Wholesalers still playing the game

Taurai Mangudhla

WHOLESALERS are still in the game, analysts say.

In recent times wholesalers have been struggling with some such as Jaggers and Trador facing liquidation.
The game seemed to have changed a little with the dollarisation of the economy.

 

But even before the adoption of the multiple currencies in 2009, hyperinflation had also plunged the once viable business into problems. Price controls also did not help.

Redstar, a subsidiary of Starafrica corporation, is just but one of the affected wholesalers.

As a result, the parent company now wants to make RedStar private. This, the company hopes, will place it in the hands of shareholders who can capitalise the division and steer it back to profitability.

Now, more and more wholesalers are going retail as well. Afrofoods — a relatively new entrant into the game — doubles up as a retailer and wholesaler.
Confederation of Zimbabwe Industries chief economist Lorraine Chikanya says wholesalers are going retail.

Although Chikanya dispelled the notion Zimbabweans were buying units of basic commodities because they have little disposable income, she acknowledged wholesalers are beginning to bring in a retail approach.

Oxlink Capital CEO Brains Muchemwa said wholesalers require technical management which some players in the sector lack.
“Whole-selling is a viable model whether a country is dependent on imports or not. The argument that wholesale business is not viable in Zimbabwe because of heavy dependency on imports is irrational,” he said.

Muchemwa argued there are many retailers scattered around the countryside and urban areas who do not have the muscle, convenience and expertise to approach manufacturers  for stocks.

He said wholesalers therefore bridge this gap and will remain an important player in the foreseeable future as long as they correctly define their target markets and keep their costs down.

Muchemwa however concluded that large retailers, who tend to import directly from manufacturers, to some extent reduce the wholesaler’s market share.

Africa Investments Markets executive director Farai Dyirakumunda said the manufacturer or producer is not a specialist in distribution thereby creating a continued need for wholesale and distribution in the market.

“Middlemen did not arise out of regulation but emerged out of a need for convenience in the market. The wholesaler’s role is to break the bulk and provide a centralised source of diverse products,” Dyirakumunda said.

“Over time, the wholesaler has moved down the value chain to become more accessible to the end user due to a shift in market trends and requirements.”

Although Jaggers could have gone under owing to myriad of problems and reasons, wholesale is not yet a failed industry given a number of old players and new — Mohamed Mussa, Afrofoods, Innscor distribution, Bhadella — are still in the game.

The wholesale industry still has some space in this market, Dyirakumunda argued.

Consumer Council of Zimbabwe  executive director Rosemary Siyachitema said imports dependency, reported to have accounted for 45% of domestic expenditure in 2010, and expenses associated with having a middleman threaten the success of wholesalers.

“Supermarkets get most supplies directly from foreign manufactures,” she said. “The role of the middleman in such a set up is reduced because it makes things more expensive.”

Siyachitema added Zimbabwe’s manufacturing industry, which is poorly mechanised, also depends on imports.

“Whatever is being produced requires some components from outside especially acids and oils that are not produced locally. Capacity utilisation is low and our manufacturers are using archaic machinery yet in South Africa they are well mechanised,” said Siyachitema.

Whilst the level of production has increased since 2009, it is not at par with international trends that are generally more economic, she argued.