BUSINESS REPORTER
Amalgamated Regional Trading (ART), a publicly traded conglomerate, has decried the central bank’s requirement for 75% currency retention on exports, claiming it is adversely affecting the company’s ability to grow because margins are severely squeezed,Business Times can report.
It comes at a time when ART and other industry players are pushing to access at least 90% of their export earnings while surrendering 10% to the central bank, in exchange for local currency at the prevailing exchange rate.
In a trading update for the quarter to June 30 2023, company secretary Abisai Chingwecha said an increase in export earnings will count for nothing as the company will suffer from the current forex retention policy.
“Export volumes recovered, registering a 16% increase from the prior year in line with improved product availability. The group remains profitable however margins have come under pressure due to increased input costs and the impact of the punitive foreign currency retention policy on exports,” Chingwecha said.
He said volumes increased during the quarter by 28% to 12 430 000 pens as a result of increased production output brought on by retooling and improved power supply.
Exports to Zambia were also resumed and stationery trading was buoyed by the introduction of the Eversharp Mate and Eversharp Pen Pal brands in response to consumer demand.
Chingwecha said revenue for the period to June 2023 grew by 54% to ZWL$75,2bn in inflation adjusted terms compared to the prior year.
Even though the company’s top line increased, production actually decreased.
“Overall volumes declined by 2% during the quarter. Overall volumes for batteries declined by 9% from the prior year volume of 90,445 units due to the power induced downtime at the beginning of the quarter,” he said.
Efficiency gains in production after the installation of new grid casters led to an increase in output in June and July, which aided the “Powered by Exide” winter campaign.
ART expects to increase automotive battery production capacity as the project is nearing completion and will allow for improved stockholding across all product lines.
The division commissioned an additional 200KVA generator and is working closely with the power utility ZESA to upgrade power at the Workington factory.
As trading was impacted by exchange rate volatility and pricing distortions, particularly in the formal retail sector, paper volumes decreased by 5% from the prior year’s volume of 2,290 tonnes, but the demand for bulk tissue on the export market remained stable.
However, imports, which are more pervasive in the black market, are a serious source of competition for the company.
According to Chingwecha, the company’s ability to access foreign currency will give it a competitive edge.
The new tissue mill will be supported by the streamlining and restructuring of the paper divisions in order to drive performance along the value chain.
Before the end of the fiscal year, a new converting line will be put into operation, resulting in cost savings, improved quality, and increased tissue output.
Timber volumes at 2,350 cubic meters increased by 7% from the prior year.
The order book for both structural timber and pallets remains firm as customers in the sector preferred to trade in foreign currency.
In Zambia inflation decreased marginally whilst the Kwacha remained stable following the successful restructuring of the country’s debt.
In its latest call to the government, the Zimbabwe National Chamber of Commerce (ZNCC), said the industry had been destroyed by the current retention level of 75%.
“We also believe that a competitive and market-driven exchange rate will also avoid losses for exporters, and in the absence of such a competitive foreign exchange market, then surrender requirements should be substantially reduced to levels of between 10 and 15%.
“Exposing exporters to surrender requirements at uncompetitive exchange rates is akin to killing the goose laying the golden eggs, especially noting how domestic foreign currency sales have no surrender requirements,” ZNCC said.
