HARARE - Listed grocer OK Zimbabwe (OK) says red tape is stalling its regional expansion plans.
Its chief executive Willard Zireva said the group’s efforts to set up operations in two countries he did not disclose (but are reportedly Mozambique and Zambia), have “proved difficult”.
“If you go into some of the African countries, those who have been there know how different they are. You will be dealing with different people, each one claims to have authority over this or that,” he said while presenting OK’s financials last week.
He added: “When we were going into the two sides we are chasing, one of the lawyers, who is a South African based in Maputo, spoke to us saying before you waste your time in signing with anybody on anything you need to get somebody with legal background to go through the hobbles of checking.”
However, some analysts say the retailer should “first sweat out” competition in the Zimbabwean market before going into regional markets, otherwise the ventures will flop.
“We have seen examples such as Starafrica Corporation and Redstar who have failed to sustain their operations within the region. They lost out to local competition and failed to fund operations outside our borders. OK should be careful about that,” said an analyst with a local bank who preferred anonymity.
OK faces stiff competition from TM Supermarkets, which recently teamed up with South African retail giant and Pick n Pay.
Botswana retailer Choppies has also ventured into the Bulawayo market.
This comes as OK plans to spend $16 million in capital expenditure this year, targeted mainly at refurbishments and establishment of bakeries.
It intends to renovate six of its retail outlets and open up in-house bakeries, a move resulting in the termination of its deal with Innscor.
Innscor was running bakeries housed in OK’s supermarkets.
Zireva said they had initially budgeted for 12 bakeries, but were targeting 25 units by October this year.
“When we went into the transaction with Innscor to run the bakeries many years ago, we thought it was the right thing to do. But after many years we thought it was the wrong thing to do and having realised that, we agreed to terminate the agreement,” said Zireva.
He added that they expected to make positive margins from utilising their bakeries’ capacity and had already acquired baking equipment at a much lower cost to capacitate the operations.