Zimbabwean consumer sector poised for improvement

An uplift in volumes has been projected for Zimbabwean consumer companies despite rising cost structures, a volatile policy and monetary environment as well as higher taxation, say analysts at IH Securities.

Hippo Valley, Tongaat Hulett's Zimbabwe-listed unit, reported a 44% downturn in revenues to $191.59 million this month although the gross profit for the year to end March rose 2% to $66.87m.

Another Zimbabwean consumer company, Star Africa Corporation that also trades in sugar, however, raised revenues by 22% over the same period.

Nonetheless, analysts at IH Securities on Friday said in the securities and advisory firm's latest research note on Zimbabwe's consumer sector that they "anticipate an uplift to volumes for consumer-facing companies this year owing to a likely recovery" in consumer spend.

However, this was against the backdrop of "general cost structures continuing to be on the rise" corresponding to a "volatile policy environment and the crystallization of costs" in United States dollars.

"On the demand side, private consumption growth, which had slowed down from 4.8% in 2023 to 2.5% in 2024, is expected to have a rosier year with household spending rebounding by 6.6% in 2025," said the report.

After an improved rainy season and prices for minerals such as gold firming up, Zimbabwean consumer firms are well placed for stronger consumer spending.

Companies expected to benefit from this include beer and soft drinks manufacturer, Delta Corporation, which has cited stiffer competition in some beverage categories.

Zimbabwean consumer discretionary spend however remains subdued, with data from Zimstats recently showing average earnings of 55% of the employed population at less than $100.

Worse still, "job losses within the past 3 months emanated mainly those engaged in agriculture and domestic activities, whilst IT and Electricity sectors had the lowest job" losses.

Moreover, Zimbabwean companies have to absorb some of the legislation-linked costs of production, such as sugar taxes and fast-food taxes, to support volumes.

IH Securities is thus skewed towards consumer-facing stocks that exhibit the ability to generate a significant portion of revenue in US dollar, have good management practices, and are also consistent in paying dividends.

Companies offering defensive staples such as National Foods - in which Tiger Brands has an interest - were displaying volume growth, said the analysts. National Foods' maize division recorded a significant volume growth of 58% in May over the comparative nine-month period, largely attributable to the market dynamics.

Dairy company, Dairibord, saw consolidated volume growth of 14% for its first quarter ended 31 March 2025.

"On the retail front, the past two years have been challenging for formal operators on account of several issues. As per leading retailers, a key impediment to viability has been S.I 81A of 2024, an exchange control act that mandated the selling of goods and services at the official exchange rate," noted the report.

It further though stated that Zimbabwe's operating environment for companies remained challenging overall, citing key issues such as elevated production costs as well as sporadic operating liquidity squeezes in light of the tightening of monetary conditions.

It mentioned "emerging cost pressures including the government's recent increase of 19.1% to the diesel levy" as further worsening costs for companies.

Headwinds in Zimbabwe had already affected Hippo Valley, which has had to rightsize its workforce with 1 000 workers expected to be let go by August.

OK Zimbabwe, another prominent retailer battling headwinds, is now undertaking a $30m rights issue to stabilize the company. The retailer has also announced further closures of stores, pointing to a 2025 year that "remains volatile and fragile, but with a possibility of better performances" by consumer companies.