Zimbabwe’s retailers are facing a new threat as some companies in the fast-moving consumer goods (FMCG) sector are pushing their products on the streets, bypassing supermarkets and wholesalers in search of the elusive hard cash.
By Fidelity Mhlanga
As a result, the retailers and wholesalers’ role in the value chain is fast vanishing as manufacturers bypass them to get cash from the street to survive the crippling cash crisis.
These products are being sold directly on the streets at discounted prices, a move which may deprive the Zimbabwe Revenue Authority (Zimra). of the much-needed Value Added Tax (VAT).
For example, Dairibord’s 1 litre Chimombe fresh milk costs $1 on the streets, while it sells for $1, 20 in supermarkets.
Dairibord CEO Anthony Mandiwanza confirmed to Standardbusiness last week that the company was selling its products directly to the consumers at a discounted rate compared to supermarkets.
“The van you are referring to is the one we use to sell our products at high traffic places,” he said.
“For example, we put a stationary van at state gatherings that will sell our products.
“They will be retailing lower than credit prices. I have confirmed that at corner Leopold Takawira and Robert Mugabe (in Harare) they park our van there for cash sales. We sell direct to the consumers.
However, the Dairibord boss said the practice had been happening for years.
“It has been happening for a long time now. I think for about four years now,” Mandiwanza said. “We have two of those vans. We continue to look [for opportunities] and will do a cost benefit analysis.”
Economist Clemence Machadu said it made more business sense for companies in the FMCG to bypass retailers in their distribution channels and sell directly on the streets than go the electronic payment way, then resort to the black market to get cash.
“The economic characteristics of the day always mould the appropriate channel of distribution to use in order to bring value to businesses,” he said.
“You will realise that the distribution channels have been getting shorter and shorter, with wholesalers virtually facing extinction more than a decade ago.
“I think it’s normal for some companies, especially those in the FMCG sector, to cut retailers from their distribution channels, as it is in line with managing their costs to the minimum.
“If they get cash, it means that they won’t have problems with going to banks where there is a daily limit for cash withdrawal and cash is not easy to get; and also considering that if they continue using retailers, that often pay them electronically. they may have to resort to the black market where they have to part with significant premiums, which affects their cost of production.
“It also safeguards the continuity of their operations as they minimise chances of product unavailability due to lack of cash to make payments for some of the raw materials and inputs, considering how some of the inputs suppliers now want payments in cash,” he said.
But, Confederation of Zimbabwe Retailers Denford Mutashu claimed products on the streets were smuggled goods from outside the country.
“The retail sector still enjoys a cordial and symbiotic relationship with their suppliers and the manufacturing sector,” he said.
“The Confederation of Zimbabwe Retailers is not aware of any manufacturers who are dumping their products on the streets.
“The challenge, though, is that those selling from the streets are selling inferior, cheap quality and smuggled goods that pose a serious health time bomb to the general public.
“Most of the products on the streets are imitations of the original brands and we urge consumers to be cautious.”
Machadu said a situation where producers sold their products directly to the streets affected the collection of VAT by the Zimra.
“The challenge is that street sales do not normally use fiscalised electronic registers, and that might somehow affect the collection of VAT by Zimra, to a certain extent, as concrete records will not be available,” he said.
“But I think it might also prejudice the survival of some retailers and their profitability,” he said.
Zimra acting board secretary, corporate communications and international affairs Ropafadzai Majaja said the taxman could be losing potential revenue through this phenomenon.
“The cases that you have mentioned cannot be confirmed or denied. However, we acknowledge that the observations could be true as tax evasion takes various forms and this cannot be overruled,” she said.
“While Zimra does a lot of enforcement activities through audits and investigations, we do not have capacity to audit each and every business in the country.
“As a result, we work with the community and encourage people with information about tax evasion of whatever form, to come forward and report such cases.”
Mujaja said Zimra did not control how taxpayers sold their goods or services.
According to Zimra revenue collection figures released last week, the authority collected $1,789 billion for the first half of the year from the initial target of