Struggling OK Zimbabwe plans US$30m rights issue

SAMANTHA MADE

OK Zimbabwe Limited, the country’s largest retailer, is planning  to raise US$30m through a rights issue, private placement, and debt instruments in a desperate bid to stabilise its financial position and restore operational efficiency, Business Times can report.

The capital raise plans come as the company grapples with severe liquidity constraints, mounting supplier debts, and declining stock availability—factors that have significantly impacted its revenue generation and overall performance.

Additionally, the company has been forced to close several retail outlets due to financial pressures, further reducing its market presence.

According to Margaret Munyuri, the Group Secretary, OK Zimbabwe has been struggling to sustain adequate stock levels as many suppliers have halted deliveries due to unpaid balances.

This situation has disrupted the retailer’s supply chain, leading to diminished product availability across its extensive store network and further exacerbating its financial woes.

“The company has been unable to maintain adequate stock levels as many suppliers can no longer continue providing goods and services due to outstanding unpaid balances. This has directly impacted product availability across the company’s stores, affecting revenue generation and overall business performance. Particularly in the last six months, trading levels have been insufficient to cover operational costs,” Munyuri stated.

As a result of these financial pressures, OK Zimbabwe anticipates reporting a significant loss for the financial year ending March 31, 2025. The capital raise is expected to bridge the funding gap and restore stability to the company’s financial position.

“In light of the foregoing , the board of directors have resolved  to undertake a capital  raise the sum of up to US$30m to bridge the funding gap and stabilise  the company’s financial position. The capital raise  will be a  combination of  a rights issue, private placement and debt instruments,” Munyuru said.

A rights issue is a method of raising capital where existing shareholders are given the opportunity to purchase additional shares at a discounted price. This allows them to maintain their proportional ownership in the company while injecting much-needed funds into the business.

In addition to the rights issue, OK Zimbabwe will also conduct a private placement, which involves selling shares directly to select institutional investors and high-net-worth individuals rather than the general public.

This approach enables the company to raise funds quickly and efficiently without the complexities of a public offering.

The capital raise will also include debt instruments aimed at securing long-term financing to ease the company’s immediate working capital constraints.

Management remains optimistic that this capital injection will provide a much-needed financial lifeline, enabling the retailer to revamp operations, settle outstanding supplier debts, and re-establish robust inventory levels.

The company has also undergone significant leadership changes, with former CEO Max Karombo and his executive team stepping down. Their tenure was marked by increasing financial strain and operational difficulties, prompting the board to seek a new strategic direction.

In response, OK Zimbabwe has appointed Willard Zireva to lead the turnaround efforts. Zireva, who previously served as CEO, is a seasoned retail executive with extensive experience in Zimbabwe’s business landscape.

His leadership is expected to bring stability and a renewed strategic focus to the embattled retailer.

Munyuri emphasised that the capital raise is expected to strengthen the company’s balance sheet, enhance liquidity, and support its strategic turnaround plan.

She stated that this initiative will ensure that OK Zimbabwe remains a competitive player in the retail market while safeguarding long-term shareholder value.

The retailer’s financial woes stem from broader macroeconomic challenges, including Zimbabwe’s persistent currency volatility, high inflation, and constrained consumer spending power. The liquidity crunch has made it difficult for businesses to access foreign currency for restocking imported goods, further exacerbating supply chain disruptions.

OK Zimbabwe’s leadership believes that with a successful capital raise, the company will regain stability and reposition itself for sustainable growth. The infusion of fresh capital is expected to improve relationships with suppliers, restore consumer confidence, and reinvigorate sales across its network of stores nationwide.

In light of the ongoing capital raise, the company has advised shareholders and the investing public to exercise caution when dealing in its shares until further announcements are made.

Market analysts will be closely watching the retailer’s ability to execute the capital raise successfully and navigate the challenging economic landscape.

OK Zimbabwe has long been a cornerstone of the country’s retail sector, and the success of this funding initiative will be pivotal in determining its future trajectory.

If executed effectively, the $30m capital raise could provide a crucial turnaround for Zimbabwe’s largest retailer, ensuring its resilience in an increasingly complex economic environment.