer, last week reported “intermittent product supply challenges”, a result of a “volatile operating environment”.
Last year, DGA, the Axia unit that is the major distributor of consumer goods to supermarkets, said it was forced to go direct to the unregulated informal market. This was because formal retailers are forced to demand unfavourable payment terms.
Mega Market has had a similar experience with supermarkets, Ahmed says. “The formal retailers are struggling at the moment. This is translating into cash flow which affects our ability to supply the retailers.”
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