Financial Gazette (Harare)
Staff Reporter
29 November 2008
Harare — OK Zimbabwe Limited could not publish inflation-adjusted financial results for the six months to September 30 because of the Central Statistical Office (CSO)'s failure to release inflation data, The Financial Gazette heard this week.
The CSO last released inflation figures for July but is yet to unveil the numbers for August, September and October.
While the national statistical agency is mum on the reasons for the delay, sources said the CSO no longer has the capacity to release the inflation numbers on time.
Last week, the World Bank offered the CSO funding to help it improve services in one of the clearest signs that its operations have been hamstrung by insufficient funding.
There is suspicion that President Robert Mugabe's administration could be deliberately withholding the inflation figures for fear of embarrassing itself.
While official figures put the country's inflation at 231 million percent, the highest in the world, independent estimates suggest the rate has soared beyond one trillion percent.
Eric Kahari, OK Zimbabwe chairman, said the retail giant was unable to comply with the International Accounting Stan-dards that oblige companies operating in hyperinflationary conditions to publish inflation-adjusted financial statements because the Group could not access inflation figures for August and September.
"In the current hyperinflationary environment, inflation adjusted financial statements are the primary accounts to be published. However, in light of the unavailability of the official inflation statistics at the time of publishing this press release, we are unable to comply with the above statutory obligation," he said.
The OK Zimbabwe chairman said the on-going political uncertainty has affected business confidence and accelerated economic decline. He said suppliers were tightening credit terms against the backdrop of diminished working capital resulting in retailers struggling to restock.
Kahari said the situation has been worsened by the price controls being enforced by the state-run National Incomes and Pricing Commission.
"As a result of the above negative factors, businesses operated way below capacity leading to acute product shortages. Low productivity and the sharp depreciation of the local currency accelerated the already galloping hyperinflation.
"The high inflation eroded consumer disposable incomes and softened demand while the shortage of local currency cash curtailed business further as consumers failed to access their money at the banks.
"Competition for the scarce foreign currency and the shortage of local currency created pricing disparities with a heavy premium being factored into payments made by cheque or bank transfer while cash prices contained a discount. All these issued made it difficult for business to transact," said Kahari.
OK is one of the country's largest retail chains operating about 60 stores countrywide.
Commenting on the outlook period, Kahari said poor farming preparations and the huge food import bill this year have dampened turnaround prospects for the coming year.
He said: "Efforts to continue to manage the company profitability will continue despite the adverse conditions prevailing in the economy. Although stringent cost control measures have been put in place, it has been extremely difficult to contain costs but these measures will be reviewed and reinforced from time to time."
Kahari said insuring assets at meaningful levels of cover has become difficult due to hyperinflation.
"Premiums payable are no longer affordable. The company will therefore self insure most assets and explore the option of purchasing conventional cover in foreign currency on a selective basis to comprehensively cover certain key assets," he said.
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