Formal retail operations in Zimbabwe are being threatened by declining disposable incomes which are forcing consumers to turn to cheaper options in the informal sector or smuggled goods.

In its half-year report for the period ending August 25, 2024, Pick n Pay reported a 6.9% year-on-year drop in sales across its African markets outside South Africa, totalling R1.9 billion (US$107.1 million).

While operations in Zambia have continued to perform well despite local disruptions, the deteriorating conditions in Zimbabwe led to the impairment of the TM investment to zero in early 2024. Pick n Pay’s half-year report reads in part:

The group’s operations in Zambia delivered another strong trade performance, notwithstanding severe operational disruption from power outages in the region and the impact of local currency devaluation.

As a consequence of the deteriorating economic conditions in Zimbabwe, the group impaired its investment in its associate TM Supermarkets to a book value of zero in February 2024 and no further losses have been recognised.

The group is actively working to optimise its footprint outside of South Africa, including exiting Nigeria, restructuring the Botswana franchise into a company-owned model, and pursuing new growth opportunities in Namibia, following the termination of the existing master franchise agreement in that country.

Pick n Pay also operates in eSwatini and Lesotho. In Zimbabwe, Pick n Pay and TM jointly operate 74 outlets across the country.

In light of TM’s ongoing losses, Pick n Pay has expressed limited optimism for future returns, indicating that dividends are unlikely and any potential profits would be minimal.

More: Pindula News