eBusiness Weekly
Tawanda Musarurwa
With the Zimbabwe economy under-performing in recent years, advantage lay with local firms with a regional focus; but the Covid-19 appears to have eroded some of those advantages.
Diversified investments holding company, Zimre Holdings Limited (ZHL), says the pandemic has increased business uncertainty even in comparatively stable economies where it has operations.
Besides the linchpin entity in Zimbabwe, the Zimbabwe Stock Exchange-listed group, also has subsidiaries in Botswana, Malawi and Zambia.
But whereas Zimbabwe’s doing business climate had long been complicated by factors including inflationary pressures, foreign currency shortages and waning demand, the other regional operations are likely to be negatively affected by general weakening economic performance due to Covid-19.
“The outbreak of the Covid-19 pandemic resulted in an unprecedented disruption to economic activity and created material uncertainty for business in all countries where the group conducts operations,” said ZHL chairman Benjamin Kumalo.
For Botswana – which has been one of the most stable regional economies – the economy is now expected to contract by 9.6 percent this year, compared to growth of 3 percent in 2019.
The Zambian economy is projected to contract by 5.1 percent (according to projections by the International Monetary Fund) this year, compared to a muted growth of 1.5 percent in 2019. And its currency, the Kwacha remained unstable resulting in double digit inflation.
On a slightly positive note, the Mozambique economy is expected to remain resilient and gross domestic product (GDP) growth of 1.4 percent is projected in 2020 compared to 2.2 percent in 2019.
And for Malawi, the economy is expected to grow by 1 percent in 2020 from 4.5 percent last year.
The weaker macro-economic performances in these countries, at least for the current year, is likely to impact on the group’s numbers going forward.
However, for the six months to June 30, 2020 ZHL posted an improved performance on a comparative basis.
The group’s total income – in inflation adjusted terms – came in at $1.5 billion, up 49 percent over the $1.02 billion recorded in the same period in 2019.
On a historical cost basis, total income increased by 1220 percent from $167 million in 2019 to $2.2 billion, “driven by investment property revaluation gains following change of functional currency, growth in insurance revenue of 747 percent, and increase in rental revenue of 888 percent,” said the chairman.
During the period under review, total claims and expenses stood at $452 million on an inflation adjusted basis, total claims and expenses grew by 24 percent when compared to the $387 million registered in the same period in 2019.
At 795 percent on a historical cost basis, growth in claims and expenses was below growth in total income of 1220 percent.
However, this did not weigh down ZHL’s profitability.
On an inflation adjusted basis, profit for the period increased to $1.2 billion in 2020 from $533 million last year, an increase of $685 million in absolute terms.
In historical cost terms, profit for the period increased by 1491 percent from $117 million to $1.9 billion as most of the group’s business units performed well during the half year.
Total comprehensive income increased to $1.4 billion in inflation adjusted terms from $718 million
in 2019.
And on a historical cost basis, total comprehensive income was $2.3 billion, compared to $185 million same period last year.
Meanwhile, total sales grew by 64 percent in inflation adjusted terms from the restated level of $2.9 billion in 2019 to $4.7 billion as at 30 June 2020.
On a historical cost basis, the Group’s financial position remained sound with total assets at $4.4 billion compared to $1.05 billion as 31 December 2019.
“The growth was mainly attributed to the revaluation of the investment properties and other non-monetary assets,” said the group.
The board did not declare a dividend for the six months period.
