Zimbabwe manufacturers can no longer sell to tuck shops
Business Zimbabwe

Zimbabwe manufacturers can no longer sell to tuck shops

If you’re not registered for VAT, or if you don’t have a retail licence or have tax clearance, you cannot buy goods worth more than US$1,000 per month at a wholesaler. If you go shopping at a wholesaler, you will need to bring a receipt showing your last purchase from that wholesaler. If you don’t have that receipt, you can’t buy goods worth more than US$20.

Crunch time for wholesalers and manufacturers (pic credit: Tnash Photography)

The government’s skewed exchange rate policy has broken the supply chain. Manufacturers choose to sell goods directly to informal traders, who pay USD cash up-front, unlike formal supermarkets who pay on terms, and at times in Zimdollars. Retailers such as OK and Pick n Pay cannot compete with informal shops. Because big supermarkets are forced to use the overvalued official exchange rate, their goods are more expensive in USD than in “tuck shops”. While the economy is now largely using USD, just 20% of sales in supermarkets is in forex, according to OK.

Now, under the new measures, manufacturers are forced to sell only to wholesalers. They can no longer deliver goods directly to tuck shops. The new regulations will affect sales for both manufacturers and wholesalers, who are already facing low business. Foreign goods may also now dominate space in informal retail, reversing the progress made by local manufacturers in recent years. Manufacturers and wholesalers also have the administrative burden of checking the tax status of their customers. If a bottle store without tax clearance buys drinks at Delta, the company will now add a 30% surcharge on the price to send to ZIMRA.

Manufacturers such as Dairibord sell most of their product to informal traders. In October, Distributed Group Africa, one of the largest distributors of consumer goods in Zimbabwe, announced that it had stopped supplying formal retailers because they pay late. The company said it preferred “to exploit growth opportunities from economic activities in the informal business sector that will not require extended credit terms.” DGA has exclusive distribution arrangements with brands such as Colgate Palmolive, Nestle, Johnson & Johnson, Tiger Brands, and Unilever.-Newzwire

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