Zimbabwe Food and Drink Report 2013

Zimbabwean economic growth in the first three years following the return of macroeconomic stabilitythat came with dollarisation in 2009 was relatively robust at an estimated 5.8%, 8.1% and 9.3% year-onyear(y-o-y) respectively in 2009, 2010 and 2011. However, the prospects for growth to remain at theselevels in 2012 and the years thereafter look somewhat dimmer. While we acknowledge that Zimbabwe,with its abundant natural resources, educated workforce and relatively developed physical infrastructure,possesses considerable potential, it will require the inflow of foreign capital to finance the harnessing ofthis potential.

Key Industry Trends

Delta Shining Post Dollarisation: Zimbabwe's Delta Corporation, which dominates the Zimbabweanbeer and soft drinks landscape, has invested considerable sums in the country (believed to be in thevicinity of US$200mn) since 2009 with SABMiller, which owns about 36% of its equity, among its mainbackers. Given its size, its allegiance and how well it has done post 2009, Delta has been able to accesscredit internationally at affordable rates. Significantly, both beer and soft drinks have been performingvery well with both units registering annual volume growth in excess of 20% in the year to March 2012.

The company reported a 37.4% rise in net sales to US$479.9mn, with operating profits jumping by 44%to US$98.3mn. In October 2012, Delta Corporation has become the first company in the country toachieve a market capitalisation of US$1bn.

Retail Attracting Interest in Zimbabwe: We estimate formal food retail stores account for about 25% ofsales in Zimbabwe. To provide some context, this compares with about 5% in Kenya, which is consideredto be among the region's most developed organised retail markets after South Africa, Botswana andNamibia. Mass grocery retailers such as South Africa's Pick n Pay are believed to be keen to increasetheir exposure to Zimbabwe. Given that Pick n Pay increased its stake in domestic retailer Meikles-ownedTM to 49% during 2012, the retailer is now better positioned to expand in the country. In summer 2012Pick n Pay opened its first store in Harare, Zimbabwe, after acquiring the stake in TM. The outlet includesa supermarket, a liquor store and a clothing store as part of the refurbished Kamfinsa shopping centre, andwill devote at least 40% of its floor space to fresh produce and deli goods. Pick n Pay has said that therebranding exercise of TM stores will take at least three years to complete.