HomeBusiness DigestRetailers slash credit period

Retailers slash credit period

Ngoni Chanakira

CLOTHING firms are now reducing their credit period forcing cash-strapped customers to speedily pay up during the current cash squeeze.

e=”Verdana, Arial, Helvetica, sans-serif”>Some firms have reduced their credit periods from one year to six months while others have even gone as far as cutting them down from six to five months.

The move comes as Zimbabwe experiences a severe cash shortage caused mainly by hyperinflation as well as poor planning by the Reserve Bank of Zimbabwe (RBZ).

The nation’s largest building society, the Central African Building Society (Cabs) says it has seen a change in banking trends due to the cash shortage.

The society said the number of cheque transactions went up from 11 276 in May to 19 635 in June and up to higher levels for July.

However dishonored cheques are now rampant as customers frantically try to make ends meet.

In its results Edgar’s Ltd said net sales increased by 279% from $3,284 billion in the prior comparable period to $12,829 billion for the most recent six months.

With a market capitalisation of $44 billion, the firm said Edgars Stores contributed $8,663 billion to group turnover as compared to $2,185 billion in the prior comparable period, an increase of 296%.

This growth was attributed to the availability of credit facilities within the stores, which offset the ongoing cash shortages affecting the average consumer.

The stores contribution to operating profit was 39% of total operating profit.

Express Stores, on the other hand, experienced a decline in volumes in the main due to the unavailability of credit facilities within its stores, which inhibited consumers from buying because of the cash situation.

Net turnover at the stores increased from $1,039 billion to $3,520 billion, an increase of 239%.

Another major clothing entity, Truworths Ltd, said a decision by the group to reduce the credit period from six to five months resulted in improved cash collections and cash flow.

In its audited group results for the year ended July 6, Truworths, which has a market capitalisation of $33 billion, said debtors in this current year were 83% which was similar to the previous year.

Interest on debtors in arrears increased by 187% compared to a growth in the debtor’s book of 256%.

Truworths said the number of active debtor’s accounts grew by 3%.

The company recorded a significant improvement in sales for the past six months, registering a turnover of $11 billion for the year ended July 6.

“The shortage of cash, uncertainty in the currency markets – both availability and pricing, hyperinflationary conditions make the trading conditions very difficult,” Truworths said.

In its hasty bid to address these problems, government came up with a number of measures aimed at mitigating the impact of the shortages as well as normalising the situation.

Government outlawed the repatriation of cash outside Zimbabwe through the gazetting of Statutory Instrument 163 of 2003.

To prevent cash hoarding and unlawful trading in cash, both by traders and individuals, government then gazetted Statutory Instrument 171 of 2003 which is designed to ensure accountability of all cash generated and result in the re-channeling of deposits back into the banking sector.

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