• Group Performance: Revenue fell to ZWG 2.8 billion from ZWG 3.5 billion, resulting in a ZWG 5.6 million loss, while maintaining healthy solvency and liquidity
• TM Supermarkets: Revenue decreased to ZWG 2.7 billion, with profit after tax dropping to ZWG 14.8 million
• Hospitality and Properties: Hospitality revenue increased to ZWG 44.5 million, but profit fell to ZWG 6.2 million
• Properties revenue rose to ZWG 7.9 million, with profit after tax at ZWG 13 million, aided by a property sale

Harare- Zimbabwe’s second largest retailer, Meikles Limited with stores trading as TM Pick n Pay saw profit declining in both US dollar terms and local currency terms as the sector continues facing unsatiable competition from the unregulated informal sector.

During the six months to 31 August 2024, its first half year to FY2025, the flagship asset recorded revenue decrease to ZWG2.7 billion from ZWG3.4 billion during the same period last year.

In US dollar terms, revenue was estimated to have been declined by 5% to 198.8 million, and resultantly, the unit saw massive profit decline to 4.7 million in US dollar terms from US$10.3 million.

With flagship operations recording a depressed performance, overall group revenue declined by 20% year-on-year to ZWG 2.7 billon with profits collapsing from ZWG 40.8 million to a ZWG 5.6 million loss.

One of the biggest challenge retail operations in Zimbabwe, which employs over 20000 workers is high informalisation in the country. Estimated at 64% by the World Bank and 80% by other economic agents, this unregulated sector is sweating formal businesses. Informal sector should not be terminated. Infact, government should not do any favours to the formal sector against the informl ounterparts as it is a critical component of the economy. However, it should create a level playing field for both parties.

The problem at large is the unregulatory nature of the informal sector. It sducts, evades duty, taxes from the border and in the country. Some of them will come and sell identical goods on its verandas where it still pays rent. This informalisation, estimated at 64% of Zimbabwe’s economy by the World Bank (though some peg it at 80%), is exacerbated by a punishing tax regime of over 30 licensing costs and a 2% Intermediated Money Transfer Tax (IMTT) on digital payments that formal retailers like OK cannot evade.

The fallout is striking. Competitors like Metro Peech and Brown, Choppies, and N Richards have ceased and sold operations entirely, while Food World drastically reduced their outlets, making Meikles and OK Zimbabwe standing giants, but struggling.

The second challenge lies in the currency crisis, specifically with regards to exchange rate management. The RBZ has pegged the local currency at a higher value whereas the parallel market exchanges use the market-forces determined one.  Suppliers who accept ZWG also charge according to this parallel market rate.

Overvalued official exchange rate, which is 30% weaker than the parallel market, discourages suppliers from accepting local currency, while informal vendors and smuggled goods undercut formal retailers’ pricing power.

TM Supermarkets’ coping strategies such as closing underperforming stores, increasing foreign currency revenue (24% of total sales), and optimizing working capital have preserved liquidity but failed to reverse declining profitability.

The retail sector’s struggles mirror broader regional challenges, though contrasts exist in how Southern and East African governments support large-scale retailers. 

In South Africa, formal retailers like Shoprite have established a dominant market position, largely attributable to favourable government policies that foster macroeconomic stability and curtail informal competition. The rigorous enforcement of tax compliance, zoning regulations that restrict street vending, and investments in supply chain infrastructure, such as cold storage networks, have created a protective environment for large retailers. The requirement for suppliers to exclusively sell to licensed vendors has levelled the playing field, ensuring a regulated market ecosystem.

In contrast, Zimbabwe's attempts to emulate this approach are likely to falter due to the prevailing foreign exchange shortages. Suppliers necessitate US dollars, not Zimbabwean Gold (ZWG), to sustain their operations. Formal retailers, such as OK Zimbabwe, are grappling with a significant mismatch in their revenue streams, with only 20% of sales generated in foreign currency and a staggering 80% in ZWG. Conversely, informal retailers have managed to accumulate US dollars due to their exclusive reliance on cash-based transactions.

Given these circumstances, it is improbable that suppliers will comply with government directives, which would inevitably lead to the demise of their businesses. Instead, they will likely opt for a more pragmatic approach, prioritizing rational decision-making to ensure their survival.

Still in South Africa, the government also maintains a relatively stable exchange rate, enabling predictable pricing. Shoprite further insulates itself by sourcing 90% of products locally, reducing forex exposure a strategy hard for Zim companies to emulate due to Zimbabwe’s import dependency. 

For Kenya, east Africa’s biggest economy, Kenya’s retail sector, while less formalised, has seen government efforts to stabilize the shilling through Central Bank forex reserves and interest rate adjustments. However, rampant informal trade persists due to weak enforcement of licensing laws. Retailers like Naivas survive by adopting hybrid models, leasing space to informal vendors within stores to attract foot traffic.

This contrasts with Zimbabwe, where informal traders operate outside formal stores, cannibalising sales. Kenya’s recent tax incentives for retailers investing in automation and digital payments could inspire Zimbabwe retailers  to modernise its operations. 

Back to southern Africa, Zambia and  Botswana offer contrasting approaches. Zambia’s kwacha volatility and lack of anti-smuggling measures have allowed informal traders to capture 60% of the retail market.

However, the government has introduced VAT exemptions for manufacturers supplying formal retailers. Botswana, with its stable pula pegged to a currency basket, provides a more favourable environment. Retailers such as Choppies benefit from government partnerships to build distribution hubs in rural areas, ensuring nationwide supply chain resilience, a model Zim retailers could explore to mitigate Zimbabwe’s infrastructure gaps. 

In Africa’s biggest economy, Nigeria’s retail sector grapples with forex scarcity, high infomalisation which is actually the biggest informal economy in Africa, and high import tariffs, but the Central Bank prioritizes USD allocations for retailers importing essential goods.

 Large chains like Spar and Shoprite Nigeria also leverage partnerships with local agro-processors to reduce reliance on imports. While Nigeria’s inflation rate (28% in 2024) remains high, its flexible exchange rate regime narrows the gap between official and parallel rates, reducing pricing distortions. This contrasts sharply with Zimbabwe, where exchange rate rigidity exacerbates disparities. 

Thus, regional governments employ varied measures to shield large retailers. South Africa and Botswana enforce strict tax compliance and zoning laws to limit informal trade. Nigeria and Kenya allocate forex directly to retailers for critical imports, while Zambia offers tax rebates to incentivize formal supply chains.

Zimbabwe’s government, however, has been ineffective in curbing smuggling or stabilizing the ZWG. While the introduction of the Zimbabwe Gold (ZWG) currency initially narrowed exchange rate gaps, policy inconsistency and lack of anti-smuggling infrastructure have left retailers vulnerable. 

The latest measure, Statutory Instrument 7 of 2025 designed to protect formal market enterprises by authorising the Zimbabwe Revenue Authority (ZIMRA) to enforce compliance among businesses found in possession of specified goods without verified proof of duty payment has some loop-holes. Businesses unable to provide adequate documentation demonstrating lawful importation will be classified as having engaged in smuggling and will be subject to duty payments, along with applicable penalties. 

However, this policy appears to be more reactionary than proactive. While it addresses immediate challenges, it falls short of the forward-thinking, strategic measures required to foster long-term resilience and competitiveness in the face of external pressures and market distortions. A more proactive approach would involve comprehensive structural reforms, enhanced support for local industries, and policies that anticipate and mitigate future disruptions rather than merely responding to them.

A critical question arises: how do goods evade border controls despite the presence of ZIMRA officials? This blatant circumvention of customs regulations reflects the pervasive corruption within the system.

Recommendations for Meikles and Zimbabwean Policymakers

To regain competitiveness, Meikles should adopt localised sourcing, as seen in South Africa and Nigeria, to reduce forex needs and counter smuggling. Hybrid models incorporating verified informal vendors, similar to Kenya’s Naivas, could reclaim foot traffic while digitising payments and expanding e-commerce would align with regional trends toward omnichannel retail.

Meanwhile, Zimbabwe’s government must prioritise exchange rate liberalisation, mirroring Nigeria’s gradual forex unification, and invest in customs enforcement to curb smuggling. Fiscal incentives for local manufacturing, as in Zambia, could strengthen formal supply chains. 

Therefore, Zimbabwe’s retail crisis stems from uniquely severe structural flaws, but regional examples prove that proactive government policies, forex allocation, tax incentives, and infrastructure investment can stabilise formal retailers.

Meikles’ survival hinges on adopting localised, digital, and hybrid strategies while lobbying for reforms to level the playing field. Without macroeconomic stability and anti-smuggling measures, even optimised operations will struggle against the tide of informality and currency dysfunction.

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