ZB Financial Holdings says it remains pessimistic about the future economic environment given the severe currency devaluations, tight money supply and persisting high levels of inflation in the market.
Inflation has recurrently proved to be a cancer in the local economy despite growing efforts by the Government to arrest instances of rampant price increases and currency depreciation that erode savings and incomes.
The second quarter of 2023 was apparently a problematic phase as far as local inflation is concerned as the country experienced a wave of rapid currency devaluation.
Absurdly as it stands, local businesses and individuals have developed a fear of losing their incomes to inflation and fickle exchange rates.
Businesses in particular have faced difficulties in planning and conducting transactions as they struggle to anticipate exchange rate movements.
Notably in June this year, Zimbabwe’s year on year inflation spiraled to a high of 175, 8 percent while month on month closed at 74, 5 percent.
This was a rise from an elevated 15, 7, and 86, 5 percent month on month and year on year inflation rates in May 2023 respectively.
As such, the Government in the second quarter of 2023 introduced two sets of measures that included a commitment to fund 25 percent of export surrender requirements and maintenance of the US$ cash withdrawal tax at 2 percent.
The authorities also liberalised the Dutch Foreign Currency Auction, allowing the market to determine the exchange rates through the Willing Buyer Willing Seller (WBWS) system, an arrangement where banks acquire foreign currency from the Reserve Bank of Zimbabwe (RBZ) at a wholesale floor price for sales to their customers.
This was coupled with the lifting of import restrictions on basic commodities and the assumption of all external loans by the RBZ.
All these measures were implemented after the Zimbabwe dollar fell victim to inflation mainly in May and June as the parallel market exchange rate plummeted to $8500 against US$1, while the weighted average foreign exchange rate reached its weakest of $6 926 to the greenback on auction as at 20 June 2023.
Since the implementation of the measures, parallel market exchange rates have been cooling off in terms of strength.
Immediately after the introduction of the aforesaid measures particularly liberalisation, the local currency saw unsubstantiated and rapid depreciation before it firmed to $4505 to US$1 at the end of July.
As it stands, year on year inflation has since receded to 17, 82 percent (October 2023 figure) while month on month inflation closed the month at 2, 46 percent.
In terms of foreign exchange rate, the Zimbabwean dollar reached an all-time low of $6926 to the greenback on 20 June 2023 compared to the prevailing $5755 as of 14 November 2023.
“The geopolitical concerns, particularly surrounding the Russia Ukraine conflict and Israel-Palestine conflict, appear likely to impact the outlook for some time.
“Domestic economic outlook remains volatile and uncertain, including severe currency devaluations, tight money supply and fiscal space and high inflation levels in the market,” said Tinashe Masiiwa the ZBFH group company secretary in its 2023 third quarter trading update.
However, the group indicated that it remains resilient and committed to fully implementing inventive strategies to curb these hurdles.
He said this will be anchored on a ‘customer-centric’ business model offering one stop shop financial services solution to its customers in the newly restructured service centres.
ZBFH indicated that its business units continue to ensure pricing relevance in their specific markets to match ever-changing consumer spending ability given the inflationary environment.
According to ZBFH operating costs control remained another key management area in the first nine months of 2023.
Driven by a high-inflation environment the group’s operating expenses grew by 258 percent in the third quarter of 2023, which pushed up both remuneration and administration costs.
Property business, however, remains a preferred investment for the group given the inflationary environment.
As such ZBFH maintained an occupancy rate of at least 90 percent over the nine months to 30 September 2023 which boosted net property income.
The group did not declare any dividend for the quarter under review.