OK Zimbabwe, the country’s largest supermarket group, believes the market turmoil precipitated by recent government policies is temporary.
The chain is one of the biggest victims of the upheaval caused by the authorities’ October 1 decision to separate foreign currency deposits from bond notes and electronic balances, as well as the imposition of a 2% tax on electronic transactions.
The policy measures resulted in the value of the bond notes and electronic deposits – the country’s unacknowledged local currency – being sharply devalued on the black market, triggering sharp price increases and frenzied buying as panicky consumers sought to stock up on basic goods.
Shops shelves rapidly emptied in scenes reminiscent of the 2008 economic crisis, when most basic goods were in short supply as hyperinflation ran rampant.
Unable to keep up with the pace of stock depletion, OK was forced to shut down some of its branches, while trading times were reduced in most of its outlets.
“Fiscal and monetary developments subsequent to the end of the reporting period created uncertainty which caused panic buying by the public as a way of protecting their savings and speculation on product shortages and price hikes,” OK said in its financial report for the half year to September 2018.
“This led to depleted stocks in the stores and warehouses. Despite these challenges, the board and management believe that the current market dynamics are temporary and the outlook remains positive in the medium to long-term.”
In the six months, OK revenue rose 23% to $330 million, while earnings before interest, tax, depreciation and amortisation (EBITDA) lept 42% to $16 million.
After-tax profit was 66% up to $8.4 million on a combination of volumes, improved efficiency and inflation, the company said. OK’s internally measured inflation was 12.2% in September, considerably higher than the official 5.39%.
OK spent $7.5 million on capital expenditure, up from $4.9 million in the comparable period, on property acquisition, shop refurbishment and equipment upgrades. During the period under review, OK opened a new shop in Glen View, Harare, while refurbishing the Chisipite Bon Marche branch and expanding floor space in Marondera.