OK Zimbabwe, a name synonymous with supermarkets in the country, has taken drastic action, firing its senior executives. This move comes as part of the company’s concerted efforts to steer the ship back on course, following a period of challenges. The decision, communicated in a formal notice, details the “conclusion of voluntary separation agreements” with key directors. Simultaneously, a team of “experienced retailers” is being brought in to assist the board with restructuring and turning the company around. These changes have been implemented with immediate effect.

The Executives Who Have Departed

The notice details the following directors are gone:

• Chief Executive Officer – Mr Maxen Phillip Karombo
• Chief Financial Officer – Mr Phillimon Mushosho
• Supply Chain Director – Mr Knox Mupaya.

The Executives Who Have Come Back

The notice details that the following former executives are coming back in an acting capacity:

• Chief Executive Officer – Mr Willard Vimbai Zireva
• Chief Financial Officer – Mr Alex Edgar Siyavora
• Supply Chain Director – Mr Muzvidzwa Richard Chingaira

Stocking Issues and Supplier Relationships

Over the past few months, OK Zimbabwe has been grappling with significant stocking issues. As we noted in our previous article, OK Zimbabwe is not leaving Zimbabwe, it is shutting down six branches, these issues partly arise from liquidity problems stemming from decreased sales. This has led to delays in paying suppliers, resulting in some suppliers becoming reluctant to supply OK stores. This reluctance has, in turn, manifested as empty shelves in some of their supermarkets.

For example, there were reports of bakers such as Lobels, Bakers Inn, and Proton no longer supplying bread to OK, due to outstanding payments. Maintaining strong supplier relationships is crucial in the retail sector, and disruptions can have a visible impact on the availability of goods for consumers.

Rumours and Reckless Spending

While the official communication from OK Zimbabwe does not explicitly blame senior executives for the company’s current challenges, rumours circulating from former employees who were made redundant paint a different picture. These former employees suggest that the executive’s luxurious lifestyles and alleged overspending on the company’s budget have contributed to the current problems.

While we have been unable to independently verify these claims, they highlight the importance of responsible financial management at the executive level in any organisation. Transparent financial practices are essential for maintaining trust with employees, shareholders, and the public.

The Return of Seasoned Retailers

The move to bring back Willard Zireva, who retired in 2017, and Alex Siyavora, who succeeded Zireva and led the company until 2021, signals a desire to leverage experience and stability during this turbulent period. Their return suggests a need for familiar hands to guide the company through a comprehensive business review and restructuring. It’s a vote of confidence in their previous leadership and a recognition of their understanding of the Zimbabwean retail landscape.

Broader Retail Sector Crisis

The troubles at OK Zimbabwe are not isolated. As previously reported, the closure of branches is a symptom of a broader crisis affecting the retail sector in Zimbabwe. You can read more on this in our previous report. The combined pressure of a difficult operating environment, restrictive monetary policies, rising overhead costs, changing supply chains, and competition from the informal sector has created a perfect storm for formal retailers.

Monetary Policy and the USD Conundrum

One of the key challenges facing OK Zimbabwe, and other formal retailers, is the restrictive monetary policy framework. These businesses are often compelled to use a rate much closer to the formal exchange rate when conducting transactions in the local currency. This rate is frequently less favourable than the rate offered on the parallel or black market, a rate that is now preferred by most manufacturers.

Furthermore, unlike smaller retailers, OK cannot offer USD discounts, which have become increasingly common. This puts them at a disadvantage, creating cash flow problems, as many suppliers and manufacturers now insist on payments in United States dollars. To compensate for these losses, formal retailers often have to charge higher USD prices, making them less competitive in an already challenging market.

Overhead Costs: The Weight of Formal Retail

Unlike smaller tuckshops and informal traders, formal retailers such as OK Zimbabwe operate with significantly higher overheads. They have larger, more expensive premises to maintain, coupled with greater staff numbers. These overheads reduce the company’s profit margins. In contrast, smaller retailers often operate lean businesses, focusing on a limited line of products, giving them the flexibility to offer lower prices.

The Rise of the Informal Sector

The informal sector poses a significant challenge to formal retailers. Informal traders predominantly deal in USD cash, allowing them to offer lower prices. They often operate outside the formal banking system, avoiding taxes such as the IMT tax, which adds to the cost of online payment options for customers. Furthermore, informal retailers are not always subject to the same level of regulatory compliance, such as fiscalisation, giving them a competitive edge.

Will this do the trick?

The firing of senior executives and the return of experienced leaders signals a pivotal moment for OK Zimbabwe. The coming months will be crucial as the company undergoes a comprehensive business review and restructuring. The ability to adapt to changing market conditions, strengthen supplier relationships, manage costs effectively, and navigate the challenges posed by the informal sector will determine whether OK Zimbabwe can successfully weather this storm and regain its position as a leading retailer in Zimbabwe. We will continue to monitor the situation and provide updates as they become available.