By Almot Maqolo
HARARE – A variety of challenges, including the Covid-19 pandemic, climate change, skyrocketing fertilizer prices as a result of the Ukraine-Russia crisis, and currency changes, among others, had a severe impact on CFI during the third quarter ended 30 June 2022.
Sales volumes were impacted by the country’s late and unpredictable rains, as well as instances of drought and flooding, throughout the period under review. This was made worse by the increase in fertilizer costs, which led to decreased seed uptake.
Consequently, sales volumes for the group retail division’s key revenue drivers during the quarter werebehind those of the same period last year. “The late onset of the 2021/22 rain season and the resultant lower harvest suppressed demand for agricultural inputs,”; said the company. “Demand for fertilisers, which traditionally peak during the tobacco marketing season, was also constrained by the significant real price increases for the commodity.”
Climate change remains one of the major challenges affecting the group’s performance.
Cement sales for the quarter were also adversely affected by supply constraints, according to the company.
At Victoria Foods, flour sales were up 135% relative to the comparable prior quarter following the company’s recapitalization at the beginning of the year and improved raw materials availability during the period. Glenara harvested 1,770 tonnes of maize as well as 729 tonnes of potatoes and 621 tonnes of soya beans, maintaining yields relative to prior year. As of financial figures, the group’s inflation-adjusted revenues grew by 21.8% to ZWL6.54 billion from ZWL5.34 billion in the prior year’s quarter. Of the group’s inflation-adjusted turnover, retail contributed 70.85% (2021– 87.37%) whilst milling and farming operations accounted for 25.79% (2021–7.91%) and 3.36% (2021– 4.72%) respectively.
On the hand, CFI Holdings noted that the requirement for businesses to use the official rate when pricing their goods and services has undermined competitiveness. There have recently been growing worries that some companies across the nation are using money from the Reserve Bank of Zimbabwe’s weekly foreign exchange auction to raise prices using black market exchange rates. It prompted authorities to demand businesses use official rates.
Some fear that this regulation may negatively impact businesses’ value preservation efforts owing to the difficulty in pricing products at sustainable levels.
“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 30 June 2022. Authorities had 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.” The widening of the parallel market premiums threatens to reverse the gains made on the inflationm front. Prices of goods and services have been going up in US dollars-all of which risks pushing up inflation.
The group will maintain its focus on sustaining business continuity in the current environment.
“The group hopes that collaborative dialogue between government, industry and other stakeholders will be maintained in order to safeguard business confidence and the significant economic achievements mattained since the introduction of the auction system,” the group said in its outlook. The period covered was loaded with quite a lot of economic hazards, chief among them half-baked economic policies. Whilst the list is endless, some of these hazards are the pricing of goods and services in local currency parallel to the official exchange rate, increase in fuel prices, suspension of bank lending, increase in capital gains withholding tax, increase in the bank policy rate, increase in the medium term accommodation interest rate and the annual inflation rate.
