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Retail companies in Zimbabwe with links to South Africa are maintaining a business-as-usual approach as the political and economic crisis in that country deepens, but the strategy of survival appears to be to source products – including food items – locally.

July 14, 2008 

By Donwald Pressly

Cape Town – Retail companies in Zimbabwe with links to South Africa are maintaining a business-as-usual approach as the political and economic crisis in that country deepens, but the strategy of survival appears to be to source products – including food items – locally.

Nando’s group marketing director Paul Appleton said the business was suffering “great difficulty” in Zimbabwe with all supply lines.

Speaking from London, he said supplies were sourced locally despite the disruption of the agricultural sector.

Appleton said there needed to be “some degree” of political stability and some indication where the country was heading politically. There also needed to be monetary and fiscal control and measures put in place to fight inflation.

Without divulging figures, Appleton said Nando’s business had been good in recent months, despite the downturn in the economic fortunes of Zimbabwe. “People like to treat themselves in these times,” he said. Nando’s, which operated 17 restaurants in the country, was hoping for a positive outcome to current efforts at resolving the crisis – “like any business”, he said.

President Thabo Mbeki was involved in discussions at the weekend to try to get Zimbabwe to form a national unity government between Zanu-PF, which has been in power since 1980, and the Movement for Democratic Change’s two factions, which are led by Morgan Tsvangirai and Arthur Mutambara.

Tsvangirai’s faction, the largest party in the country, described the talks as being “talks about talks”.

Clothing retailer Edcon Holdings’ deputy chief executive, Mark Bower, said through his spokesperson, Jennifer Cohen, that Edcon’s financial investment in Zimbabwe stores had been written off in 2003.

“Edcon donated 27 percent of its shareholding to an empowerment trust for the benefit of the staff of Edgars Zimbabwe, leaving a 40 percent stake for Edcon in the listed entity,” Cohen said. “While there are no longer any financial consequences for Edcon in this investment, we obviously have significant concern for the wellbeing of our employees, our customers and our good name.”

Like all stores in Zimbabwe, the Edcon outlets were operating with very limited stock, said Cohen. Clothing was made from local fabric.

Kevin Hedderwick, the chief operating officer of Famous Brands, said its outlets in Zimbabwe were run by Inscor, a company listed there.

Raw material was sourced locally and the business “is quite self-sufficient”, though it had access to confidential recipes from South Africa.

“In Zimbabwe one cannot even dream that the quality on offer is going to mirror what you are offered in South Africa,” said Hedderwick.

Famous Brands had a total of eight stores in the capital, Harare, and Bulawayo.

A plan to take Debonairs Pizza into the country was on hold, he said.

Pick n Pay spokesperson Tamra Veley noted that 25 percent of TM Supermarkets in Zimbabwe was owned by Pick n Pay, the retail supermarket chain. The other 75 percent was owned by Kingdom Meikles Africa. “There are currently no plans to change operations in Zimbabwe,” she said.

“TM continues to trade under exceptionally difficult conditions. We continue to support our colleagues and hope for political and economic stability in the near future.”

Pick n Pay had not received a dividend in close to four years. Last year, Pick n Pay had written down the carrying value of its investment in TM by R64 million to R9.1 million, reflecting the shortage of foreign exchange, the low possibility of receiving dividends and the depreciating currency.

“In the current year we impaired our remaining investment in TM of R9.1 million,” Veley said.

Engen chief executive Rashid Yusof said his business was expanding from holding just three retail sites and an interest in a Zimbabwe company, Noczim, which blended lubricants. Yusof said Engen had taken “a long view” on Zimbabwe, considering its economic problems.

Engen – owned by the giant Malaysian state oil company Petronas and black empowerment group World Wide Africa Investment Holdings – has announced that it will have a 50 percent share, with BP, of about 200 retail outlets that will be disposed of by Shell.

Reuters reports that a spokesperson for Royal Dutch Shell in Amsterdam said on Friday that the decision to sell its Zimbabwe interests was made after a study last year of the profitability of all downstream activities and was not related to the country’s political situation.