RYAN CHIGOCHE
Listed seed manufacturer, Seed Co says the government’s de-facto price controls have adversely affected the company’s operations.
The group CEO, Morgan Nzwere on Tuesday told delegates at the company’s analyst briefing the controls were hitting the company.
Government recently directed companies to use the interbank rate when pricing their goods and services, a move described as de-facto price controls.
Nzwere said this was affecting business viability.
“The unstable economy highlighted by hyperinflation and currency erosion was not helped by pricing distortions due to countless monetary and fiscal regulations not in sync with market developments,” Nzwere said.
(More so ) de facto price controls arising from exchange rate disparities affecting the ease of doing business viably.”
He added: “The temporary lending ban, interest rate hikes and increasing taxes on the stock market caused and continue to cause apprehension in the market coming soon after the closure of the stock market in 2021.Authorities are sending mixed signals about dollarization as state enterprises are collecting revenue in US$.”
In its trading update for the year to March 31, 2022, Seed Co swung into a loss position of ZWL$650.5m from a profit of ZWL$1.4bn reported in the prior comparative period.
Revenue for the group shrunk 8% to ZWL$9.3bn from ZWL$10.1bn achieved in the prior comparable period.
The flagship maize seeds volumes dropped by 23% in the reported period with wheat sales volumes and soya beans also dropping by 6% and 31% respectively all attributed to erratic rains and pricing challenges.
Inventories at ZWL$3.3bn were higher than ZWL$2.7bn recorded in the year prior because of the larger volumes of wheat seed held at year end in preparation for the winter cropping season and the unsold maize seed stock carried over into the next trading year.
The rise in property, plant and equipment to ZWL$6.3bn from ZWL$4.7bn in the year prior was driven by new acquisitions during the period as the company completed and commissioned the artificial maize seed drying plant during the year under review.
The company also reported that season production for the 2022/23 now at intake stage
challenged by higher costs of inputs but expected to be higher than prior year
Nzwere is pessimistic and anticipate the current economic environment to drag on into 2023
“Zimbabwe’s economic situation is not expected to improve soon in view of upcoming elections next year. The gap between the official and alternative exchange rates in Zimbabwe is set to continue weighing down real profitability as it is not easy to de-link selling prices from official rates given the sensitivities around staple seeds in the country,” Nzwere said.
However in the face of the anticipated challenges Nzwere said that Zimbabwe food security will remain top of the company’s agenda so as to mitigate global supply shocks as African governments activate import substitution local production strategies.
He said Seed Co was better positioned to leverage the strong brand and intellectual property to actively contribute to primary food production to plug supply gaps.
