CLOTHING retailer, Edgars Zimbabwe (Edgars), says it now owes international suppliers close to $2 million due to the country’s foreign payment delays.
The group’s chain director, Vusa Mpofu, said Edgars has been steadily accumulating arrears with suppliers outside the country.
“Every importing business is facing a forex crisis and we are no exception. We have actually been struggling; our import payments have not been flowing as smoothly as we want them to. I can say we have not hit crisis point but it is getting harder by the day,” Mpofu told The Financial Gazette on the side-lines of the firm’s Stanley House branch re-launch in the capital last week.
“A rough guess of how much is outstanding in terms of our foreign payments would be anything from $1 million to $2 million but this is not imports for one month; it is an accumulation over time. We are looking at things like import substitution to rectify this situation.”
Mpofu said the company imports about 40 percent of its stock.
At the moment, local companies are failing to secure key raw materials from foreign countries as the country’s banks have low nostro account balances.
A nostro account is a bank account held in a foreign country by a domestic bank mainly to facilitate settlement of exchange and trade transactions.
Thus, when the retailer makes orders, the bank then has to pay suppliers through the nostro account. But payments are presently not being processed fast enough. However, in the wake of cash shortages, banks have been unable to meet local as well as foreign accounts demand, a situation that has been worsened by the country’s import restrictions, putting more pressure on local firms as demand rises.
Due to liquidity challenges, the Reserve Bank of Zimbabwe last year came up with a payment priority list, ranking essential imports like fuel above raw materials for local manufacturers.
Mpofu pointed out that the retailer was also facing a pricing crisis due to a dual taxing system.
“We import things from the Far East. When the stuff gets to South Africa, there is duty that is paid. The reason it becomes more expensive for us is that we cannot get a bonded warehouse in South Africa because we are not importing the volumes that can make it cheaper for us to have a bonded warehouse. So we pay South African duty and Zimbabwean duty. It is double duty,” he said.
Meanwhile, the retailer is set to spend over $2,5 million on the facelift of five of its main branches around the country. – Fingaz