Tawanda Karombo Harare
A DEAL involving South African distribution firm Kawena Distributors and Zimbabwe’s biggest retail operator, OK Zimbabwe, that enables expatriate Zimbabweans to pay for groceries for their relatives back home is expected to start making a profit only by the end of this year as it is experiencing take-off hurdles.
Zimbabweans in South Africa had had to use all sorts of methods, some very risky, to get groceries to their loved ones at home, said James Madondo, the business information systems executive at OK Zimbabwe, when the deal was launched last year.
Kawena Distributors was initially established to serve Mozambicans working in South Africa through distribution services to Mozambique and has now broadened operations to enable payments to be made in South Africa for groceries that will then be obtained from OK Zimbabwe’s outlets.
Although the Zimbabwean retail sector has been resilient, most stores procure their stock from South African producers, according to executives in the retail industry in Zimbabwe.
It was against this backdrop, and a larger number of Zimbabweans settling down in South Africa, that Kawena and the Zimbabwean retail giant initiated the deal.
Although its take-off had been less robust than first expected, OK Zimbabwe said it had set aside financial resources to shore it up.
It was expected to be profitable by the end of this year.
“The trans-border initiative we started last year in partnership with Kawena of South Africa has been slow to take off but we have allocated resources to it and expect the project to make some contribution to the performance of the company by the end of the year,” OK Zimbabwe said in a trading update on Friday.
Under the distribution deal between the two companies, expatriate Zimbabweans in South Africa make a payment at a Kawena outlet in South Africa and the money is electronically credited to the recipient’s card in Zimbabwe. Beneficiaries in Zimbabwe can then use their cards to purchase goods at any OK retail outlet across the country.
OK Zimbabwe also runs Borne Marche outlets in Zimbabwe and directly competes with Pick n Pay branded shops as well as TM Supermarkets stores. Pick n Pay has a 49 percent interest in TM Supermarkets, which has opened a refurbished store in Chinhoyi, about 110km west of Harare.
Executives at OK Zimbabwe said on Friday that the retailer was operating against the backdrop of “a shrinking economy and declining revenues”, which had forced management to focus on improving the gross margin while also keeping operating costs at sustainable levels.
“At the end of the quarter, operating profit grew by 1 percent against the prior year, which is a result of these efforts,” the Zimbabwean retailer said.
Chief executive Willard Zireva told the annual general meeting in Harare on Thursday that “revenue is under pressure and during the period in terms of sales we were slightly below budget and (down) 3.5 percent” compared with a year earlier.