ZIMBABWE’S retail sector has been one of the hardest hit by a prolonged economic crisis that was compounded last year by the Covid-19 outbreak. With hard lockdowns keeping consumers home and disrupting value chains, many operators were pushed to the brink and remain weak. But this week, Confederation of Zimbabwe Retailers (CZR) president, Denford Mutashu (DM) told our business editor Shame Makoshori (SM) that while the headwinds continued into the first quarter of this year, the oceans were clearing and retailers could rebound. Here is the discussion turned out:
SM: What is your comment on Statutory Instrument (S1) 127 of 2020, which was introduced last week?
DM: Government is trying to achieve too many things through legislating rational behaviour, which doesn’t work. It is quite clear that the authorities are trying to force businesses to display their prices in both the US dollar and the Zimbabwe dollar while also plugging foreign currency leakages.
While the intention is noble, the execution leaves a lot to be desired. As long as there is arbitrage in our systems, people would always find creative ways of making a quick buck and no amount of legislation can dissuade them.
Government must allow market forces to discover the correct prices for interest rates, foreign currency and goods and services and make interventions where there are absolutely justifiable grounds to do so, like in the case of taking care of vulnerable members of our society. It is not too late for the government to consult widely on these issues and do the right thing to avoid tampering with the stability that we have been enjoying lately.
SM: What are the challenges confronting retailers today?
DM: Retailers have not been spared by the tough economic conditions prevailing locally. These range from the three-digit inflation and illiquid market conditions that are impacting negatively on disposable incomes. While year-on-year inflation figures are technically coming down, in actual fact, prices are creeping upwards in sympathy with movements in the exchange rate since Zimbabwe remains a net importer.
Fuel prices are also exerting pressure on costs, with prices going up twice in April. Considering that fuel costs constitute up to 10% of our overheads, the impact of a price adjustment on product prices is significant. To make matters worse, the costs for utilities are also going up, including shop licences.
The net effect of this is that demand for goods isn’t at levels where it should be. There has been a significant rise in operating costs as retailers are making substantial investments in personal protective equipment to safeguard the health and safety of their customers, employees and other stakeholders in the wake of the Covid-19 pandemic.
SM: You are painting a gloomy outlook
DM: Keeping shelves full hasn’t been easy. For externally acquired products, retailers have to access foreign currency from the auction system where, despite the commendable efforts of monetary authorities in providing resources, it hasn’t been smooth sailing.
For locally acquired products, our suppliers have their own challenges. But I am glad that we still have a retail sector which is doing the best it can under extremely challenging circumstances to ensure that we don’t run out of stocks.
SM: How efficient has been the auction system in allocating forex to retailers?
DM: We all appreciate that Zimbabwe is battling a poorly performing productive sector. It is not producing enough for export. The foreign currency which is flowing into the country from the development sector and lines of credit is not enough to meet our forex requirements. The RBZ must be applauded for doing the best it can with limited resources and for plugging loopholes within the banking system.
This makes it easy for those who deserve forex from the auction system to access it. It is our wish to see an improvement in allocations and efficiencies within the value chain.
SM: Take us through what has been happening since the beginning of 2021
DM: The first quarter was really difficult due to the hard lockdown that dealt a body blow on volumes. Despite the fact that the retail sector is an essential service, there was a dip in human and vehicular traffic, which affected volumes as authorities enforced the tough but necessary restrictions that were then relaxed progressively.
The situation has since normalised. When compared with other sectors that were classified as non-essential, our situation is not as bad. We are encouraged by forecasts pointing to a recovery in household spending after it had contracted by more than 10% last year. But we are deeply concerned by some policy inconsistencies. Just recently, we were taken aback when the Zimbabwe Revenue Authority backdated payment of value added tax (VAT) on rice to February 1, 2017 despite the fact that rice had long been exempted from paying tax in order to make the product affordable to consumers. While we commend the Minister of Finance, Professor Mthuli Ncube, for rescinding the directive, we remain hopeful that the Treasury will deal with this sore issue once and for all.
SM: What is your view on the Consumer Protection Act?
DM: We are all consumers whom the Act is seeking to protect through fair trading practices. We therefore fully support the Act and continue to work with organisations such as the Consumer Council of Zimbabwe and the Standards Association of Zimbabwe in promoting product quality and ensuring adherence to standards. These matters are also in keeping with the United Nations Guiding Principles.
SM: Is the sector prepared for a third wave of Covid-19?
DM: Dealing with Covid-19 is the most difficult thing one could think of, especially when you look at what is happening in countries with advanced health delivery systems. But we have taken a position that we must never be found wanting. We remain alert to the dangers and leave no stone unturned in taking the necessary precautions to safeguard lives.
We have done very well in ensuring that all public entrances and till points have sanitisers and that all standards and regulations from the World Health Organisation (WHO) and government are adhered to and without exception. I am satisfied with the work that has been done and my assessment is that the retail sector has maintained high levels of vigilance to deal with future outbreaks. We continue to call upon all Zimbabweans to do their part by avoiding unnecessary movements. Together we will overcome Covid-19. We have always had Covid-19 regulations and protocols for the retail sector. All we have now sought to do is to put all that information into a handbook, which our members can distribute to all their stakeholders.
SM: What has happened to companies that were not positioned to face the pandemic?
DM: Our sector has gone through many cyclical challenges in the last three decades. A few have exited the industry within that period, but the majority are adept and agile.
Unlike in the United States and Western Europe, where more than one in three retailers filed for bankruptcy, our members are focussing on stripping out cost to preserve margins. They are also consolidating their branch networks. Others are actually expanding and renovating their outlets. It is a mixed bag. The retail industry is a low margin, high-volume sector, hence your procurement strategy determines your success or failure. To stay in the game, more and more retailers are gravitating towards private label products that are more affordable and can compete with more expensive branded products or imported goods.
SM: E-commerce is dominating everywhere. What are trends in Zim like?
DM: The Covid-19 pandemic has changed how we shop and many of those changes are likely to stick around into 2022. Automation technology and social media trends will continue to play a part in how the retail industry evolves with more of our retailers offering personal shopping services, while social media influencers would be roped in to promote brands. Online shopping is going to get more rooted, albeit slowly due to our infrastructural inadequacies.
We are still unhappy with limits on mobile money payment platforms and believe our customers can do with more realistic limits. Engagements on this are ongoing. We also hope that the 2% intermediated money transfer tax will not continue in perpetuity, so that the government could release more spending power to the consumers who are feeling the pinch because of the tough economic conditions.
We were set up in November 2013 to cater for the interests of a cross-section of retailers, cutting across grocery stores, wholesalers, clothing, fabrics and footwear outlets, bookshops, pharmacies, stationery, automobiles, hardware and furniture shops. Over the past eight years, we have enjoyed a quantum lead in its membership, attracted to it by the benefits available to them.