Liquidity constraints hit OK

via Liquidity constraints hit OK – DailyNews Live  21 NOVEMBER 2013  

Zimbabwe’s largest supermarket chain by revenue and outlets, OK Zimbabwe (OK), says post-election uncertainty over policy direction coupled with low foreign direct investment inflows have resulted in increased liquidity constraints.

“Additionally, the economy has been adversely affected by reduced manufacturing capacity utilisation, low prices on exported commodities and increased unemployment,” said chairman David Lake in the grocer’s financials for the half year to September 2013.

The country has been battling liquidity challenges since introduction of the multiple currency system — dominated by the United States dollar and South African Rand — in 2009.

However, the situation has worsened following the July 31 elections which saw President Robert Mugabe extending his 33-year rule on Zimbabwe.

Market experts assert that slowed economic growth has a negative impact on spending patterns of customers’ disposable income will remain low.

Lake noted that the Zimbabwe Stock Exchange-listed retailer’s growth in the six months to September was significantly affected by the prevailing liquidity crisis.

“Operating in the environment…. the group achieved limited growth in revenue but returned profits virtually identical to those reported this time last year,” he said, adding that they continued to import most of their products.

During the period under review, the group’s profit remained flat at $4,8 million while revenue rose 5,4 percent to $243,6 million on the prior year as consumer spending tightened and economic activity slowed.

Earnings Before Interest, Taxes, Depreciation and Amortisation (Ebitda) increased 4,8 percent to $9,6 million.

Sales at $243,2 million were 5,4 percent up on the prior year showing weak consumer demand in tight liquidity conditions.

“To enhance brand strength and improve sales growth, the group will embark on full-scope refurbishment work at OK Waterfalls, OK Houghton Park and OK Bindura and will carry out limited work at OK Gweru and OK Mutare,” said Lake.

The retailer expects to open two more stores this year.

Despite operating in a subdued economic environment OK declared an interim dividend of 0,20 cents.

Meanwhile, Reserve Bank of Zimbabwe governor Gideon Gono has said the country requires foreign direct investment (FDI) to solve the liquidity crisis and should not be seen as attacking the owners of capital.

“The other way we can solve the liquidity crunch faced in the country is through attracting FDI,” Gono said.

“Among ourselves, we don’t have much and we have to bring in capital from somewhere in exchange of something, whatever we get. But we don’t have to attack the owners of capital,” he said.

The country desperately needs FDI to rebuild and revive infrastructure neglected over the years.