Forex surrender rule stifles Ariston

LIVINGSTONE MARUFU

Ariston Holdings, a publicly traded agro-industrial concern, has criticised the central bank’s stringent surrender requirement portion, which the company claims makes exporting unviable,  Business Times can report.

A quarter or 25% of all exporting companies’ foreign currency earnings are surrendered to the central bank.

Consequently, exporters would therefore be compensated in  Zimbabwe dollars  for the 25% of foreign currency forfeited at the current exchange rate.

Nkosilothando Ncube, the company secretary at Ariston, stated in a trade update for the quarter to December 31, 2023 that the 25% surrender requirement is detrimental to the company.

“The economic environment continued to be challenging, especially so for exporting agricultural businesses as the 25% Reserve Bank of Zimbabwe (RBZ) export retention coupled with the significant disparity between the interbank rate and the fair market rate used by suppliers became very significant.

“This disparity is making some export lines unviable due to loss of value on the 25% RBZ retention. It is hoped that the authorities will implement positive policies that will support the growth of exporting businesses. The local environment continued to be characterised by further dollarisation of the economy, increasing inflationary pressure and liquidity challenges,” Ncube said.

She added: “In an effort to protect value, more tea sales are being channelled into the local market as the 25% RBZ export proceeds retention is having a significantly negative effect on the tea business’ profitability given the significant disparity between the interbank rate and the fair rate used by our local suppliers.”

Ncube said sales in the quarter under review are minimal due to the cyclical nature of the group’s operations as the majority of harvesting and selling occurs in the second half of the year.”

The group’s revenue increased by 5% to US$1,037,724 during the reviewed period from US$987,135 during the previous comparative period.

The rise was mostly caused by higher volumes of tea sales and sales of macadamia stocks that were carried over from the previous comparative period.

Ncube stated that the amount of tea sold during the review period was 529 tonnes, which was 12% more than the 473 tonnes sold during the previous comparable period.

Macadamia nut sales volumes exceeded production volumes as a result of the sale of stocks kept at the conclusion of the previous year’s period in the current year.

The amount of macadamia nuts sold during the current time, 132 tonnes, was 415% higher than the amount sold during the previous comparative period, 26 tonnes.

According to Ncube, sales of poultry and other products matched the volume of output.

The volume of tea produced, at 716 tonnes, rose by 2% over the previous comparative period’s 700 tons.

The 2023 volume was however 20% behind the 898 tonnes produced in FY2022.

“The 20% decline was due to the deliberate decision made by the Board to focus the business on quality of tea produced as opposed to quantity so as to increase the percentage of tea whose quality meets export parameters which would result in improved selling prices and hence export revenue,” Ncube said.

She said macadamia harvesting only commences towards the end of the second quarter, so it is too early to make a determination on macadamia nut production.

In the period under review, there were some early macadamia nut drop notes and these amounted to 76 tonnes.

On the whole, macadamia nut set in the orchards is encouraging and has held. In the global macadamia nut industry, it is still too early to get an indicative view on what the market prices will be,she said.

Ncube said management is however ensuring the quality will be improved, so as to ensure that the group is well positioned to take advantage of improvements in selling prices for the forthcoming season.

Poultry is produced on an out-grower model.

Volumes are determined by the poultry operator for whom the chickens are being grown.

In the period under review other products only consist of bananas, whereas the prior comparative periods also included potatoes which were not part of the cropping plan in the current period.

Potatoes were not grown in an effort to preserve the dam water for seed crop irrigation given the predictions for an El Nino this season.

Accordingly, there was a volume decline in this category.

Ncube anticipates that the business environment will remain difficult, but the company’s priorities will still be cost-cutting strategies, enhancing product quality, and optimizing production procedures.