eBusiness Weekly
Kudzanai Sharara
Spending in the country seems to be very high with big gains across formal clothing retailers, supermarkets, and home improvement stores. This is despite intense competition from informal traders who are equally eating into the market share.
Turnover figures from most companies that have either reported their financial results or have given first quarter trading updates all point to increased consumption.
Although not scientific, footprint in most major retail outlets also seem to be on the high side with some branches staying open as late as 9pm with queues still being evident at the tills.
Some could point out to inefficiencies and slow pace in payment system, but management at most FMCG businesses have talked of increased volumes going past their tills.
“The growth we reported in the period to March 31, 2018 is real judging by the products we processed from order and through products processed out of the stores,” Alex Siyavora told analysts at the release of his company’s results which showed revenue had grown by 23,4 percent to $582,9 million.
He said although there was an inflationary component in the numbers, the retail group had experienced real growth as evidenced by the growth in volumes.
“The internal inflation is not necessarily the exit inflation because we measure at the point of procurement. So while we saw an average of eight percent at the point of procurement that has not always come into sales,” explained Siyavora in justifying the level of growth the grocery retail giant had achieved.
Clothing retailer Edgars, also recorded an increase in sales with unit sales increasing by 13,9 percent over the same period in 2017. Recording any form of growth in the clothing retail space is no mean feat, as just outside its doors, the retail chain competes with informal traders who sale much cheaper products, most of which are but second hand clothes.
There is actually no street in Harare’s CBD, for example, where you won’t find vendors selling clothes, some from the street pavements and some from the boot of their cars. They have customers too, a reason they keep coming back and keep increasing by the day – there is money to be made.
The increased demand is not confined to fast moving consumer goods but extends to building and home improvement products.
Powerspeed managing director Hilton Macklin said: “The Group had a pleasing half year, on the back of increased throughput, resulting from an increased footprint and market share.”
Commenting on the hardware retailer’s financial results for the half year ended 31 March 2018, Macklin said his company reported a 55 percent turnover growth and has been on an expansion drive, driven by demand for its products.
Powerseed, a leading brand for the retail and wholesale supply of all types of hardware and home improvement products, recently opened two new branches in Harare, one in Pomona, on Harare Drive, and the other in the Village Walk Complex, in Borrowdale. This speaks to management’s confidence in making sales.
A similar growth trajectory, was also experienced at Turnall, a company that makes and produces roofing material as well as at cement maker PPC Zimbabwe.
Turnall witnessed a 71 percent volumes growth to 16 578 tonnes in the five months to May 2018 while Performance from PPC’s Zimbabwe operations was very strong with its revenue growing by 34 percent after sales volumes increased by 46 percent.
These growth rates are much higher than our inflation figures at below 3 percent even as they are disputed.
Expansionary fiscal policy pushing demand
The reason? According to the Reserve Bank of Zimbabwe, Government has been pursuing and expansionary fiscal policy which has resulted in significant increase in money supply.
“The substantial increase in money supply is therefore a reflection of the expansionary fiscal stance which has continued to increase RTGS money from $954 million in 2016 to $1,7 billion in 2017.” The figure must be much higher by now as we have seen more unbudgeted Government spending including salary increases.
We have also seen the increase in the issuance of Treasury Bills and Bonds, which increased from $3,2 billion in 2016 to $5,2 billion at the end of 2017.
The increase of around $2 billion largely arose from securities issued for Government projects which include the financing of grain producers as well as for financing agriculture.
This speaks to real spending power if GMB payouts and gold output is anything to go by.
This again has increased money supply in the economy and disposable income in the hands of the consumer.
Export schemes fuelling consumption
The RBZ itself has been running several export incentive schemes dolling out millions of dollars to economic players in its efforts to boost exports and earn the much needed foreign currency.
Tobacco farmers are currently getting 12,5 percent, while cotton farmers and gold producers are getting 10 percent, this again has boosted consumer demand.
Movements in the parallel market exchange rate affecting the cost of converting local bank balances into foreign exchange amid low interest rates for bank deposits seem likely to have added to the increased spending and discourage saving.
Cash rich corporates have also resorted to increased dividend payouts as the low interest rates, foreign currency shortages, have meant little use for the cash holdings.
Millions of dollars have since been paid out as dividend with the high chances that the beneficiaries, individuals in particular with a little extra in their pockets, it’s likely there’s a bit more spending money to go around.
With consumers feeling more optimistic thanks to political developments in the country the spending spree may continue well after elections. The pessimists will also still spend as they fear erosion of their hard earned incomes.
