BUSINESS REPORTER
Zimbabwe’s leading plastic pipe manufacturer, Proplastics Limited, says delays by the central bank to release funds allotted at the auction will worsen the group’s foreign currency exposure.
The group chairman Gregory Sebborn said the company was exposed to about US$1.7m, owed to foreign creditors adding that further delays in settling allocated amounts “will result in the worsening of the group’s foreign currency exposure”.
“The backlog at the end of the period stretched to almost two months and arrears to foreign creditors stood at US$1.7 m. The position exposes the group to huge exchange rate risks as well as negative impact on supplier relation,” Sebborn said.
He said authorities should address the crisis with urgency as the delays “are now a huge performance hindrance for industries and the economy at large” as the gap between the official exchange rate and the alternative market continues widening.
Recently, the Reserve Bank of Zimbabwe governor, John Mangudya said the bulk of funds at the forex auction system comes from export earnings through voluntary liquidations and the surrender requirements on exports and domestic foreign currency transactions.
He said more than 70% of forex has come from surrender requirements on exports and domestic foreign transactions.
Mangudya said the upward review in the surrender ratio for exporters to 40% from 30% and the removal of the 60- day liquidation requirement on unutilised export earnings in January this year was meant to increase the supply of foreign currency onto the auction from the exporters, and at the same time providing flexibility in the usage of foreign currency earnings.
In its financial results for the six months to June 30, 2021, Proplastics’ turnover grew 120% to ZWL$889m from ZWL$404m in the prior period on the back of a 71% increase in sales volumes.
Exports grew 240% and contributed 11% of total turnover for the period under review. A significant portion of the group’s revenue was recorded at the interbank rate having been received in United States dollar.
Proplastics swung back into the black, reporting a profit amounting to ZWL$57m from a ZWL$58m loss recorded in the prior comparative period.
Total assets for the group stood at ZWL$2.110bn from ZWL$2.088bn.
Sebborn said the company’s new PVC 500mm extrusion production line is expected at the end of the year, for commissioning in the first quarter of 2022.
“This new line will help address the demand for large bore PVC diameter pipes, which continues to grow and will increase production capacity,” he said.
