
OK Zimbabwe, the country’s largest retailer by store count, is navigating increasingly turbulent waters as it announces the closure of five branches across the nation.
The 83-year-old retail giant cited a challenging trading environment as the primary reason for the shutdowns, but critics argue that deeper structural and managerial issues are at play.
The affected branches include Robson Manyika, Glen Norah, Kuwadzana Express, and Mbare in Harare, as well as Chitungwiza Town Centre and Entumbane in Bulawayo. A sixth branch is slated to close in March 2025. The closures will result in significant job losses, with hundreds of employees set to be retrenched. The company has offered a severance package of one month’s salary for every year served, three months’ notice pay, and payment of outstanding leave balances, though it remains unclear whether workers have accepted the terms.
A Perfect Storm of Challenges
OK Zimbabwe’s struggles are multifaceted. The retailer is grappling with severe cash flow issues, exacerbated by its inability to restock shelves. Suppliers have reportedly halted deliveries due to outstanding payments totalling US$17 million and ZiG537 million. Some suppliers have allegedly refused to extend further credit, leaving many OK outlets with empty shelves and dwindling product offerings.
The company’s woes are further compounded by Zimbabwe’s currency crisis. Despite the introduction of the Zimbabwe Gold (ZiG) currency in April 2024, which stabilized the local currency, OK Zimbabwe has struggled to access foreign currency on the formal interbank market. This has hindered its ability to replenish stock and compete with informal traders, who pay suppliers in US dollars and operate without the regulatory burdens faced by formal businesses.
Bloated Management and Questionable Decisions
Critics have pointed to OK Zimbabwe’s bloated management structure as a significant drain on resources. The company reportedly employs nine directors and over 30 senior executives, each drawing substantial salaries and perks. Sources claim that the monthly expenditure on salaries, allowances, and vehicle costs for top executives exceeds US$200,000—a sum that could otherwise be used to restock multiple stores.
Corporate governance concerns have also surfaced, with allegations that two senior directors have ties to Spar, a direct competitor. One director is said to have secured a 90-day credit facility with OK Mart, raising questions about conflicts of interest and adherence to governance best practices.
Dividends and Land Acquisitions Under Scrutiny
Market analysts have questioned the company’s financial decisions in recent years. In March 2022, OK Zimbabwe declared a US dollar dividend of 0.13 cents per share, totalling approximately US1.7 million. This was followed by another dividend in March 2023, amounting to 0.15 cents per share.
However, just five months later, the company borrowed US5 million at an interest rate of 7.5% per annum, raising concerns about resource allocation.
“Declaring dividends while increasing borrowing at 7.5% per annum was imprudent,” one analyst noted. “A more prudent approach would have been to suspend dividends and utilize internally generated resources to address working capital needs.”
The company also invested heavily in land acquisitions, purchasing properties in Mutoko, Southly Park (Harare), Guruve, Kadoma, and Gweru. While these investments were likely intended for future expansion, they have tied up capital that could have been used to navigate the current crisis.
Industry-Wide Struggles
OK Zimbabwe is not alone in its struggles. The formal retail sector in Zimbabwe is under immense pressure, with competitors like N Richards Group and Spar Zimbabwe also downsizing operations. Choppies Zimbabwe has exited the market entirely while leading wholesaler Mahommed Mussa has reduced its shop space by 60%.
The Confederation of Zimbabwe Retailers (CZR) has called for government intervention to save the sector. CZR president Denford Mutashu highlighted the growing disparity between formal retailers and informal traders, who enjoy significant advantages due to their ability to pay suppliers in US dollars and avoid taxes and regulatory obligations.
What’s Next for OK Zimbabwe?
As OK Zimbabwe moves forward, the company faces the dual challenge of addressing its internal inefficiencies and navigating an increasingly hostile economic environment. The closure of underperforming branches and potential restructuring of its management team may provide some relief, but broader economic reforms will be necessary to ensure the survival of Zimbabwe’s formal retail sector.
For now, the once-thriving retail giant finds itself at a crossroads, with its future hanging in the balance.
Reporting by Golden Sibanda for Business Weekly.