Tawanda Karombo
Zimbabwe’s largest but struggling retail operator, OK Zimbabwe, is seeking to raise $30 million (around R560m) in capital to strengthen its balance sheet, enhance working capital and to support its turnaround after profitability tanked amid a worsening economic environment.
OK Zimbabwe also runs Born Marche and some Food Lovers' outlets in the country. Recently, the company sacked its CEO and other officials, and brought back retired executives to help turn around its fortunes.
As part of its turnaround strategy, the troubled retail operator will undertake a capital raise of up to $30m “to bridge the funding gap and stabilize the company’s financial” position, it said on Wednesday.
“The capital raise will be a combination of a rights issue, private placement and debt instruments,” said Margaret Munyuru, company secretary for OK Zimbabwe.
The funds will be used to “ensure smooth business operations” and strengthen the company’s balance sheet and liquidity position.
After “experiencing significant operational and financial difficulties arising from both endogenous and exogenous factors, driven by a challenging operating environment,” OK Zimbabwe has seen its financial performance nosedive.
It blamed this on a difficult operating environment characterized by “macroeconomic volatility, including pricing issues related to the exchange” rate.
OK Zimbabwe argues that informal players that now dominate Zimbabwe’s economy “operated without this constraint, giving them a competitive” advantage.
“Additionally, inflationary pressures have impacted cost structures and pricing strategies. Liquidity constraints in the broader economy (affected) consumer spending and the company’s ability to generate sufficient cash flows and working capital challenges leading to disruptions in supply chain and reduced stock availability,” added Munyuru.
The firm has thus been unable to maintain adequate stock levels as many suppliers can no longer continue providing goods and services due to outstanding unpaid balances.
“This has directly impacted product availability across the company’s stores, affecting revenue generation and overall business performance,” Munyuru said.
These challenges have been more pronounced in the last six months under which “trading levels were not adequate” to cover costs.
These challenges have impacted the company’s ability to meet its financial obligations, particularly payments to suppliers and financial institutions. Consequently, OK Zimbabwe “anticipates making a significant loss” for the year ended 31 March 2025.
Volumes and revenue in top Zimbabwean retailer, OK Zimbabwe fell by 36% during the lucrative quarter to end of December.
Suppliers to Zimbabwean retailers also insisted “on shorter trading terms and in some cases prepayments for supplies invoiced in local” currency. This exerted pressure on OK Zimbabwe’s working capital and necessitated the need to access short-term funding.
Compared to the same period a year earlier, volumes for the December quarter decreased by 36%, with the reduction in volumes translating to revenues declining by a similar margin.
Further worsening the operating environment was a largely subdued consumer spend. The period was marred by acute local currency liquidity shortages restricted access to the much needed funding for the company to cover working capital cycles.
“The local currency unit, ZWG, experienced a sharp devaluation at the end of September 2024 as monetary authorities sought to improve the viability of the exchange rate system for the broader economy,said the company,” said the company.
“Invariably, the devaluation had the net effect of nearly doubling existing US dollar denominated obligations in loans and creditors’ balances.”
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