Zimbabwe consumer spending on upward trajectory

26 May, 2024 - 00:05 0 Views
Zimbabwe consumer spending on upward trajectory In Zimbabwe, Simbisa Brands operates 89 Chicken Inn and 54 Pizza Inn outlets

The Sunday Mail

Tawanda Musarurwa

LOCAL consumption is on the rise, with the country’s largest listed manufacturers recording growing volumes over the past year, which indicates that the economy is on a growth trajectory.

According to estimates from the International Monetary Fund (IMF), Zimbabwe has one of the fastest-growing economies in the region.

Increasing volumes point to high aggregate demand, which means consumers are spending more.

Global research platform MacroTrends says the country has seen significant growth in consumer spending in recent years.

It says Zimbabwe’s consumer spending for 2021 rose by 22,4 percent to US$21,2 billion, up from US$17,4 billion in 2020.

And in 2022, the country’s consumer spending rose by a marginal 0,1 percent to US$21,3 billion from a year earlier.

An analysis of some of the country’s biggest listed manufacturing firms’ volumes performance in 2023 highlights this trend.

Beer, drinks and chicken

According to the Zimbabwe National Statistics Agency, food and non-alcoholic beverages constitute the largest share of household expenditure, accounting for approximately 50 percent of total spending.

But consumer spending is also being directed towards alcoholic beverages and convenient foods.

In the 2023 financial year, beverages manufacturer Delta Corporation Limited recorded volumes growth across key segments.

The group’s lager beer segment volumes recorded a 17 percent growth to reach 2,2 million hectolitres, while its local sorghum beer volumes rose by 9 percent to 4,1 million hectolitres.

Delta’s sparkling beverages volumes grew by 10 percent to 1,6 million hectolitres, while its wines and spirits associate — African Distillers — recorded volume growth of 18 percent for the year. This was on the back of a 23 percent increase in the ciders ready-to-drink category, as well as a 16 percent increase in the wines category.

Consumption levels in the sparkling beverages space are even higher, given that Delta is in fierce competition with Varun Beverages, which says it has invested around US$110 million since 2018 to establish nine production lines with capacity to produce 80 million bottles and cans per month across its different brands.

Another key player in this space is Innscor Africa Limited’s Probottlers, which recorded a 532 percent jump in sales of its sparkling beverage — Fizzi (500ml) — in 2023.

Over the same period, Probottlers’ total volumes were up by 23 percent.

In the opaque beer market, Delta is now contending with The Buffalo Brewing Company’s Nyathi sorghum beer brand, which came onto the market in December 2022.

The Buffalo Brewing Company is an Innscor Africa subsidiary that was established in 2021.

Drinks aside, Zimbabweans also love their chicken.

Quick service restaurant group Simbisa Brands, whose core unit is the Chicken Inn brand that was established in 1987, recorded an 18,2 percent jump in customer count to 61,8 million in the 2023 financial year from the prior year.

As at the end of its 2023 financial year, Simbisa Brands operated 280 outlets in Zimbabwe — 89 Chicken Inn, 54 Pizza Inn, 58 Bakers Inn, 39 Creamy Inn, 14 Nandos, 10 Steers and 16 “others”.

In this space, the competition is rather spread out, with Chicken Slice’s 13 outlets providing the stiffest competition, although numerous smaller fast-food outlets have sprouted across the country.

Staples and almost everything else

No other company in Zimbabwe has more diversified production lines than light manufacturer Innscor Africa Limited.

For its 2023 financial year, the group posted a 9,6 percent volumes growth across all its business units.

To fully appreciate what a 9,6 percent rise in volumes for Innscor means, it is important to understand the scope of the light manufacturer’s operations.

The group has three major divisions — Mill-Bake, Protein and Other Light Manufacturing.

The Mill-Bake division holds a 37,45 percent stake in National Foods Limited, a 100 percent stake in Baker’s Inn, a 49 percent stake in Profeeds (Pvt) Limited and a 49 percent stake in Irvine’s Zimbabwe (Pvt) Limited.

National Foods Limited’s fully controlled subsidiaries include National Food Properties Limited, Breathaway Food Caterers (Pvt) Limited, Botswana Milling and Produce Company (Pvt) Limited, Red Seal Manufacturers (Pvt) Limited.

Natfoods also has a 50 percent stake in associate company National Food Logistics (Pvt) Limited.

The bread unit — Baker’s Inn — includes the Shepperton Road plant (Harare), Lennard Bread Bulawayo, 72 Baker’s Inn Express Stores (container stores), Baker’s Inn Logistics (Pvt) Limited and a 50 percent stake in Superlinx (Pvt) Limited.

Innscor’s associate company Profeeds (Pvt) Limited consists of 50 retail stores, a feed factory, a 66 percent stake in Aquafeeds (Pvt) Limited and a 50 percent stake in Nutrimaster (Pvt) Limited.

Irvine’s Zimbabwe’s divisions include Feedmill, Commercial Hatchery, Breeders, Layers, and Broilers and Abattoir.

The Protein division consists of the Colcom unit and Associated Meat Packers (Pvt) Limited. The Colcom unit includes Colcom Holdings Limited, Triple C Pigs and Colcom Foods Limited.

Associated Meat Packers consists of Texas Meats (which has 23 retail stores and four Texas Meat Markets), a 50,01 percent stake in Silkchin Trading (Pvt) Limited and a 50,1 percent stake in Intercane (Pvt) Limited (which has 23 Texas Chicken stores).

The Other Light Manufacturing segment includes a 50,64 percent in Probottlers (Pvt) Limited, a 39,2 percent stake in associate company Probrands (Pvt) Limited and a 50,1 percent stake in Prodairy (Pvt) Limited (which holds a 50 percent stake in associate company Keshelmar (Pvt) Limited, and an 80
percent stake in Mafuro Farming (Pvt) Limited).

The same segment also holds a 58,33 percent shareholding in NatPak (Pvt) Limited (which has a 78,33 percent stake in Alpha Packaging Pvt Limited), a 60 percent stake in Zando (Pvt) Limited (which fully controls Saxin Enterprises (Pvt) Limited and has a 54 percent stake in Sabithorn (Pvt) Limited), and a 50,2 percent stake in The Buffalo Brewing Company (Pvt) Limited.

Overall, this makes Innscor a behemoth that interfaces with Zimbabwean consumers at various touch-points.

Multi-million expansion projects

Not only are these big manufacturers experiencing volumes growth; they are also expanding production to meet untapped demand.

In its 2023 annual report, Innscor group chairperson Mr Addington Chinake said the group spent almost US$125 million in capital investment across its numerous business units over the past two financial years.

It has also set aside between US$50 million and US$60 million for similar projects this year.

A fortnight ago, Innscor’s bakery division commissioned a new state-of-the-art fully automated production line in Bulawayo, with a capacity to produce 160 000 loaves daily.

The expansion also extends to non-listed companies.

Another big bread producer, Proton Bakers, recently announced plans to set up a new US$3,6 million plant, which is expected to boost the company’s daily output by 60 000 loaves to 200 000 loaves.

In the 2024 Budget, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube projected an increase in both consumer spending and industry expansion.

“From the expenditure side, household consumption and gross fixed capital formation (outlays on additions to fixed assets, including the net change in inventories) are projected to grow by 3,4 percent and 2,7 percent, respectively,” he said.

Zimbabwe’s consumer spending in 2023 is particularly impressive, especially considering that the local economy was dogged by phases of inflationary pressures and depreciation of the local currency during the year.

Official figures show that the country’s month-on-month inflation peaked in June 2023 at 12,10 percent, before declining to -1,3 percent in August 2023.

The month-on-month inflation then rebounded to 4,7 percent in December 2023 due to exchange rate volatility.

Spending others’ incomes

While various factors can contribute to an increase in consumption spending — including an increase in income, decrease in interest rates, consumer confidence and changes in Government policies — an interesting factor are diaspora remittances.

Last year, diaspora remittances amounted to US$1,87 billion, a 16 percent gain from US$1,62 billion in 2022.

Diaspora remittances account for around 16 percent of the country’s foreign exchange receipts (at US$11 billion for 2023) and these transfers directly strengthen the income of the recipient households.

A 2021 joint study by the Zimbabwe Reconstruction Fund and the Zimbabwe Economic Policy Analysis and Research Institute titled “Remittances, consumption patterns and household investment: The case of Zimbabwe”, indicates a correlation between diaspora remittances and rising consumer spending.

Reads part of the study:

“The results suggest that remittances, in general, tend to stimulate all categories of household expenditure in Zimbabwe.

“We find that domestic remittances increased expenditure on food and healthcare emergencies but had no impact on durables and education.

“International remittances, on the other hand, stimulated the expenditure on all expenditure categories (including on durables and education).

“Furthermore, households that received international remittances witnessed larger increases in all categories of expenditure, compared to domestic recipients.”

Spending, not saving

Further, a 2017 study carried out by the Government, in partnership with the United Nations Population Fund, titled “Harnessing the Demographic Dividend in Zimbabwe Report”, pointed to a disproportionate bias towards consumption relative to labour income in the country.

“Average annual consumption per person is higher than average labour income per capita from infancy to age 29,” reads part of the report.

“Over a range of 24 years between the ages of 30 and 53, mean per capita labour income exceeds per capita consumption.

“Thereafter, labour income again falls below the level of consumption.”

While high consumer spending patterns indicate the vibrancy of an economy, the irony is that it leads to a poor national savings culture.

Long-term savings are considered vital for economic growth and development in the long run.

According to the FinScope Consumer Survey 2022, the overall savings uptake in Zimbabwe has continued to decline in recent years, with 36 percent of adults saving in 2022, down from 47 percent in 2014.

The report also highlighted that savings/investments at the bank dropped to 5 percent in 2022 from 10 percent in 2014.



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