eBusiness Weekly
Business Writer/Reuters
Alcoholic drinks firm Distell, which basically helps to ensure imported brands are available in Zimbabwe, is likely to hold off on further investments, chief executive Richard Rushton said on Wednesday this week.
Distell, alongside Delta Corporation is a 31 percent shareholder in ZSE-listed African Distillers (Afdis), the makers of alcoholic brands Amarula, Savanna and Hunter’s Dry. Distell is also a supplier to Afdis.
He had said earlier this year that if an opportunity arose to invest further in the country the company would look at it favourably, but since then soaring inflation, shortages of basic goods and foreign currency and other problems have worsened.
The company reported that its full-year profits had dropped by 1,8 percent partly because of problems in the country.
Distell recorded a R266.1 million credit loss provision related to its Zimbabwean business. Early this month, management said “due to the shortage of foreign exchange in Zimbabwe, Afdis was unable to settle all of the trading debt owed to Distell.
“In the face of further currency devaluations and to protect the value of the trading debt owed to it, Distell accepted payment in local currency and invested the proceeds with the Reserve Bank of Zimbabwe in US dollar-denominated savings bonds yielding 7 percent and maturing at the end of 2020.”
Zimbabwe brings in the eighth-largest share of revenue on the continent excluding South Africa, but its contribution is in the low single digits below Kenya, Namibia and Botswana amongst others.
While Distell is committed to the long-term opportunity the country offers, he said it wants to see an improvement in currency flows and a plan of action to address the issues Zimbabwe faces coming to fruition before it invests further.
The company is striving to become Africa’s premier drinks brand via an ambitious expansion plan focused on the continent.
While this offers attractive growth prospects, it also exposes it to risks as it pushes into Africa’s tougher markets.
