eBusiness Weekly
Tapiwanashe Mangwiro
Listed firms that have been releasing quarterly and half year results in the past month have all highlighted the need for authorities to curb inflation as well as ensure stable power supply and market-determined framework for pricing foreign exchange.
However, despite the challenging operating environment, companies remain optimistic about expanding their footprint and refurbishments.
Confederation of Zimbabwe Industries (CZI) president, Kurai Matsheza, also confirmed the power cuts and other issues arguing: “As business, we are operating but operating with a number of challenges like the recent fall in aggregate demand across all product lines and massive power cuts.
“These affect our production capacity in a big way because we end up supplying less in the market. However, we are being saved by the fall in aggregate demand which is causing shortages not to be noticed.”
starafricacorporation in the first quarter of the 2022/23 financial year, revealed production volumes of granulated white sugar at Goldstar Sugars were 14 percent lower than those attained during the prior year’s comparative period.
“Power and steam supply constraints were the main causes of the reduced throughput at the refinery, as they negatively impacted plant uptime,” the company said commenting on its production levels.
Accordingly, the reduced production led to a 3 percent decrease in sales volumes when compared with the prior year and the company has since turned to solar energy to augment power supplies.
“The business has since installed a 11kV dedicated power supply line, procured a 1,000kVA generator and electrical cables to augment the power supply. An overhaul programme on two of the five boilers is nearing completion,” said the firm in a statement.
CFI Holdings said the requirement for businesses to use the official rate when pricing their goods and services has undermined competitiveness.
“The official exchange rate, against which formal businesses are required to benchmark pricing, has remained uncompetitive relative to the alternative market rates,” the company said in a trading update for the third quarter ended June 30, 2022.
The monetary authorities stopped businesses from quoting prices using black market rates in a bid to encourage more use of local currency.
“This contributed to uncompetitive prices in US dollars and consequently reduced foreign currency inflows for the group,” CFI said.
CAFCA, the country’s biggest cable manufacturer, says its export volumes were 92 tonnes in the third quarter ending 30 June 2022 against 85 tonnes in the same quarter last year.
“Our customers in Malawi continue to experience difficulty in obtaining foreign currency so sales there are slightly constrained,” the company said in a trading update.
However, local aluminum conductor sales were down mainly due to the impact of awaiting regulatory approval for the barter deal with ZETDC.
CAFCA said regulatory bottlenecks and continued monetary policy changes, were affecting their operations although they say they can still be profitable despite the hiccups.
Banks have moved interest rates above 200 percent “which obviously will materially reduce profits though our interest bill will still be at least four times covered by profit,” the cable manufacturer said.
Retail giant, OK Zimbabwe, said like any other business, the ability to pass on the full cost increase to the consumer is hampered by declining disposable incomes.
The changes and volatility of the Zimbabwean currency make operating in this market extremely difficult.
“The willing buyer willing seller interbank market exchange rate against which formal businesses are required to benchmark pricing is not as attractive as the rates offered in alternative unregulated markets,” the company said in a trading update.
“This continues to impact competitiveness of our USD prices, impacting foreign currency collections.”
To eliminate the arbitrage, the bank policy rate was revised from 80 percent to 200 percent per annum, bringing the cost of borrowing closer to the inflation experience.
“This has made borrowing costs excessive, resulting in liquidity pressures across the entire supply chain,” said the company.
