Consumer staples concern, MedTech Holdings, says foreign companies have cut supplies of raw materials as the Zimbabwe Stock Exchange listed firm struggles to service legacy debts amounting to R27.9m.
The Reserve Bank of Zimbabwe (RBZ) is set to resume legacy debts over the period 2016 to 2019 which are cash flows generated in Zimbabwe by foreign entities that could not be repatriated to foreign suppliers due to foreign exchange shortages.
In a statement accompanying the financial results for the half year ended June 30, MedTech board chairperson Rose Mazula said RBZ had R25.8m of the legacy debt while appeals have been lodged R2.1m.
“Delays in the payment of legacy debts have resulted in cuts in supply and stock outs which is one of the contributing factors to the decreased sales volumes,” Mazula said.
She said the foreign creditors have been restated using the interbank rate of ZWL$57.35 at the end of the reporting period.
“The restatement of the foreign creditors leaves the group in a precarious position,” Mazula said.
Group revenues decreased by 22% to ZWL$75,156,388 in the half year ended June 30 from ZWL$ on $96,992,719 in the same period last year in 2019 to in 2020.
Revenues were weighed down by stock outs as foreign creditors wanted overdue balances to be cleared, a stance by management to restrict sales in the FMCG segment due to the continual devaluation of the debtors book with the aim of preserving shareholder value, a decrease in consumer spending as income levels have not kept up with rising general price levels and this has caused aggregate demand to remain subdued.
The company said there were delays in restocking directly resulting from Covid-19 lock downs Mazula said the deterioration in operating performance saw the company posting an operating loss of ZWL$7,136,029 in 2020 from an operating profit of ZWL$19,020,929 in 2019.
The legacy debts burden by MedTech has haunted a number of local firms which are finding it difficult to borrow from offshore creditors and financiers.
Most lenders across the world have now become risk-averse when dealing with Zimbabwe companies.
In February, RBZ governor John Mangudya said the bank’s Exchange Control had processed and validated blocked funds in an amount of US$1.2bn from 730 applications out of 1080 requests.
Of those processed, 299 transactions with a value of US$861m were rejected for various reasons ranging from double dipping to lack of supporting documentation, he said.
Mangudya said the balance of 350 transactions with a value of US$457m was supposed to have been processed by February 29.
Mangudya said the validated blocked funds exclude the legacy foreign exchange obligations of US$361 million under the RBZ Debt Assumption Act.