OK Zimbabwe secures vital $20 million lifeline amid challenging retail landscape
Image: Tawanda Karombo/Independent Newspapers
Troubled retailer, OK Zimbabwe has secured a financial life-line pivotal to its revival bid under new management.
The company, which competes in Zimbabwe's retail sector against Pick n Pay, Spar and other smaller players, intends to raise as much as $30 million to revive its struggling retail operations.
OK Zimbabwe's battle for survival comes against the backdrop of wider wholesale and retail sector challenges that include monetary challenges and pricing distortions that are driving away suppliers.
For OK Zimbabwe, the plan for revival plan includes securing a financial package to turnaround the company. This month, OK Zimbabwe raised $20m through a rights offer, the company said Monday.
'The rights offer was fully-subscribed through a combination of shareholder take-up and shares taken up by the underwriters in accordance with the underwriting agreement,' said Margaret Munyuru, OK Zimbabwe company secretary.
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Shareholders in the company subscribed to 77% of the rights under offer, helping to raise $15.3m. The remaining 23% was snapped up by the scheme's underwriters, who put in $4.6m.
The OK Zimbabwe rights offer opened July 21 and closed August 4, the company said.
Focus for the company's revival and capital raise has now shifted to the disposal of some property assets. This will help it to raise about $10m.
Over the past two years, Zimbabwe's retail sector has faced a challenging operating environment.
Retail operators in Zimbabwe say 'a key impediment to viability has been S.I 81A of 2024, an exchange control act that mandated the selling of goods and services at the official exchange rate,' analysts at IH Securities noted recently.
They also cited elevated production costs as well as sporadic operating liquidity squeezes in light of the tightening of monetary conditions as hobbling retail operators and manufacturers that supply store operators.
As part of its turnaround strategy, OK Zimbabwe is raising capital ' to bridge the funding gap and stabilize the company's financial' position.
The funds will be used to 'ensure smooth business operations' and strengthen the company's balance sheet and liquidity position.
After 'experiencing significant operational and financial difficulties arising from both endogenous and exogenous factors, driven by a challenging operating environment,' OK Zimbabwe has seen its financial performance nosedive.
It blamed this on a difficult operating environment characterized by 'macroeconomic volatility, including pricing issues related to the exchange' rate.
OK Zimbabwe argues that informal players that now dominate Zimbabwe's economy 'operated without this constraint, giving them a competitive' advantage.
Volumes and revenue in top Zimbabwean retailer, OK Zimbabwe fell by 36% during the lucrative quarter to end of December, with the company, rocked by de-stocking and store closures.
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