The company’s management notes that the continued increase in local production costs had a negative impact on margins, which reduced to 27% against a prior year comparative of 30%.
OK Zimbabwe admitted to importing as much as 65% of their products from South Africa and Asian countries including China. The quagmire that Pelhams and OK find themselves in is the same quandary that most of our companies face in Zimbabwe today: In order to make a profit you must import literally the bulk of your products.
Even manufacturing firms, in order to bring down their input costs, also have to import the same. We used to laugh when we used to hear that the Senegalese imported bread from France. How can people be so colonially bamboozled, we thought. Alas, we sure could be heading in that direction. In fact we did.
During the hyperinflation days we imported some of our bread from South Africa, and the legacy from that era is the price of US$1 for a loaf of bread today, even though there are some selling it profitably for half the price.
An acquaintance who wholesales vegetables and other fresh produce at Mbare Musika recently phoned me asking if I had any contacts in South Africa from whom he could order onions. Onions? I asked bewildered. Yes, he answered. There were none available locally and his competitor was importing from South Africa, and that’s the same route he had to go.
Unbelievable, I remarked to myself. And yet this is the stark reality our country is in. Recently in this column, we wrote about Zimbabwe’s ever-widening trade deficit, which according to the latest Reserve Bank figures was a negative balance of nearly US$1 billion in the first quarter of this year alone.
This implies that if the same pattern persists throughout the year, our deficit will be US$3,6 billion, roughly the market capitalisation of the Zimbabwe Stock Exchange. Seasonal exports like that of tobacco may bring this down a bit, but given faltering mining exports, including that of the controversial diamonds, it is highly unlikely that we will end the year without an even greater deficit.
The demand for foreign products is relentless, partly to fill a gap in our production and partly to offer price relief. We have tragically become a nation of traders. That may help explain why, if one looks at the Old Mutual stock market report elsewhere in this edition, the consumer or retail counters are the ones which have had the least dip of 0,64%.
All other segments have taken more than a 10% knock, the commodities sectors (agriculture -21,69% and mining-25,03% being the hardest hit). Yet agriculture and mining are supposed to be the mainstay of our economy. Because of lack of capacity, be it financial, technical or political, we’ve failed to take advantage of extremely high prices our commodities are fetching on the international markets at present where gold is still on record highs around US$1 600, platinum around US$1 450.
Average tobacco prices have improved substantially this year, fetching as high as nearly US$5/kg for the top grades. However, because we’re no longer producers, we’ve become a consumer nation.