Pick n Pay faces tough time in Zimbabwe as local currency slows down sales

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  • The official exchange rate is making Pick n Pay’s prices uncompetitive in Zimbabwe.
  • The retailer is also not seeing US dollars come in, which makes it hard to restock shelves.
  • Pick n Pay said it was engaging authorities over the “in-store exchange” rate.

South African supermarket giant Pick n Pay is finding it tough in Zimbabwe because a majority of its sales are in the local currency.

That made for a poor performance, despite an increase of 5% year-on-year sales in the last quarter of 2023.

In a statement, Meikles Limited, the Zimbabwean partner of Pick n Pay, said the last quarter of last year was “characterised by persistent depreciation of the Zimbabwe dollar [ZWD] and a high use of United States dollars [USD] in the economy”.

The official exchange rate of the local dollar and the US greenback as of Monday was US$1 for ZW$8 331, while at the parallel market it is US$1 for ZW$14 000.

What makes things more complicated is registered businesses are required to trade at the ZWD official rate, which is always lower than the black-market rate, which reflects actual supply and demand.

“The exchange rate increased by 784% year-on-year, considerably increasing the cost of transacting in ZWD,” Meikles said in a statement.

This means goods and services in supermarkets were more expensive than those sold by street vendors, which have mushroomed on pavements outside established businesses.

Those who shopped at Pick n Pay would typically first change US dollars on the parallel market, and then pay in local dollars.

That is reflected in the low inflow of foreign currency into Pick n Pay’s coffers, which in turn made it harder to restock and sustain the business.

Meikles said:

The percentage of revenue received in foreign currency during the quarter and the nine months to date was below 20% despite an improvement from last year. This fell far short of the average of 80% per ZimStat’s [national statistics survey body] consumer survey findings, primarily due to compliance with the in-store exchange rate policy.

“The in-store exchange rate policy remains an albatross on formal retail in attaining the dollarisation level reached by most businesses in the economy.

“This creates ongoing supply chain challenges as suppliers are invoicing in USD and prefer settlement in USD.

“There are ongoing engagements with monetary and fiscal authorities on changing the in-store exchange rate policy,” Meikles said.

Lured by the lucrative multi-currency regime in Zimbabwe, during the Government of National Unity, Pick n Pay opened shop in 2012 after securing a 49% stake in Meikles’ TM Hyper stores.