Weaknesses.
Per capita food consumption remains very low, with many consumers unable to find access to foreign exchange. Independent retailers continue to dominate heavily among low-income consumers in particular. By no means a low-cost market, operating costs are high in Zimbabwe. Difficulties in sourcing locally produced food, owing to the rapid decline in agricultural production since the 1990s, means that entry into the Zimbabwean retail sector will not be profitable for foreign supermarkets. Despite strengthening consumer confidence, significant business continues to take place on the black market, further damaging mass grocery retail sales. Living standards have plummeted and, according to some estimates, unemployment has risen to 90% – meaning that domestic demand is very weak. Foreign currency is not readily available to all consumers.
Opportunities
The adoption of the US dollar and the relative political stability considerably strengthened the mass grocery retail industry in 2009, a trend expected to continue over the coming years. Zimbabwe’s mass grocery retail industry remains an investment target for leading South African retailers in particular. Once political and economic recovery begins, with store infrastructure already in place, foreign investors could purchase stores at bargain prices.
Threats
Although unlikely, any government decision to reintroduce the Zimbabwean dollar would very likely have severe repercussions on inflation. Business planning remains highly challenging given the improving but still highly delicate political climate. Publication of a set of indigenisation laws that require all businesses to be majority Zimbabwean-owned risks scaring off foreign investors.
Post published in: News