ZIMBABWE’s retail sector has been one of the hardest hit by a protracted economic crisis that was made worse by the Covid-19 outbreak last year. With tough lockdowns keeping consumers at home and disrupting value chains, many operators have been pushed to the brink and remain weak. But this week, Zimbabwe Retail Confederation (CZR) chairman Denford Mutashu (DM) told our editor Shame Makoshiri (SM) that while headwinds persisted in the first quarter of this year, the oceans were emerging 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: The government is trying to accomplish too much by legislating rational behavior, which does not work. It’s pretty clear that authorities are trying to force companies to display their prices in both US dollars and Zimbabwean dollars while plugging foreign currency leaks.
While the intention is noble, the execution leaves a lot to be desired. As long as there is arbitrage in our systems, people will always find creative ways to make money fast and no legislation can deter them.
The government must allow market forces to discover the correct prices of interest rates, foreign currencies and goods and services and intervene where there are absolutely justifiable reasons to do so, as in the case of taking into account. burden of vulnerable members of our society. It is not too late for the government to consult widely on these issues and do what is necessary to avoid undermining the stability we have enjoyed in recent times.
SM: What are the challenges facing traders today?
DM: Retailers have not been spared from the difficult economic conditions that prevail locally. These range from triple-digit inflation and illiquid market conditions that negatively impact disposable income. While year-over-year inflation figures are technically declining, in reality prices are slowly rising due to exchange rate movements as Zimbabwe remains a net importer.
Fuel prices are also putting pressure on costs, with two price hikes in April. Considering that fuel costs represent up to 10% of our overhead, the impact of a price adjustment on product prices is significant. To make matters worse, utility costs are also rising, including store licenses.
The net effect of this is that the demand for goods is not where it should be. Operating costs have increased dramatically as retailers invest heavily in personal protective equipment to protect the health and safety of their customers, employees and other stakeholders in the wake of the Covid-19 pandemic.
SM: You paint a dark perspective
DM: Keeping the shelves full was not easy. For products acquired externally, retailers must access the foreign currency auction system where, despite laudable efforts by monetary authorities to provide resources, it has not been smooth.
For locally purchased products, our suppliers have their own challenges. But I’m glad we still have a retail industry doing their best under extremely difficult circumstances to make sure we don’t run out of inventory.
SM: How effective has the auction system been in allocating forex to retailers?
DM: We all know Zimbabwe is struggling with a poorly performing productive sector. It does not produce enough for export. Foreign currency entering the country from the development sector and lines of credit is not enough to meet our foreign exchange needs. The RBZ is to be applauded for doing its best with limited resources and for filling the gaps in the banking system.
This allows those who deserve the forex auction system to access it easily. We want better allocations and efficiency gains in the value chain.
SM: Tell us what has been happening since the start of 2021
DM: The first quarter was really difficult due to the harsh containment which took a heavy toll on volumes. Despite the fact that the retail sector is an essential service, there was a drop in human and car traffic, which affected volumes as authorities enforced the strict but necessary restrictions which were then gradually relaxed. .
The situation has since returned to normal. Compared to other sectors classified as non-essential, our situation is not so bad. We are encouraged by forecasts of a pickup in household spending after it contracted by more than 10% last year. But we are deeply concerned about certain political inconsistencies. Just recently, we were surprised when the Zimbabwe Revenue Authority backdated the payment of Value Added Tax (VAT) on rice to February 1, 2017, despite the fact that rice had long been exempt from tax in order to make the product affordable for consumers. While we congratulate the Minister of Finance, Professor Mthuli Ncube, on repealing the directive, we remain hopeful that the Treasury will deal with this sensitive issue once and for all.
SM: What do you think of the Consumer Protection Act?
DM: We are all consumers the law seeks to protect through fair business practices. We therefore fully support the law and continue to work with organizations such as the Zimbabwe Consumers Council and the Zimbabwe Standards Association to promote product quality and ensure compliance with standards. These questions are also consistent 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 hardest thing you can think of, especially when you look at what’s going on in countries with advanced healthcare delivery systems. But we have taken a position that we must never be at fault. We remain alert to dangers and spare no effort to take the necessary precautions to protect lives.
We have done very well in ensuring that all public entrances and checkouts are equipped with disinfectants and that all World Health Organization (WHO) and government standards and regulations are met and without exception. I am satisfied with the work that has been done and my assessment is that the retail industry has maintained high levels of vigilance to deal with future epidemics. We continue to call on all Zimbabweans to do their part by avoiding unnecessary movements. Together, we will defeat Covid-19. We have always had Covid-19 regulations and protocols for the retail industry. All we have now sought to do is put all of this information in a manual, which our members can distribute to all of their stakeholders.
SM: What happened to companies that were not positioned to deal with the pandemic?
DM: Our industry has gone through many cyclical challenges over the past three decades. A few left the industry during this time, but the majority are skilled and nimble.
Unlike the United States and Western Europe, where more than one in three retailers has filed for bankruptcy, our members are focused on cutting costs to preserve margins. They are also consolidating their branch networks. Others are in the process of expanding and renovating their outlets. It’s a mixed bag. Retail is a low-margin, high-volume industry, which is why your sourcing strategy determines your success or failure. To stay current, more and more retailers are turning to more affordable private label products that can compete with more expensive branded or imported products.
SM: Electronic commerce dominates everywhere. What do the trends look like in Zim?
DM: The Covid-19 pandemic has changed the way we shop and many of these changes are expected to last until 2022. Automation technology and social media trends will continue to play a role in the evolution of the healthcare industry. retail with more of our retailers offering personal purchasing services. , while social media influencers would be mobilized to promote brands. Online shopping will become more entrenched, albeit slowly due to our infrastructural shortcomings.
We are still unhappy with the limits placed on mobile money payment platforms and believe our customers can settle for more realistic limits. Commitments on this subject are ongoing. We also hope that the 2% intermediated money transfer tax does not continue in perpetuity, so that the government can free up more purchasing power for consumers who suffer from it due to difficult economic conditions.
We were established in November 2013 to meet the interests of a cross section of retailers, spanning grocery stores, wholesalers, clothing, fabric and shoe stores, bookstores, drugstores, stationery, automobiles, hardware and furniture stores. Over the past eight years, we have enjoyed a quantum lead among its members, attracted by the benefits available to them.