Zim operating environment remains complex: Delta

31 Jan, 2025 - 00:01 0 Views
Zim operating environment remains complex: Delta Delta’s focus remains on leveraging on activities that generate aggregate demand and positioning the business for future growth

Business Writer

DELTA Corporation Limited says the operating environment in Zimbabwe remains complicated, primarily characterised by high input costs, frequent and unpredictable policy changes.

In its business update for the third quarter ending December 31, 2024, the group revealed that its operations were adversely impacted by fluctuations in exchange rates, disruptions in utility supplies and varying consumer spending patterns during the traditional summer peak season.

According to Delta, the implementation of the sugar content surtax in January 2024 led to substantial price increases for soft drinks and cordials.

This surtax significantly affected the Group’s competitiveness in pricing, which in turn fuelled an influx of imported similar products from neighbouring countries, a position that was exacerbated by rampant smuggling.

Currency-wise according to Delta, the ZiG experienced mixed fortunes since its introduction in April 2024, and this includes rapid depreciation culminating in a significant devaluation at the end of September 2024.

Exchange rate disparities, on the other hand, contributed to pricing misalignments in the formal sector, creating additional challenges for the business.

Given the prior standing according to Delta, the company particularly the beverages segment, is likely going to continue facing challenges that include uncompetitive retail prices arising from high input costs and taxes which attract lower-priced imports from the region and policy-driven changes to the route to market.

As such, Delta implored relevant authorities to implement policies that promote the stability of the local currency and access to foreign currency through formal banking channels would improve the operating environment.

“The operating environment in Zimbabwe remains complex, influenced by policy changes and currency instability. The beverages sector faces further challenges relating to uncompetitive retail prices arising from high input costs and taxes which attract lower priced imports from the region and policy driven changes to the route to market.

“The implementation of policies that promote the stability of the local currency and access to foreign currency through formal banking channels would improve the operating environment. Despite these challenges, the business remains well positioned to seize any opportunities from increased consumer spending. Our focus remains on leveraging on activities that generate aggregate demand and positioning the business for future growth,” said Delta Corporation secretary, Faith Musinga in the third quarter trading update to December 2024.

Despite these challenges, Delta said it remains strategically positioned to capitalise on potential opportunities from an increase in consumer spending.

According to Delta its focus remains on leveraging on activities that generate aggregate demand and positioning the business for future growth.

This comes as the Group is currently contesting tax assessments issued by the Zimbabwe Revenue Authority (ZIMRA) regarding amounts they believe should have only been payable in foreign currency.

New assessments received in November 2024 add to those from 2022, raising the disputed total to a staggering US$73 million.

This amount encompasses principal taxes, penalties, and interest related to value-added tax and income tax for the periods spanning 2019 to 2022.

Notably, these assessments disregard local currency payments made during the relevant times, which have since lost their value due to rampant inflation and currency depreciation.

Delta has faced adverse judgments from both the High Court and the Supreme Court concerning these tax disputes, though appeals and new cases are currently at various stages within the judicial system, including proceedings in the Constitutional Court and the ZIMRA appeals process.

As of December 31, 2024, the Group has complied with its obligations by paying a total of US$9.2 million in accordance with the “pay now, argue later” principle, as well as pre-existing payment plans.

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