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Harare - Meikles Africa Limited, Pick n Pay's Zimbabwean partner in the country's TM Supermarkets, said it is now in a better financial position to fund expansion of its retail, mining and hospitality arms. This is because the government is now completing issuance of Treasury Bills amounting to US$89m to settle money it owes the company.
Pick n Pay [JSE:PIK] has a 49% stake in TM Supermarkets, which has about 53 branches countrywide. Two Pick n Pay branded stores have also been opened in Harare, with a third set to open its doors in the city's CBD in the next few weeks.
Pick n Pay is currently drawing down from a loan facility extended by Standard Chartered to fund refurbishment and other investment exercises in the Zimbabwean retail operator. This is expected to help it attract more shoppers and stay ahead of rival operators such as OK Zimbabwe.
According to Dharmalingum Dass, an executive at Pick n Pay and TM Supermarkets, the current expansion programme is being bankrolled through a $25m loan facility from Standard Chartered Bank. The company recently opened a Pick n Pay branded outlet in Gweru, Zimbabwe’s third-largest city after Harare and Bulawayo.
Additional funding from the money the government of Zimbabwe owes Meikles will provide the much-needed financial muscle to open new stores for the supermarket chain.
"The group has an opportunity to restructure its activities in both Zimbabwe and South Africa with a view to securing its affairs in a manner that first and foremost will focus on a strategy to ensure that shareholders benefit from their investment in the group," Meikles said on Tuesday.
Apart from the TM Supermarkets operation, Meikles has city and resort hotels in the country and also runs an agri-processing unit, Tanganda. It has recently ventured into mining and is bidding to secure investment partners for its resource extraction venture.
“The previously announced expansion programmes and strategies relating to TM Supermarkets, Tanganda, Hospitality and Mining will continue with greater urgency given that our major financial restraint has been removed,” the company said.
The TM Supermarkets division had a turnover of $334m during the year to end-March, said Meikles chairperson John Moxon. He added that the average cost of product to the consumer in the supermarket division had declined, while earnings before interest, tax, depreciation and amortisation dropped from $11.6m the prior year to $11m.
Investors currently view Zimbabwe with a squint in the eye owing to fears over the country’s uncertain business environment.
Zimbabwe is battling a worsening economic situation threatening to tip into a crisis, with the International Monetary Fund advising President Robert Mugabe’s government to urgently reform economic policies so that the country could “live within its means”.
The government owes some companies in Zimbabwe money after the central bank dabbled in quasi-fiscal activities in a bid to save the economy from total collapse between 2008 and 2009.
The central bank impounded foreign currency accounts of companies and allegedly used the money for government programmes. Meikles is owed a total of $90.8m.
- Fin24
