Zimbabwe’s economy may be down and out, but new investment by Pick n Pay, OK Zimbabwe and Botswana-based Choppies points to a fierce battle for retail market share

Zimbabwe’s retail sector is defying the odds. Earlier predictions of a looming collapse of the sector — brought on by an imports-restriction law, a liquidity crunch, competition from informal traders and a fall in consumers’ disposable income — has not materialised.

Instead of scaling back, retailers are locked in a fierce contest to either expand their operations or to refurbish existing stores, in a sector that has increasingly become cut-throat.

This is at odds with the widespread slump in the rest of Zimbabwe’s economy.

Turning up the heat is retail giant Pick n Pay, which has 58 stores in Zimbabwe. It is fast catching up to the country’s biggest retailer, OK Zimbabwe, which has 64 stores.

Botswana-headquartered Choppies is the third largest. It operates 32 stores in Zimbabwe and hopes to expand that to 50 by the end of 2017.

Pick n Pay owns a 49% stake in TM Supermarkets, with 51% owned by the Meikles group. About 15 stores out of the 58 operate under the TM Pick n Pay banner.

Since 2012, Pick n Pay’s revenue has risen by 73% from $228.2m to $395.3m in the year to March 2016.

Economist John Robertson, head of Robertson Economics in Harare, suggests the links and access to capital enjoyed by TM from Pick n Pay were the main drivers of its growing foothold in Zimbabwe.

Earlier this month, Pick n Pay opened a $25m mall, Village Walk, in Harare’s upmarket Borrowdale suburb. In addition to a Pick n Pay store, the mall has about 30 shops.

TM Pick n Pay Zimbabwe MD Malcolm Mycroft says the new mall will not be 
a one-off investment, adding that the Borrowdale development was the first of its kind in Zimbabwe.

OK Zimbabwe has expansion plans of its own. COO Albert Katsande says two new stores, in Harare and Chipinge, will open in the second half of 2017. Last year, two stores 
were opened in Gweru and Victoria Falls.

The scale of new investment by retailers pours cold water on fears that the imports-restriction law, introduced by government last July, would affect the supply of goods. The law prohibits imports of products including bottled water, mayonnaise, salad cream, peanut butter, jams, yoghurt, flavoured milks and dairy juice blends. It was implemented to boost local manufacturing.

Empty shelves, a shortage of basic goods and the rise of the black market were the potential risks cited as consequences of Statutory Instrument 64 of 2016. The law largely affects imports from SA, Zambia and Malawi.

Denford Mutashu, president of the Confederation of Zimbabwe Retailers Association, says the law has spurred local-industry growth and the stocking patterns in most stores was now skewed in favour of local products.

"An average of 70% of goods on the shelf is local," he says. "The retail sector in Zimbabwe is safe, sound and secure despite the challenges the economy has faced pre and post dollarisation."

Zimbabwe’s manufacturing sector is operating at about 64% capacity, according to the latest industry survey from the Confederation of Zimbabwe Industries.

The manufacturing sector eyes production output of about 75% this year, largely on the back of the imports law and an increase in demand for local goods.

The fierce contest taking place among retailers has not gone unnoticed by manufacturers, who have seen it as a means to return to full production.

While the retail sector shows buoyancy, its longevity in light of economic challenges — such as demands for upfront cash from suppliers, a fall in sales/m², and the rise in informal traders — will lie in its ability to adapt to new consumer spending patterns.

"The average basket has declined, with most customers choosing to spread purchases over the whole month as opposed to one big purchase at month-end," Mutashu says.

The medium to long-term outlook for the sector suggests the next phase of the contest among retail operators may shift from urban to rural areas, which are home to about 70% of Zimbabwe’s 13m people.