23/02/2025
What Went Wrong with OK Zimbabwe Limited! My Thoughts...& Questions
I must admit from the onset that I have more questions than answers on what is happening with OK Zimbabwe Limited. In this short article, join me as I try to unpack the mystery of one of the leading formal retail giant's noticeable stockouts and supposedly store closures across the country.
It boggles my mind to this day why other formal retailers like Pick & Pay, Food World & Spar are fully stocked while OK Zimbabwe Limited is not. How are these formal retailers navigating the volatile economy and exchange rate regime in Zimbabwe?
According to the 2024 OK Zimbabwe Limited’s Annual Report, the retail giant trades predominantly in local currency. From their recent trading update, the retail giant indicated that it collects about 80% ZWG and 20% USD. It has obligations (loans and supplier balances) denominated in foreign currency. This brings me to the question, why is OK Zimbabwe Limited collecting less revenue in USD when it has the liberty to price its products competitively in foreign currency like any other retailer in the country? Could it be that its USD pricing is also out of reach for many particularly low-income earners?
According to its recent annual report, OK Zimbabwe Limited’s average credit period on purchases is 30 days. The retail giant makes sure that all payables (outstanding supplier balances) are paid within pre-agreed credit terms (suggesting a good relationship with suppliers). So, if OK Zimbabwe pays its suppliers on time and has a good relationship with its suppliers why is it having stockouts in its stores? Why are suppliers deserting the retail giant at a time when it needs supplier partners the most?
Could it be that suppliers no longer want to get paid in local currency anymore and now prefer to be paid in USD? If that’s the case, how has the retail giant managed to pay its suppliers in the past and kept its stores adequately stocked? Since the introduction of the local currency OK Zimbabwe Limited has never had instances of stockouts in its stores. Why now? What has changed?
OK Zimbabwe Limited has been making advance payments for imported inventory and capital equipment since 2016. In addition, the bulk of the firm’s inventory is imported from outside the country which means it has been paying its suppliers in foreign currency all this while. Why is OK Zimbabwe Limited complaining now about suppliers demanding cash payments and prepayments for inventory? Could it be that it is now expensive to import given the foreign currency shortages and huge exchange losses since it collects most of its revenue in the ever-depreciating local currency?
In its 2021 Annual Report, the retail giant stated that improving availability in this turbulent economic environment has been the biggest challenge for its supply chain as its suppliers seek to find ways to recover product costs in the shortest possible time and mitigate risks associated with currency devaluation.
Moreover, OK Zimbabwe Limited has been facing erratic supply of essential products. The average availability for its key products was at 71% against a benchmark of 90% needed to guarantee optimal product availability across the Group according to its 2023 and 2024 annual reports.
It's also important to bear in mind that the retail giant makes the bulk of its revenue in local currency and paying suppliers in foreign currency is simply not sustainable, especially in the face of massive exchange rate deterioration against the US dollar.
Having said that, I am convinced that OK Zimbabwe Limited has a supply chain problem that dates back to 2021 largely exacerbated by the COVID-19 pandemic, inflation, and local currency volatility. This has made suppliers view the retail giant as high risk since it trades predominantly in local currency. I suppose OK Zimbabwe Limited is failing to keep up with strict and shorter credit terms which also includes payments for supplies in foreign currency. Another issue is that their USD pricing is neither competitive nor affordable enough for the average customer. Wait, after seeing Pick and Pay and other retailers fully stocked which also trade in both the local currency and USD, I think there could be more to the OK Zimbabwe Limited’s story that cannot be explained by its financials or any publicly available information. Sadly, that’s the missing piece to complete the puzzle.
What are your thoughts?
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