Harare – In a dramatic move signalling the severity of its operational challenges, OK Zimbabwe Limited has announced a sweeping overhaul of its executive leadership.
The retail giant, grappling with a volatile economic environment, currency instability, and dwindling consumer spending, has parted ways with its Chief Executive Officer Maxen Phillip Karombo, Chief Financial Officer Phillimon Mushosho, and Supply Chain Director Knox Mupaya, all through voluntary separation agreements.
To steer the ship through these turbulent waters, OK Zimbabwe is turning to familiar faces. Willard Zireva, who retired as CEO in 2017 after a long and successful tenure from 2001, makes a surprise return to the helm. He is joined by Alex Siyavora, who assumes the role of chief financial officer, having previously succeeded Zireva as CEO and led OK Zimbabwe until 2021. Muzvidzwa Richard Chingaira steps in as the new supply chain director.
The trio has been given a clear and urgent mandate: to stabilise and turn the business around within the next six months. This interim leadership team will hold the fort while the board embarks on a search for permanent replacements.
In a statement, company secretary Margaret Munyuru acknowledged the contributions of the outgoing executive team during a “challenging period” and welcomed the returning team, expressing confidence in their ability to “stabilise and turn the business around.”
The restructuring exercise comes as OK Zimbabwe navigates a perfect storm of economic headwinds. A recent trading update painted a bleak picture, with the company reporting a 36 percent decline in revenue for the third quarter ended December 31, 2024. This sharp drop was attributed to a confluence of factors: subdued consumer spending, the relentless devaluation of the Zimbabwean dollar (ZWG), and persistent supply chain disruptions.
The company has been grappling with acute local currency liquidity shortages, severely restricting its access to funding for essential working capital cycles. The sharp devaluation of the Zimbabwean dollar in September 2024 nearly doubled the group’s US dollar-denominated obligations in loans and creditor balances, further exacerbating its financial woes.
Adding to the challenges, stock availability plummeted to around 50 percent of normal levels due to limited supplies from manufacturers and distributors. Low US dollar sales collections, at times as low as 20 percent of sales revenue, have further strained the supply chain. Suppliers, wary of the volatile currency, have increasingly insisted on shorter trading terms and, in some cases, prepayments for supplies invoiced in local currency.
The group’s working capital has been stretched to its limits, forcing it to rely heavily on short-term funding. Power outages, a recurring problem in Zimbabwe, have further disrupted operations and driven up costs.
OK Zimbabwe’s struggles are symptomatic of the broader challenges facing Zimbabwe’s formal retail sector, which is deeply intertwined with exchange rate stability. The company has welcomed recent monetary policy measures aimed at introducing greater flexibility in the foreign exchange market but has also called for “absolute clarity on the roadmap towards a full market-determined exchange rate system.”
The company’s woes are not unique. Several other retailers have been forced to close their doors, including N Richards, one of the largest wholesale and retail chain stores in the country. Choppies, a Botswana-based regional supermarket chain, recently exited the Zimbabwean market, citing a “hostile” business environment characterized by currency instability and a decline in formal retail businesses due to low aggregate demand. Their local stores are now being rebranded as “Sai Mart” after being sold to Deputy Minister of Industry and Commerce Raji Modi.
The Confederation of Zimbabwe Retailers (CZR) has expressed deep concern over the situation, warning of more closures of formal retail and wholesale businesses unless authorities take urgent intervention measures. CZR president Denford Mutashu highlighted key challenges faced by formal retailers, including the dual currency system, which compels them to accept ZiG in a predominantly dollarised supply chain, amid exchange rate distortions and arbitrage.
The challenges facing OK Zimbabwe and other formal retailers can be attributed to a complex interplay of factors:
- Currency Volatility and Exchange Rate Distortions: The country’s multi-currency system has created significant exchange rate distortions and arbitrage opportunities, making it difficult for retailers to operate efficiently. Retailers often sell goods at the official exchange rate but must pay their suppliers, often in foreign currency, at the black market rate, resulting in losses. The fluctuating exchange rate also creates uncertainty in cash flows, making effective planning difficult.
- High Operating Costs: Excessive utility bills, especially electricity charges, licensing costs, and compliance requirements, have eroded the viability of formal businesses. The rising cost of electricity, coupled with frequent power outages, has forced retailers to rely on expensive back-up generators.
- Supply Chain Disruptions and Shortages: Currency volatility and liquidity shortages have disrupted supply chains, leading to stock shortages and increased reliance on short-term funding.
- Lack of Investment and Modernisation: Limited access to funding has hampered investment and modernisation efforts, making it difficult for retailers to compete with the informal sector.
- Changing Consumer Needs and Behaviour: Shifting consumer preferences and spending patterns, coupled with low aggregate demand, have further strained the retail sector.
- Informalisation and Competition from the Informal Sector: The growth of the informal sector, fueled by economic hardship and unemployment, has created unfair competition for formal businesses, which must comply with regulations and pay taxes. The informal sector offers goods at lower prices, making it difficult for formal businesses to compete.
- Liquidity Crunch and Limited Access to Funding: The shortage of local currency and limited access to foreign currency have created a liquidity crunch, making it difficult for retailers to fund their operations and import goods.
- Brain Drain and Skills Flight: The emigration of skilled workers has further hampered the retail sector’s ability to adapt to the changing economic landscape.
OK Zimbabwe’s recent struggles can be traced back to a series of strategic decisions and unforeseen events. According to an internal trading overview obtained by The NewsHawks, the business procured stock in US dollars from April to June 2024 and signed contracts with suppliers to that effect, aiming to secure the best prices, achieve price stability, and obtain extended trading terms.
However, the Reserve Bank of Zimbabwe’s (RBZ) unexpected introduction of the ZiG currency in early April disrupted these plans, causing US dollar collections to plummet. Suppliers were unwilling to accept ZiG in exchange for their US dollar balances, forcing OK Zimbabwe to revert to ZiG procurement and operate on very short trading terms, including prepayments for fast-moving products. This resulted in higher US dollar prices on the shelves, a decline in customer footfall, and trading stocks being held for extended periods. The devaluation of the ZiG in September 2024 further compounded the problem, requiring the business to acquire more ZiG to settle suppliers at a higher exchange rate.
The business has faced difficulties accessing banking facilities since October 2024 due to liquidity challenges, despite ongoing engagements with financial institutions.
While the government has been cracking down on the informal sector in an effort to ensure fair competition and tax compliance, critics argue that these efforts are primarily aimed at generating tax revenues to fund government operations.
Amid the growing market turmoil, the Confederation of Zimbabwe Retailers has warned that more formal retail and wholesale businesses will close unless authorities take urgent intervention measures.
