CAFCA suffers a staggering 39% drop in exports

ROBIN PHIRI

Listed cable manufacturer, CAFCA Limited, has suffered a staggering 39% decline in exports for the first quarter ending December 31, 2024, as foreign currency shortages cripple key regional markets, including Malawi, Mozambique, and East Africa.

This sharp drop comes despite the company’s strong domestic performance, which saw a 23% increase in total volumes, driven by surging demand in the utilities and commercial sectors.

CAFCA’s latest trading update highlights the growing challenges Zimbabwean manufacturers face as they struggle with currency instability, power disruptions, and intensifying competition.

While the company managed to post a 29% revenue increase, export struggles underscore the harsh realities of operating in an increasingly volatile economic environment.

The September 2024 currency devaluation has further disrupted trade dynamics, forcing businesses to favor U.S. dollar transactions due to limited circulation of the Zimbabwean Gold (ZWG) currency. Smuggling has also surged, flooding the market with illicit imports that threaten CAFCA’s competitiveness.

Despite these setbacks, the company remains determined to protect its market position by focusing on operational efficiency, engaging distributors, and exploring alternative power solutions. However, as currency fluctuations, policy uncertainty, and power outages continue to loom large, CAFCA faces an uphill battle to sustain its growth trajectory.

CAFCA’s export markets suffered a devastating blow in the first quarter, with a 39% decline in outbound shipments. The key factor behind this drop was the severe foreign currency shortage affecting major trading partners in Malawi, Mozambique, and East Africa.

For businesses in these countries, securing U.S. dollars or other stable currencies to pay for imports has become increasingly difficult, significantly reducing demand for CAFCA’s products.

This challenge has forced the company to shift its focus toward domestic sales, but the loss of regional trade remains a significant setback.

The crisis reflects a broader problem facing Zimbabwean exporters, as foreign currency scarcity and restrictive trade policies across Africa make it harder for businesses to access international markets.

Compounding the issue is the influx of cheaper, lower-quality alternatives, which further erodes CAFCA’s competitive advantage in the region.

While export figures were disappointing, CAFCA’s domestic market performance was impressive, with total volumes rising 23%.

This growth was largely driven by a remarkable 74% surge in aluminum volumes, while the copper-based business expanded by 13% year-on-year.

The utilities and commercial business segments saw explosive growth, with volumes soaring by 187% and 83%, respectively. This increase was fueled by infrastructure development projects, construction sector expansion, and a rising demand for high-quality cabling solutions.

However, not all segments experienced the same success.

The retail and distribution sectors struggled, reporting a 25% decline in volumes due to growing competition from informal markets and an influx of smuggled electrical products. The rise of illicit imports has distorted market prices, making it harder for companies like CAFCA to compete on price while maintaining quality.

Beyond market challenges, CAFCA’s operations were significantly affected by power outages and equipment failures, disrupting production and complicating supply chain management.

Zimbabwe’s ongoing energy crisis continues to pose a major threat to industrial production, with frequent load shedding and inconsistent power supply forcing manufacturers to rely on costly alternative energy sources. CAFCA has been investing in backup power solutions, but the cost burden remains high.

In addition to power disruptions, unexpected equipment breakdowns further strained operations, increasing downtime and affecting production efficiency. The company has ramped up maintenance efforts to minimize these disruptions, but the impact on output remains a concern.

Despite these headwinds, CAFCA reported a 29% increase in revenue for the quarter, thanks to strong domestic demand. However, the company acknowledged that profit margins remain under pressure due to intensified competition from imported and smuggled products, rising input costs, driven by inflation and supply chain challenges and currency instability, making pricing strategies more complex.

With trading margins squeezed, CAFCA is now focusing on enhancing operational efficiency and optimizing cost structures to sustain profitability.

As Zimbabwe’s economy remains highly unpredictable, CAFCA is preparing for a challenging year ahead. The company recognizes that currency volatility, policy uncertainty, and power supply issues will continue to shape the business environment.

To remain competitive, CAFCA is pursuing several key strategies including investing in equipment upgrades and alternative energy solutions to minimize production disruptions, expanding distribution networks and working closely with retailers to ensure product availability, lobbying for government action to curb smuggling and ensure fair market conditions and exploring regional market alternatives.

CAFCA’s staggering 39% decline in exports highlights the harsh realities of Zimbabwe’s current economic climate. Yet, the company’s ability to achieve strong domestic growth and revenue expansion demonstrates its resilience and adaptability.

As it navigates ongoing challenges, CAFCA’s future success will depend on its ability to mitigate risks, strengthen operational efficiency, and capitalize on domestic opportunities. The company remains optimistic, but the road ahead will demand agility, strategic planning, and continued investment in innovation to maintain its market position.

For now, CAFCA’s strong domestic performance provides a much-needed buffer against export losses, but the long-term sustainability of its growth hinges on stabilizing the operating environment and restoring regional trade competitiveness.