Johnson Progress

OK Zimbabwe Limited, the retail giant, has turned to supplier-finance schemes to maintain stock levels amidst severe revenue decline and liquidity crunch.

The company has been facing challenges since last year, driven by supply chain disruption, volatile exchange rates, and intensified competition from the informal sector.

According to the company’s annual report, trade payables stood at US$25.55 million, plus a further US$2.73 million in accruals and other payables, bringing total supplier debt to US$28.29 million as of March 31, 2025.

This accounts for 37% of the group’s total liabilities.

“The group endeavours to settle its obligations to suppliers in accordance with agreed terms,” the company stated, adding that it did not have sufficient liquidity to settle all obligations as they fell due, resulting in delays in payments to creditors.

To address this, OK Zimbabwe has entered into supplier-finance arrangements with third-party financial institutions, where the finance provider pays the supplier the invoiced amounts on or shortly after the due date, and the group subsequently settles the amounts directly with the finance provider at a later agreed date.

OK clarified that suppliers themselves bear the financing costs for obtaining early settlement from the financier.

“The group incurs incremental interest expense under the arrangement should it fail to meet the finance provider settlement date,” the company added.

The interim management team has engaged all suppliers to agree on amounts owed and established a settlement plan funded by the company’s capital raise and operational income.

Suppliers agreed to a partial settlement, after which they would resume deliveries.

However, the company noted that trading terms have not allowed adequate stock build-up to support the required level of activity.

“Unfortunately, trading terms that are in place have not allowed adequate stock build-up to support the required level of activity,” OK explained.

As part of its cost-cutting strategy, OK significantly reduced its supplier base during the year to 1,526 from 4,181 the previous year, and spending on suppliers fell to US$253.49 million from US$309.39 million in 2024.

To bolster its financial position, the company concluded a rights issue in July 2025, receiving US$20 million in proceeds, and has identified property valued at US$10.5 million for disposal.

These severe challenges culminated in a US$25.03 million loss for the audited financial year ended March 31, 2025, a dramatic downturn nearly forty times worse than the previous year’s result.

As part of its turnaround strategy, OK closed 11 stores, leaving it with 62 stores.