No Christmas cheer for OK as Govt exchange rate plays Grinch

The December quarter was once the busiest period for retailers, but OK Zimbabwe suffered a drop in sales over the period due to the continuing impact of Government’s exchange rate policies.

Sales volumes were down 32% in the three months to December. They fell 28% for the nine months to the end of the year, OK reports in its latest trading update. Supermarkets are forced to price their goods using the overvalued official exchange rate, which makes them more expensive than informal traders, the tuckshops.

“Compliance with laws and regulations governing currency resulted in high instore prices and loss of competitiveness especially against unregulated markets,” OK says. The company says it is “engaging amicably” with authorities on policies to support formal retail.

OK’s main rival, Pick n Pay, increased units sold by just 5% in the three months to November last year. Sales recovered in December.

 “The last quarter of the financial year commenced on a strong note, with the units sold by the supermarkets in December surpassing those sold the previous year,” Pick n Pay’s parent company Meikles reported in January.

John Legat, CEO of Imara Asset Management, said recently that the exchange rate policy is decimating government revenues as VAT contributions from tax-paying retailers fall.

“Government’s aim should therefore be to level the playing field with the informal sector rather than punish the formal one,” he said.

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