It’s a tough time to be in the high-end fashion business in Zimbabwe. Truworths Limited, a clothing chain listed on the Zimbabwe Stock Exchange, has just announced that they expect volumes to fall in the coming year following a bold move to suspend Zimbabwe dollar credit sales.
In a joint statement, Truworths CEO Themba Ndebele and Chairperson Mordecai Mahlangu said the outlook for the company remains uncertain as disposable incomes continue to fall in the face of skyrocketing inflation.
At 243% in December, Zimbabwe has the region’s highest inflation rate, which is having a major impact on economic growth. Consumers are turning to cheaper second-hand clothing, leaving Truworths, which reported an inflation-adjusted $37.1 million loss during the period, struggling to stay afloat.
The company’s revenues did rise to $1.1 billion during the period, compared to $836 million during the same period last year, but Truworths says that this increase is not enough to offset the negative effects of the country’s economic crisis.
“High unemployment levels and low disposable incomes due to inflation had a negative impact on volumes sold,” the company said in its statement. “Customers are resorting to buying products in the unregulated market at prices which the business could not compete against.”
Truworths also pointed to restrictive pricing laws that make their products expensive in US dollar terms and relatively cheap in Zimbabwe dollar terms. This, combined with the gap between the official exchange rate and the black market exchange rate, has made it even more difficult for the company to make ends meet.
The situation is not likely to improve any time soon. Leading advisory firms such as Morgan & Co have released downbeat forecasts for the year ahead, with one report suggesting that a “bloody” run-up to this year’s polls could further undermine foreign direct investment and hurt Zimbabwe’s economic growth prospects.
Analysts say that these developments may continue to affect spending patterns and that companies like Truworths may struggle to stay afloat. It’s a harsh reality for the fashion industry in Zimbabwe, but one that is all too real in a country plagued by economic uncertainty and political turmoil.