One of the country’s biggest retailers, OK Zimbabwe, last week was forced to issue a statement allaying fears that it was facing collapse after some videos showing empty shelves at its stores went viral.
There were insinuations that the Zimbabwe Stock Exchange-listed company was facing insolvency, hence its failure to restock.
In the statement rebutting the allegations, OK Zimbabwe said: “We assure all stakeholders, including customers, shareholders, employees and partners, that our stores are open for trading.”
“Although the company faced intermittent product supply challenges during the festive period, we continue to serve our loyal customers and contribute to the economic growth and development of Zimbabwe,” the retailer added.
The apprehension by Zimbabweans who saw the empty shelves could have been influenced by what they see happening in the economy on a daily basis.
Formal businesses that pay taxes to the government and employ thousands of people that support their families are struggling in the face of competition from the informal sector.
The retail sector has been hardest hit by the growing influence of the informal sector as tuckshops that sell mostly smuggled products sprout all over the place.
Towards the end of last year, Botswana-headquartered supermarket chain Choppies, pulled out of Zimbabwe citing “a significant shift to the informal sector, leaving the formal retail sector to battle a reduction of up to 30% in footfall and having to compete with the informal sector.”
Prior to that, the Retailers Association of Zimbabwe (RAZ), which represents most of the country’s biggest retail chains, had warned that Zimbabwe’s overvalued exchange rate made it impossible for its members to compete with the informal sector.
In a letter to the Finance ministry, RAZ warned that the situation was untenable and would lead to company closures if the authorities do not intervene.
As usual, the authorities ignored the advice and the results are there for everyone to see.
Some government officials have actually been celebrating the death of formal businesses, claiming that it will result in the birth of a more locally rooted economy.
The warped logic ignores the fact there are indications that government revenues are already dwindling because fewer businesses are in a position to meet their tax obligations.
Zimbabwe has one of the biggest informal economies in the world, but it has been struggling to collect taxes of lack of formal structures. The situation in the retail sector requires urgent government attention because it is a symptom of serious malaise afflicting the economy.