OK Zimbabwe’s management failed to implement its own stock-counting procedures across all branches during the financial year ended March 31, 2025.
Auditors KPMG say this lapse undermined the credibility of the retailer’s reported US$16,48 million inventory and dealt a major blow to corporate governance at one of the country’s largest supermarket chains.
According to the auditors, management carried out stock counts between March 26 and April 4, 2025, as part of the year-end reporting process.
However, KPMG found that the procedures were not consistently followed across all branches, compromising the reliability of the inventory figures.
“Our audit test work included examining the audit trail of initial stock count sheets to the quantities included in the final valuation reports for all the branches we did not independently count,” the auditors noted in their report.
“Comprehensive instructions were issued by management to the respective counting teams at each of the retail branches which included the requirement to maintain an audit trail between initial and final counts and approvals to demonstrate the variances were adequately resolved.
“However, the stock count instructions, primarily in respect of maintaining an audit trail, including the approval of the variances, was not implemented at all of the branches resulting in us being unable to obtain sufficient and appropriate audit evidence in respect of the existence of inventory as at March 31, 2025,” it added.
As a result, KPMG said it was unable to determine whether any adjustments were necessary to OK Zimbabwe’s consolidated financial statements.
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The retailer’s balance sheet also weakened significantly over the reporting period.
Total assets declined to US$101,83 million from US$136,39 million the previous year, largely due to a sharp reduction in inventories from US$25,26 million.
The fall in stock levels was driven by a harsh operating environment marked by exchange controls, foreign currency shortages and the rapid depreciation of the Zimbabwe Gold (ZiG) currency.
Suppliers increasingly demanded payment in hard currency or shortened payment terms, squeezing OK Zimbabwe’s ability to replenish inventory.
These pressures, combined with supply chain disruptions, falling sales volumes and stiff competition from the informal sector, left the retailer under severe operational and financial strain.
The company’s liquidity position deteriorated sharply. For every dollar of short-term debt, OK Zimbabwe held just US$0,56 in current assets, rendering it technically insolvent.
KPMG also raised concerns over the valuation of inventory, noting discrepancies in the application of the First-in, First-out (FIFO) costing method.
“We noted variances on a majority of the sample selected in our audit testing of the correct application of FIFO based on supplier invoices,” KPMG said.
“As a result, we were also unable to conclude on the valuation of inventory.
“Accordingly, we were unable to satisfy ourselves by alternative means concerning the group’s inventory balance in the Consolidated Statement of Financial Position as at March 31, 2025 and the related changes in trade inventories, merchandise and consumables used and the possible impact on the income tax expense in the Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year-ended March 31, 2025,” it further stated.
The audit findings come as OK Zimbabwe grapples with mounting debt. The company owed more than US$30 million, of which US$28,29 million was due to suppliers. To stabilise its finances, the retailer raised US$20 million through a rights issue in July 2025, with proceeds received the following month.
It also plans to raise an additional US$10,5 million from the disposal of some supermarket properties through sale-and-leaseback arrangements, with offers currently under review.
The uncertainty surrounding stock levels underscores the depth of operational challenges confronting the retailer.
With auditors unable to verify inventory quantities and values across branches, OK Zimbabwe’s ability to manage working capital remains severely constrained, adding further strain to its already weakened balance sheet.
KPMG also warned that the stock-counting deficiencies were not new.
“We were also unable to obtain sufficient appropriate audit evidence on the inventory balance of US$25,3 million in the prior period,” it said.
“Any adjustment that may have been required was not corrected in terms of IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors (IAS 8) and therefore continues in the current year, impacting the comparative statement of financial position and the current year statements of cash flows and the performance.”
