eBusiness Weekly
Nelson Gahadza
Most companies operating in Zimbabwe are migrating towards US dollar sales as they remain skeptical of the Zimbabwean dollar (Zim dollar), which remains highly volatile.
The country has been fast dollarising, with official statistics revealing that more than three-quarters of transactions for food and goods purchases are now being done in US dollars.
In the banking sector, overall deposits are estimated at over 70 percent of total deposits, while the over 90 percent of loans and advances are now in hard currency.
First Mutual Holdings (FMHL) said in its recent financials that as the local economy increasingly has dollarised and the group continues to expand its USD-based product portfolio to maintain product relevance.
Economists say already 80 percent of transactions in the economy are in US dollars, despite the Government’s efforts to promote wider usage of the local currency.
FMHL offers services in risk management, wealth creation and wealth management in the insurance sector.
“The proportion of the USD business being written by the group constituted 74 percent of the total insurance contract revenue (ICR) at US$45,8 million,” said chairman Amos Manzai, commenting on the half-year financials.
He said the group also maintained the stance of diversifying its pool of investment assets with a skew towards real assets to minimise the impact of the volatility in the macro-economic environment.
The group’s First Mutual Health Company has also been making modest adjustments to USD premiums on account of rises in USD costs of medical benefits provided by service providers, resulting in a gradual growth in pure USD medical policies as members migrate to a more stable product.
Manufacturing company Proplastics Limited turnover for the interim period to June 2023 grew by 23 percent to US$10,5 million from US$8,5 million in the prior year, driven by a 19 percent increase in sales volumes over the same period.
The company’s exports contributed 15 percent to total sales as the group managed to secure significant supply contracts in the region.
“Increasing export performance will remain a key focus area for the group,” said Gregory Sebborn, the group’s chairman.
He said the company’s financial position remained strong, with total assets amounting to US$27 million, while the gearing ratio remained very low at 1,4 percent as the group extinguished the expensive Zimbabwe Dollar loans at the beginning of the year.
“The environment is showing that customers are preferring to settle transactions in USD, and we expect this trend to largely continue into the second half of the year,” he said.
First Mutual Properties (FMP) said the property market continued to see rental payments in multiple currencies, with the majority of payments being done in US dollars, while operating costs were mainly in the Zimbabwe dollar currency.
“This is driven by the dual-currency operating environment, where continued reviews of rentals are key to driving business growth,” the company said.
TSL Limited, in its quarterly update, said the US$ portion of revenue for the quarter to July 2023 grew by 47 percent when compared to the prior year.
TSL said group borrowings are foreign currency-denominated and remain low with adequate interest coverage.
TSL Limited says group profitability continues to grow, driven by improved operating efficiencies and increased capacity utilization across its operating units.
TSL’s interests span across sectors, including real estate, agriculture, logistics, and services. The Group has been pursuing its “moving agriculture” strategy as it targets becoming a regional powerhouse in the agricultural sector.
Zimbabwe legalised the use of foreign currencies in domestic transactions in 2020, less than a year after abandoning dollarisation.
Nampak managing director, John van Gend, the group benefited from improved USD collections on the back of constrained Zimbabwean dollar liquidity, most of which was deployed into working capital to meet customer demand.
According to IH Securities, demand for comparably more affordable US dollar loans will remain high, eventually accelerating the present dollarisation trend.
IH estimates that an estimated US$1,5 billion to US$2 billion is moving about in the informal sector, and over 70 percent of Zimbabwe’s gross domestic product (GDP) or household foreign currency savings come from the country’s informal sector.
