THE decline in consumers’ disposable incomes is affecting the operations of companies in the clothing industry. Most companies have also been affected by the unregulated textile imports from Chi
Firms involved in the clothing retail sector predicted a further decline in business as the rising inflation continues to push prices beyond the reach of many consumers.
They also said that the shortage of foreign currency is also adversely impacting on their business.
“The resurgent hyperinflationary conditions and severely declining disposable incomes will result in difficult trading conditions in the clothing retail sector,” Chris Peech, the chairman of Truworths, said in the company’s results for the year ended July 3.
He said the severe shortage of foreign currency to import fabrics for manufacture was of great concern.
Edgars, another listed firm, has also predicted tougher times ahead.
John Mkushi, the chairman of Edgars Stores Ltd (Edgars), predicted a loss of business in the forthcoming financial six months.
“Performance in the next six months will be affected by a less vibrant trading environment as general inflation is likely to push prices beyond the reach of the average customer,” Mkushi said.
Mkushi said overhead expense inflation would also depress margins.
He said that the coming half-year would also be affected by a more acute shortage of fabric and finished goods as foreign currency shortages intensify.
Despite the introduction of the foreign currency auction system by the Reserve Bank of Zimbabwe to overcome the chronic foreign currency shortage, the problem is worsening.
Companies are struggling to access foreign currency on the auction that can only raise a weekly amount of about US$12 million, yet more than US$100 million is required.
Disposable incomes of Zimbabwe’s working populace continue to be eroded by the high inflation rate which now stands at 274%.
The majority of Zimbabweans are living way below the poverty datum line of US$1 a day.
While a good number of Zimbabwe’s working populace earn far less than $5 million a month, the Consumer Council of Zimbabwe says that groceries for a family of six are now worth $7,1 million.
According to a latest report by the United Nations Development Programme (UNDP), Zimbabwe has experienced one of the world’s sharpest drops in living standards.
The country dropped 23 places to 145th position in the world in terms of human development between 1993 and 2003.