• OK is seeking to raise up to US$30 million to stabilise its finances amid a stockouts and a high debt
• The company faces significant challenges, including liquidity constraints, working capital shortages,  leading to stock shortages, declining revenues
• The proposed capital raise aims to clear supplier arrears, restore stock availability, and bolster liquidity

Harare- OK Zimbabwe Limited, the country’s largest retail operator by store count, is seeking to raise up to US$30 million to stabilise its finances amid a brutal operating environment that has pushed it to close four stores, dismiss its management, and anticipate a significant loss for the year to 31 March 2025.

This capital-raising effort, announced by the Board of Directors, comes as a response to a punishing operating environment marked by macroeconomic volatility, liquidity constraints, and working capital shortages.

These factors have crippled the company’s ability to pay suppliers and financial institutions, leading to stock shortages, declining revenues, and an anticipated significant loss for the year to 31 March 2025.

The proposed infusion of funds through a mix of a rights issue, private placement, and debt instruments aims to stabilise the retailer’s finances and support a broader turnaround strategy.

The roots of OK Zimbabwe’s difficulties lie in a confluence of external and internal pressures. Zimbabwe’s macroeconomic instability, characterised by exchange rate distortions and inflationary spikes, has hit formal retailers like OK particularly hard.

Unlike informal traders, who operate free from rigid pricing regulations and often deal in USD cash, OK has been forced to contend with an official exchange rate that distorts pricing and erodes margins.

Inflation has further driven up costs, squeezing profitability as the company struggles to pass these increases onto cash-strapped consumers. Liquidity shortages in the broader economy have compounded the issue, dampening consumer spending and leaving OK with insufficient cash flows to sustain operations.

The result has been a vicious cycle: unpaid suppliers have cut off credit lines, leading to empty shelves and a drop in sales, particularly over the last six months, where trading levels failed to cover costs.

Internally, OK Zimbabwe’s working capital woes have amplified these external shocks. The company’s inability to maintain adequate stock levels stems directly from its failure to settle outstanding balances with suppliers, a problem exacerbated by a reliance on USD-denominated obligations in an economy where local currency collections dominate.

This has not only disrupted the supply chain but also damaged the retailer’s reputation as a reliable one-stop shop, a cornerstone of its brand as Zimbabwe’s leading retailer with over 70 branches nationwide.

The financial strain is evident in recent developments five branch closures in early 2025, a 36% revenue drop in the third quarter ended December 2024, and debts of US$17 million and ZiG537 million to suppliers painting a picture of a company teetering on the edge.

This downsising, coupled with the firing of its leadership and the reinstatement of former executives Willard Zireva and Alex Siyavora for a restructuring, signals hard times.

Meanwhile, competitors like Choppies and Spar have also downsised, with Choppies exiting operations and Spar franchises closing outlets, unable to compete with informal traders thriving on USD cash transactions. N Richards Group and Mohammed Mussa Wholesalers have similarly reduced footprints, highlighting a sector-wide retreat.

 Yet, TM Pick n Pay, backed by Meikles Limited and South Africa’s Pick n Pay, bucks this trend. It opened two new stores in 2024 (Gwanda and central Harare) and saw revenue soar 102% in local currency terms for the year ending February 2024, despite a 4.8% drop in units sold.

The US$30 million capital raise is a bold bid to break this downward spiral. By strengthening the balance sheet, the funds aim to clear supplier arrears, restore stock availability, and bolster liquidity, critical steps to halt the revenue bleed .

Yet, the plan’s success is far from guaranteed. The 43% ZiG devaluation in September 2024, a policy misstep that slashed the currency’s value overnight, has already eroded confidence in local currency transactions, pushing demand for essentials like fuel (already payable sonly in USD), rentals, and medical services into USD.

Regionally, TM Pick n Pay’s South African parent offers a different narrative. Pick n Pay SA is undergoing its own turnaround, closing 32 underperforming stores (24 corporate, 8 franchise) by January 2025 and converting others to its Boxer discount brand, after a R3.2 billion loss in FY2024.

This mirrors OK’s downsizing but differs in execution, Pick n Pay raised R4 billion via a rights offer and R8 billion from listing Boxer, bolstering its balance sheet, while OK’s US$30 million raise remains aspirational.

Boxer itself thrives, with 11.4% sales growth in the 45 weeks to January 2025, targeting lower-income consumers, a segment OK struggles to retain amid informal competition.

Shoprite, South Africa’s retail titan, provides a stronger counterpoint, maintaining growth by hedging forex risks across SADC and pushing its Usave model into informal markets, a flexibility OK lacks.

In Zimbabwe, TM benefits from this regional muscle, while OK, a standalone local player, flounders without such buffers.

Globally, supermarkets like Walmart and Tesco offer a big contrast. Walmart’s 2024 revenue grew 6%, driven by e-commerce and supply chain efficiencies, while Tesco posted a 4.4% sales increase, leaning on loyalty programs and private labels.

Both giants adapt to inflation and consumer shifts challenges OK faces but cannot counter effectively due to Zimbabwe’s currency chaos and forex scarcity.

Closer to home, Kenya’s Naivas Supermarkets thrives by integrating digital platforms like WhatsApp ordering, outpacing informal traders, a pivot OK has yet to embrace.

Meanwhile, the collapse of Sears in the US, which cycled through legacy CEOs and cost cuts without innovation, looms as a cautionary tale for OK’s nostalgia-driven leadership swap.

TM’s expansion and OK’s contraction highlight a divide: one leverages regional support and adaptability, the other buckles under local constraints. Regionally, Pick n Pay SA and Shoprite show that scale and diversification can weather storms, while globally, innovation drives survival. OK’s fate hinges on whether this capital raise and restructuring can bridge its operational gap, or if it’s too late to halt a slide into irrelevance in Zimbabwe’s unforgiving retail arena.

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