Retailers Westend Foodworld Investments (Private) Limited and Trade Centre (Private) Limited announced last week that they are under corporate rescue as they moved to rehabilitate their operations.
The corporate rescue commenced on February 17.
The exercise will enable the companies to restructure their affairs, business, property, debts and other liabilities and shareholder equity in a manner that enables the entities to wade out of difficulties and continue on a solvent basis.
Alexious Dera of Moore PNA Zimbabwe was appointed the two companies' corporate rescue practitioner.
In opting for corporate rescue, the two firms said they had been failing to meet some of their obligations to creditors as and when they fell due in the last two years, necessitated by “exchange rate volatility” and competition from unlicensed retailers, which were under-cutting competitors.
They also complained that the mismatch between the currency of payment and the volatile local currency impacted on their ability to service United States dollar debts as and when they fell due.
The central bank devalued the local currency, Zimbabwe Gold, by 44% in September last year.
The gripe by the two companies is common in the retail sector as players battle to stay afloat amid a tough economic environment.
- Glossing over real problems
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They join Truworths and Beta Holdings and its subsidiaries — Beta Bricks, Beta Logistics, Beta Concrete, Beta Properties and Diamond Bird Services — that have opted for corporate rescue to rehabilitate their affairs.
OK Zimbabwe recently changed some of its senior executives as it battles to find a winning formula out of the crisis.
Nearly two weeks later, empty shelves are commonplace wailing for restocking while footfalls have not improved.
It is understood that another retailer is under stress as it struggles to pay suppliers.
Authorities have chosen to bury their heads in the sand, saying the problems bedevilling the retail sector are a result of mismanagement.
Why decree that all businesses must have point-of-sale machines and bank accounts if bad management is at the root of the problems besetting the sector?
It clearly shows that authorities, — monetary and fiscal — are living a lie and are not willing to address the root cause of the problem. The elephant in the room is the fixed exchange rate which has created distortions in pricing and triggered rent-seeking behaviour.
A rational human being will not buy from big supermarkets using the United States dollar. Instead, they convert the money to ZiG and buy in local currency.
The situation facing retailers will spill to other sectors of the economy if unchecked.
It is bad when retailers struggle to pay suppliers. The ripple effect is that suppliers will struggle to pay their creditors and the vicious cycle continues.
The biggest loser is the government which will record low revenue inflows from taxes.
The informal sector does not pay taxes. It doesn’t bank its money and it will be a hurdle to bring it into the tax net. This is why we believe formal retailers need to be nurtured.
The formal retail sector needs support and not the brickbats they received from Treasury secretary George Guvamatanga and central bank chief John Mushayavanhu who solely blame the sector’s woes on bad management.
Formal retailers can fire all their executives and still fail to record an improvement in footfalls or meet their obligations with suppliers.
