OK Zimbabwe (OK)’s board has resolved to undertake a capital raise in the sum of up to US$30 million to bridge the funding gap and stabilise the company’s financial position.
As first reported by NewsDay Business in February, struggling retailer OK was revealed to have a debt of US$30,34 million which it owed its suppliers, an accrual after the retailer failed to honour its obligations.
The retailer’s failure was due to the volatile nature of the ZiG, which caused OK’s US dollar obligations to double.
Hence, suppliers, like they had begun doing with other retailers, started demanding upfront foreign currency payments before releasing any goods, leading to shortages and store closures for the giant retailer.
With the Reserve Bank of Zimbabwe and Treasury controlling the exchange rate, a premium emerged between the formal and parallel foreign currency rates.
This left retailers essentially selling goods at a discount, forcing consumers to turn to the informal sector for higher purchasing power.
“The company has been unable to maintain adequate stock levels as many suppliers can no longer continue providing goods and services due to outstanding unpaid balances,” OK said in a statement yesterday.
“This has directly impacted product availability across the company’s stores, affecting revenue generation and overall business performance, particularly in the last six months, where trading levels were not adequate to cover costs.”
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Consequently, OK anticipates making a “significant loss” for its financial year ended March 31, 2025.
“In light of the foregoing, the board of directors has resolved to undertake a capital raise in the sum of up to US$30 million to bridge the funding gap and stabilise the company’s financial position,” OK said.
“The capital raise will be a combination of a rights issue, private placement and debt instruments.”
The firm revealed that the capital-raising initiative is expected to strengthen OK’s balance sheet and liquidity position, enhance working capital availability to ensure smooth business operations, and support the retailer’s strategic turnaround plan.
“Further details will be announced in due course,” OK said.
“The company will then publish a circular to shareholders incorporating notice of an extraordinary general meeting of members for the purpose of considering and approving the capital raise.”
OK noted that over the past financial year, it has been experiencing significant operational and financial difficulties arising from both endogenous and exogenous factors, driven by a challenging operating environment.
“These challenges have impacted the company’s ability to meet its financial obligations, particularly payments to suppliers and financial institutions,” OK said.
It noted that these difficulties were due to the “difficult operating environment” characterised by: “Macroeconomic volatility, including pricing issues related to the exchange rate, while informal players operated without this constraint, giving them a competitive advantage.
“Additionally, inflationary pressures have impacted cost structures and pricing strategies; liquidity constraints in the broader economy, affecting consumer spending and the company’s ability to generate sufficient cash flows; and working capital challenges leading to disruptions in supply chain and reduced stock availability.”
