SEED manufacturing giant SeedCo has bemoaned the liquidity dry spell which characterized the country's economy post-2023 elections on the back of tough operating conditions.
Presenting the group's performance for the period ended March 31 2024, SeedCo's company secretary, Tineyi Chatiza said the operating environment in the post-election era was characterized by a liquidity crunch.
"The post-election season witnessed a liquidity crunch of both the ZWL and the US$, slowing down activity in the market. Government payments were delayed, resulting in operating difficulties and unavoidable funding gaps, forcing companies to borrow and incur huge finance costs," he said.
He said under the current conditions, Zimbabwe's economy and businesses continue to face several challenges all playing out in the public domain to warrant specific mention.
The global front was also identified in the wake of the geopolitical conflicts in Eastern Europe and the Middle East that are disrupting global supply chains in the process fueling global inflation that further worsens the situation of fragile emerging economies.
"During the reporting period, the Zimbabwean economy remained substantially dollarised, but the ZWL remained the official trading and reference currency. Foreign currency shortages persisted as most economic players demanded settlement in US$," he said.
During the period, overall sales volumes were nearly a third lower than the prior year because of the El Nino-induced drought which negatively impacted maize and soya seed sales volumes attributed to the extensively publicized drought which dampened cropping plans as farmers cautiously tried to curb the risk of crop failure because of moisture stress.
Revenue dropped by 10% as a result of the aforementioned low sales volume performance. Other income increased due to exchange gains on US$-denominated receivables and an increase in non-seed sales. Operating expenses surged due to the current hyperinflationary environment as pricing index to the US$ became the norm.
The company remained reliant on borrowings to fund the cash flow gap created by the delayed settlement of government-related receivables and the inflationary increase in operational costs. The average interest rate year-on-year was 90% p.a. compared to 112% p.a. in the prior year.
Added Chatiza, "Moving forward, the focus will be on increasing the contribution of exports and USD-denominated sales while ensuring competitive pricing and effective cost management. The business will continue to leverage its intellectual property by continuing to offer an optimal mix of seed varieties suitable for both drought and favourable rainfall conditions."