• Strategic Restructuring for Revenue Recovery: DGA is implementing a strategic restructuring to reverse performance downturn
• Positive Outcomes from Joint Ventures: A joint venture with a major supplier has led to a 38% increase in revenues from continuing operations
• Challenges in Regional Markets: Faces challenges including currency depreciation, counterfeit products, and a decline in sales volumes

Harare – Distribution Group Africa (DGA), a vital arm of Axia Corporation Limited operating across Zimbabwe, Malawi, and Zambia, is embarking on a strategic restructuring to reverse declining revenues and align its performance with financial outcomes.

The company faces a complex regional landscape, with foreign exchange shortages, competitive pressures, and operational shifts driving a mixed performance.

During an analyst briefing last week, the group's CEO, Ray Rambanapasi, said one of the immediate solutions was to align the operations with revenues generated to ensure sustainability.

 IDuring the 1HY2025, DGA Zimbabwe reported a 25% revenue decline and a 28% drop in sales volumes, prompting a decisive overhaul aimed at restoring profitability and ensuring sustainability.

In Zimbabwe, DGA’s restructuring is already yielding results. A joint venture with a major supplier has boosted revenues from continuing operations by 38%, while tight controls on warehousing and distribution have curbed significant stock losses from prior years.

The company’s capture of 55% of Unilever’s business following its Q2 exit from Zimbabwe highlights its ability to seize market opportunities.

However, forex shortages in Malawi and Zambia continue to cast a shadow over regional performance.

In Malawi, turnover rose by 14% in Kwacha terms, supported by a modest 5% volume increase. Yet, the business contends with counterfeit products and local currency depreciation, exacerbated by severe foreign currency shortages.

The gap between formal and informal exchange rates is widening, with liquidity constrained by a reliance on forward contracts and a drop in spot transactions.

In December 2024, the Reserve Bank of Malawi imposed an 80% retention policy on NGO proceeds, prioritising forex for essentials like fuel, fertilizer, and pharmaceuticals leaving businesses scrambling for hard currency.

In Zambia, the picture is bleaker, with turnover declining 4% in Kwacha terms and volumes plummeting 19%. The cessation of a key supplier in June 2024 and stiff competition from a local rival offering alternative products have hit hard.

DGA has introduced strategies to recover lost volumes, but the road ahead remains steep amid ongoing forex constraints.

DGA’s response is a region-wide push to optimise procurement, distribution efficiency, and capacity utilisation.

In Zimbabwe, the joint venture model now equity-accounted positions the company for better profitability, while partnerships with key retailers aim to ensure competitive product availability.

Across the region, DGA is exploring product innovations and streamlining agencies to enhance competitiveness. Cost management and market expansion are top priorities for the next six months, with a cautious yet optimistic full-year outlook.

Survival in a Volatile Region: A Critical Perspective

DGA’s restructuring shows promise, but its survival hinges on revolving entrenched challenges.

In Malawi, the 14% turnover growth is overshadowed by currency depreciation and counterfeit goods, which erode margins and consumer trust. The Reserve Bank’s forex retention policy, while stabilising essentials, starves commercial operations of liquidity a bottleneck DGA must circumvent through alternative financing or local sourcing.

Zambia’s 19% volume drop signals a deeper market erosion, and without swiftly replacing the lost supplier or countering local competition, DGA risks further decline.

Zimbabwe’s joint venture and Unilever gains are bright spots, but the 28% volume decline reflects weakened formal demand a trend seen in 2023 when DGA halted supplies to major clients over payment delays.

Forex shortages across all three markets amplify these risks, with no immediate relief in sight given Malawi’s backlog and Zambia’s supply chain disruptions.

Globally, South Africa’s Distell Group restructured in 2019 to prioritise African markets, achieving 20% revenue growth despite currency volatility by enhancing route-to-market strategies. DGA’s retailer partnerships echo this, but its smaller scale limits its buffer against prolonged losses.

Can DGA Thrive?

DGA’s survival rests on execution. Zimbabwe’s restructuring offers a blueprint leveraging partnerships and efficiency, but Malawi and Zambia demand tailored fixes.

In Malawi, combating counterfeits and securing forex through forward contracts or NGO tie-ups could stabilise operations.

 In Zambia, replacing lost volumes requires aggressive innovation or new suppliers, lest competitors entrench their gains.

Over-reliance on cost-cutting, without revenue diversification, risks stagnation. Unlike Innscor’s capital-heavy approach, DGA’s lean strategy suits its constraints but lacks the firepower to outpace rivals long-term.

Therefore, DGA’s restructuring is a calculated bid to realign performance with revenues. With agility and innovation, it might weather the storm but in a region this volatile, optimism alone won’t suffice.

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