NetOne to embark on 3rd phase of capital expansion project

HARARE


Netone will soon embark on the third phase of its capital expansion project at a cost of nearly half a billion dollars, as it emerged it is finalising the second phase where it is investing $218 million. Information Communication Technology, Postal and Courier Services Minister Supa Mandiwanzira said in a recent interview that NetOne would invest about $500 million in the third phase of the projects targeting latest broadband technology and increased rural coverage. In terms of Telecel Zimbabwe, the Government is rolling out an ambitious investment programme for the company after acquiring a controlling 60 percent stake previously held by Vimpelcom of Netherlands. Phase two, which had an initial completion deadline of September 2016 targeted 2 300 stations while an additional 3 000 would be constructed in 2017 under phase three of a $485 million investment. Phase two of the project saw NetOne having the widest fourth generation (4G) technology, Long Term Evolution, while the company is targeting doubling its subscriber base to 8 million by end of 2017. – Herald

 

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Zimplats reports 16% increase in revenue, gets $6.6 mln in export incentive

Zimplats reports 16% increase in revenue, gets $6.6 mln in export incentive

HARARE,  Platinum producer, Zimplats says increase in metal prices and higher sales volumes spurred the company’s 16% increase in revenue to $237.7 mln in the interim period ended 31 December 2016 compared to $204.4 mln same period in 2015.

According to the company’s half year statement, revenue increases were in tandem with production after  Platinum and 4E metal production for the period increased by  4% to 135 824 ounces and 273 905 ounces from 130 342 ounces and 262 749 ounces respectively due to higher mills throughput.

Chief executive Alex Mhembere said platinum ounces sold increased by 4% to 133 937 ounces compared to 128 431 ounces sold same period last year.  As a result, the gross revenue per platinum ounce for the half year at $1 745 was 10% higher than the $1 591 reported during the same period last year.

Mhembere said cost of sales reduced 4% to $179 mln compared to last year’s $185.7 mln mainly due to the decrease in depreciation arising from the increase in life of Bimha Mine due to extension of boundaries and price reductions achieved on consumables and procurement contracts.

“Resultantly, gross profit margins gained from 9% in the prior period to 25% in the current half year,” he said.

Mhembere said administrative expenses for the half year at S$22 million were 61% higher than the $13.7 million reported during the same period last year mainly driven by a benefited from the reversal of FY2015 bonus and retrenchment costs over provision.

He added that share based payments for the half year were higher than the same period last year in line with the improvement in the price of the underlying shares.

Mhembere said selling and distribution expenses for the period at $3.5 mln were 182% higher than same period last year due to the export of concentrates which attract higher transport charges.

Zimplats royalty and commission expense increased by 16% from $5.1 million reported in the same period last year to $5.9 million in line with the increase in sales revenue.

Meanwhile, Mhembere said during the half year, the company benefited from export incentive of S$6.6 mln and a reversal of impairment of $13 mln on the previously written off Reserve Bank of Zimbabwe (RBZ) debt.

“The Government of Zimbabwe issued to the Group’s main operating subsidiary, Zimbabwe Platinum Mines (Private) Limited, treasury bills with a total nominal value of US$34 million in settlement of the principal amount owed by the RBZ. The treasury bills have been discounted using a rate of 27.5% to arrive at a fair value of US$13 million which has been recognised in the income statement.”

In terms of operations,  tonnes mined during the half year increased 6% to 3.47 million tonnes compared to the same period last year mainly due to the ramping up of production at Mupfuti and Bimha mines.

In addition, South Pit Mine recorded an increase of 18% from 423 000 tonnes reported for the same period last year to 500 000 tonnes.

Mhembere said tonnes milled increased by 6% to 3.21 million tonnes compared to the same period last year in line with improved ore supply.

Four elements (platinum, palladium, rhodium and gold) (4E) mill head grade at 3.239g/t was marginally better than the 3.223g/t achieved for the same period last year reflecting sustained grade control at the Group’s operations.

Mhembere said the re-development of Bimha Mine remains on schedule to reach full production in 2018. As at December 2016, a total $24 mln had been spent on the project.

BAT dividends stuck in RBZ priority queue as profits drop in F16

BAT dividends stuck in RBZ priority queue as profits drop in F16

HARARE – Cigarette manufacturer, the British American Tobacco Zimbabwe (BAT) has now accrued three dividend payments that it is failing to remit to major shareholder as a result of delays in making foreign payments by local banks.

This is despite the fact that dividend payments to external shareholders are on the Reserve Bank of Zimbabwe (RBZ) priority list of foreign payments. Finance Director Lucas Francisco said the company is in queue to remit in excess of $5 million to its major shareholder.

“We have not been able to remit dividends for F15, 1H16 and now full year 2016 whose payment is due in May,” he said adding that the company is currently conversing with the major shareholder and local banks in that regard. For the period, the company proposed a final dividend of 33 cents per share and together with the interim dividend 18 cents brings total dividend for 2016 to 51 cents.

The company according to Francisco is struggling to import raw materials though it has enough cover in terms of raw materials

Meanwhile, Francisco told analysts that revenue for the year was 25% below prior year at $34.06 mln compared to $45.26 mln in 2015 mainly due to a decline in sales volumes. Local sales brands declined 21.5% from same period in 2015 while the Global Drive Brand, Dunhill grew 7.2% on prior year driven by a small but growing consumer base.

He said the company however continues to invest in selling and marketing activities which saw marketing costs increasing 9% in the year to $4.08 mln from $3.73 mln in prior year in order to defend the sales volumes. Administrative expenses declined 3% at $10.375 mln compared to $10.66 mln in 2015 as a result of the annualized benefits of a staff rationalisation that happened in 2015 and reduction on management fees. Gross profit at $24.734 mln was 24% below prior year’s $32.373 mln mainly driven by reduced revenues.  Consequently, profit for the year was lower at $8.47 mln on 2015’s $15.47 mln.

Commenting on the balance sheet, Francisco said inventory reduced by $1.2 mln driven by changes in the leaf purchasing cycle while Trade and Other receivables reduced by $3.6 mln impacted by property sales proceeds which were received in 2016 and improved debtors’ collections. Cash and Cash Equivalents increased $8.5 mln due to challenges in paying suppliers and remittance of dividends as Trade and Other Payables increased by $4.9mn due to shortages of foreign currency.

The FD said net cash generated from operations decreased by $1.9 mln to $13,343 mln mainly driven by low profitability which was offset by a decrease in working capital driven by lower stocks, debtors and increase in payables.

Managing Director Clara Mlambo said while trading conditions remained challenging throughout the year, the company had the agility to survive. She said at half year 2016 profitability was $3.6 mln, but a strong second half performance saw H2 contributing 56% of total revenue contribution resulting in improved profitability. “As a result of increased sales and marketing activities, sales picked in December 2016 as a result we are proud of this commendable profit in this kind of trading environment,” she said.

Mlambo said the company managed to hold on to its market share despite a marginal 1% decline to 79% from 80% in prior year. “We saw a number of new entrants and growth of duty non paid cigarettes mainly on the lower base thus with pressure on consumer disposable incomes, that is where the shift is,” she said.

She said during the year BAT managed to tweak prices in order to maintain volumes and market share particularly on the Madison brand.

Mlambo said trading conditions are expected to remain challenging, particularly in view of the foreign payment challenges and continued strain on disposable income. She said while the company sources the bulk of its raw materials locally, it has a special raw material that is not available in Zimbabwe, thus is in constant engagement with banks in order not to disrupt production

Mlambo said BATZ continues to support government’s position to maintain excise, at the current rate as this allows pricing stability and volume recovery. Currently excise duty is pegged at $20 per 1000 sticks and has not changed over the past two years.

She said going forward the company will continue focusing on its key Strategic Leadership pillars to grow volumes and deliver value in 2017. These are Portfolio – Route to Market – Effective Cost Management and Control Environment.

She said BAT continues to fully comply with the laws of the land including SI 264/2002 and Indigenisation legislation. The company will be submitting to government for review its two year indigenisation compliance certificate which expires at the end of 2017.

“BAT Zimbabwe will also continue to carry out empowerment programmes through the Tobacco Empowerment Trust which is currently supporting 133 students at Chaminuka Centre in Mount

Darwin and the extension of programme up to 2020,” she said.

Our Thoughts on BAT

The economy underperformed to post a GDP growth of 0.8 percent, which was below target in F16 and this is reflected BAT’s 2016 financial performance. Profitability declined but as has come to be expected the company stuck to its dividend policy albeit under a very challenging operating environment.  although the directors managed to declare a dividend. BAT has managed to deliver a remarkable set of results under a challenging operating period

Return on sales declined significantly to 35 percent in 2016, from 46 percent in 2015mas some inefficiencies have started to creep in. The 21.5 percent decline in the volumes of local brands while the company’s global drive brand, Dunhill, grew by 7.2 percent points to how demand is more elastic on the lower end smokers and the total opposite on the higher end. As local consumers’ disposable incomes deplete, they tend to either reduce consumption or switch to cheaper substitutes offered by competitors.

BAT demonstrated its market dominance by looking at its contribution to total excise duty collected in the first 10 months of 2016, where it contributed $15.9 million out of the total excise of $18 million paid by players in the sector. However, using the excise duty statistics to measure market share may not reflect an accurate position due to the presence of duty non-paying cigarettes whose impact the group is still to fully recognise and to tackle head on.

Government’s ability to deal with the growth in duty non-paying cigarettes will therefore be important in helping BAT to grow its sales going forward. But we all know Government can only do little as they also do not have effective monitoring mechanisms. Further, competition is growing in the sector, a new company, Gold Leaf Tobacco is planning to set up a plant in Zimbabwe within two years, having already launched its Rudland and George cigarette brand last year. There are also prospects of Chinese investors establishing a tobacco manufacturing plant in the medium term. This will bring more variety and might eventually eat into BAT’s lion’s share of the market.

Further, while the company says that the package of its cigarettes to make them available in smaller packs will require capital investment, it will continue to lose out consumers who usually buy single sticks, two-packs or five packs. The majority of the company’s cigarettes are bought in 10-packs, which disadvantages someone with less than a dollar in their pocket but wants to buy BAT cigarettes. Most formalised vendors do not sell BAT brands as single sticks from open packs due to legislation which restricts the practise. Section 7 of Statutory Instrument 264 of 2002 on Public Health (Control on Tobacco) Regulations 2002 says that: “No person shall sell or distribute any tobacco or tobacco products to any person except in a container”. The lack of convenience packs, like two-packs, for random smokers with no preference tend to result in the company losing sales to competitors and the sooner the company has a strategy for this the better.

Bindura Nickel production down 16% in Q3, Smelter Restart at 78%

Bindura Nickel production down 16% in Q3, Smelter Restart at 78% 

HARARE – Bindura Nickel Corporation’s (BNC) nickel-in-concentrate production was16% lower in the third quarter to December at 1 571 tonnes compared to 1 866 tonnes in the previous quarter despite significant increases in both mining and milling output.

Parent company ASA Resources in its quarterly operational update said mining constraints for the quarter included low availability of equipment due to commissioning challenges but production is expected to improve in the ensuing quarter.

“Production is expected to improve in the fourth quarter going forward as equipment availability is expected to improve. The prioritising of ramp mining will increase ore sources to improve production,” says group chief executive officer Yat Hoi Ning.

Ning said the contractor has augmented both the pieces of equipment and its maintenance team to ensure sustained performance moving forward into the fourth quarter and availability of additional sources of massives will boost production.

During the quarter, mined tonnage was 19% higher at 123,532t compared to Q2’s 104,018t as a result of hoisting which improved in the quarter mainly due to increased scooping and fixed plant stability.

Head grade was 26% lower at 1.495% compared to 2.016% in the second quarter while recovery was 4% lower at 85.6% on prior quarter’s 89.1%.

Nickel sales volume for the period was 18% lower at 1,610t compared to 1,971t in Q2 as average net realized nickel-in-concentrate price was at $7,004/t up from $6,668/t in Q2.

According to Ning, nickel prices has been fluctuating between $8,800/t and $10,800/t for many months, mainly due to the news coming from the Philippines and Indonesia to eradicate more environmentally controversial mining practices.

“It would appear that a consensus is emerging and the Philippines government will implement its original plan to curtail the shipment of unprocessed ore this should stabilise the market,” he said.

All-in sustaining C3 costs of nickel-in-concentrate increased 27% to $6,554/t from Q2’s $5,151/t while C1 cash costs for nickel-in-concentrate increased by 29% to $6,159/t on prior quarter at $4,782/t.

Meanwhile, Ning said the Smelter Restart Project has progressed 78% and a 12-month moratorium was negotiated on the first repayment of the principal of BNC smelter bond. The expected completion date of the project is during the 2017/18 financial year.

“In the meantime, BNC continues to explore conversations with third party nickel producers in the region. As the price of nickel recovers more concentrate will come to the market and an off-take deal would be positive for the economics of our smelter,” he said.

He added that there-deepening project to extend life of mine by 5 years and allow drilling to evaluate resources below 45/0 level has progressed well.

Gold production at Freda Rebecca decreased 3% in Q3 FY2017 to 15,365oz compared to 15,904oz in the previous quarter as a result of a 22% decrease in feed grade and 2% decrease gold recovery rate.

Tonnes mined for the quarter decreased 14% to 311,349t from 363,082t in Q2 and the decrease was part of the company’s strategy to align throughput to processing plant capacity.

However, tonnes milled increased 21% to 319,026t in Q3 FY2017 compared to Q2’s 262,633t largely on the backdrop of the ramping–up of new plant throughput.

The feed grade for Q3 FY2017 decreased by 22% to 1.78g/t from 2.28g/t in Q2 attributable to high internal dilution in one of the main production stopes.

As a result, gold recovery for Q3 FY2017 decreased to 83% from 84% in Q2 due to the decline in feed grade and contamination by fine carbon due to worn out carbon escape screen.

During the quarter, C1 cash costs increased by a marginal 1% to $956/oz from $944/oz in Q2 as a result of a 3% decrease in gold production.

All-in sustaining costs realised a net decrease of 5% from $1,115/oz in Q1 FY2017 to $1,107/oz, a result of other income of $1.1 million received from the Reserve Bank of Zimbabwe gold producers’ incentive scheme.
During the quarter, Freda Rebecca earned $1.3m in export incentive cash credits for the period to December 2016 under the RBZ export incentive scheme.

Ning added that  Freda also won the inaugural ‘Best Large Scale Top Producer’ award, which attracts an additional 2.5% export incentive bonus credits for the period January to December 2017.

“This will give a total export incentive in the next 12 months of 5%, which translates to more than $4.5 million in cash rebates,” he said.

In addition to that,  Freda made an insurance claim following a serious incident in 2016 amounting to $3.6 million. Equipment claims do not take much time, however, claims for consequential loss for business interruption are often protracted and the amount of this claim was increased and Freda awaits a final settlement proposal.

Ning also said the Group will continue to integrate functions between corporate and subsidiaries, streamlining procurement and merging accounting and administrative roles, adding that while the Group’s corporate overhead continues to be at an all-time historical low, costs at the subsidiary level are still higher than they should be.

Of the ZSE and poor succession planning in corporates

Of the ZSE and poor succession planning in corporates

HARARE – There is no doubt that the current economic environment is challenging. However what separates good performing firms from those that are sinking is the way management responds to the environment. It therefore shows that the importance of leadership cannot be over emphasized. The management at the helm of a company can create or destroy shareholder value.

Over the week one of the country’s largest retailers, OK Zimbabwe, announced that Willard Zireva will be leaving the company on the 31st of March 2017 after serving the company for 33 years, 15 years of which he was the company’s CEO. He took up this assignment in 2001 when the retailer was curved out from Delta. Prior to that he was the company’s managing Director, a role he took up in 1990.

Apart from stabilizing the company following unbundling from Delta, Zireva also helped rebuild the company after the 2007 price blitz that left shops empty. The company brought on board Investec as an equity partner after successfully raising $20 million through issue of shares and convertible debentures. This capital raise enabled the group to improve stocking levels, expand product offering to include white electrical goods sourced from Asia as well as entering the mobile money space through OK Money Wave. The Zireva led team also refurbished the shops improving ambiance thereby increasing customer traffic

Management also created value for investors with Investec being the main benefactor. The company’s share commenced trading at  1 cent in the dollarized environment and the rights offer was priced at US 6 cents. Post the capital raise, the stock peaked at 30 cents on 30 July 2013. Investec had also converted their debentures to equity at 6,3 cents.

While acknowledging the positive work by the outgoing CEO, his departure again ignited talk over succession planning within listed companies. A section in the investment community has been skeptical about the trio of Willard Zireva, Alex Siyavora and Albert Katsande for a while now. The view was that they have stayed at the helm of the organization for too long, which in a way was dragging down company performance. One analyst even asked at a financial results presentation if the company had a succession plan in place. It therefore follows that the departure of Willard Zireva and replacement by Alex Siyavora will not change this view. The latter was the company’s Finance Director for the past 16 years and hence is likely to have the same thinking as his predecessor.  But is it a proven fact that the trio was weighing negatively on the firm? We are of the view that this was a just a perception which cannot be supported with statistics. The trio managed to recapitalize and rebuild the company quicker than Spar and TM, now Pick ‘n’ Pay.

However now, Pick ‘n’ Pay is now sprucing up its stores, a development that has seen OK losing some ground. It is in this regard, that an outsider would have been the ideal candidate. Fresh thinking would enable the company to view things from a different angle as the retail landscape continues to evolve. The company should also start grooming someone much younger who will have a better understanding of the evolving consumer tastes.

On the other hand, replacing management from within gives company stability and also helps sustain the growth momentum. There are organizations that have successfully replaced leadership internally. This has the main advantage of sustaining momentum and stability on part of the company. CBZH has managed to replace management internally from Gideon Gono, Nyasha Makuvise, John Mangudya to the current incumbent Never Nyemudzo.

One thing that is beyond doubt is the fact that when management stays at one firm for too long two things start to happen. Firstly, corporate governance deficiency issues surface and that company performance starts to deteriorate. CFI during the era of Steve Kuipa is one example that readily comes to mind. When managers entrench themselves in a company they appropriate shareholder value to themselves – hence the need for renewal. However on the flipside, if well incentivized probably through share options then their interests become aligned with those of shareholders thereby acting in the interest of shareholders.  In this case, there is need to put in place an effective board of directors that will keep management powers under check. But again, as time lapses, cronies of management find their way to the board thereby reducing effectiveness.

Succession issues are usually sacred on the ZSE more-so in owner managed institutions together with government-linked organizations. On the latter, the poor monitoring of the investment by the shareholder tends to give the CEO too much power. Former ZHL CEO, Albert Nduna only left the company in 2015 after the Rudlands had acquired a majority shareholding following a rights issue that NSSA did not follow.

He had led the company since 1983 when it was created by an act of parliament. ZHL had a complete insurance business comprising short term, life, reinsurance and property. Its performance did not match FML that also had similar business units.  ZHL also had an asset management

In owner managed institutions, management seldom changes as long as the founder or owner still feels capable. This is in tandem globally with notable examples being of Warren Buffett who has led Berkshire Hathaway for the past 51 years, while Bill Gates was the CEO of Microsoft for 25 years before assuming the role of Chairman and Chief software Architect.  If the owners are to depart, they handpick management whom they believe can drive their agenda. Appointment of Antonio Fourie at Innscor is one such example. Besides having no knowledge of the Zimbabwe environment, he was coming from a company that had just gone into receivership in South Africa. When Tom Brown left under unclear circumstances, Julian Schonken appeared to be the ideal candidate for the job. Hiring and firing at Meikles Africa limited, though it is a listed entity, on the other hand appears to be the responsibility of the executive chairman who has a controlling stake in the company.

Companies with foreign parents appear to have clear succession plans. When Joe Mutizwa left Delta Corporation, he was replaced by Pearson Gowero. Prior to his appointment, the latter had been seconded to Zambian breweries for five years before rejoining Delta Corporation as the Chief Operations Officer during the handover period. Similarly Matts Valela worked as the treasurer before appointment as Finance Director.

We are of the view that management should be given set terms and specific mandates on appointment. The board should also set performance targets that will then be used to review their performance. Management powers should also be kept under check all the times. This can only be achieved if the board is broad enough to represent the interest of all stockholders.
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Econet says EGM is going ahead, ignore ‘regulatory directive’ from ZSE

Econet says EGM is going ahead, ignore ‘regulatory directive’ from ZSE

HARARE – Econet Wireless Zimbabwe has set itself up for a fight with the Zimbabwe Stock Exchange after it said its extra-ordinary general meeting set for tomorrow will proceed as planned.

In a statement, Econet said shareholders should disregard any notices that are not coming from the company. This comes at the ZSE chairman Caroline Sandura had advised Econet to defer its EGM until it had addressed certain technical issues relating to the rights issue had been clarified to the satisfaction of the ZSE board.

The ZSE had raised eight issues that needed clarification.

However, in a press release sent at 0118hrs, Econet addressed only one concern that had been raised by the market and said in the circumstances, the EGM shall proceed as published in the Circular

Econet said it shall open a Rights Offer account with a local receiving, into which resident Zimbabweans shall deposit the proceeds of the rights offer using cash, bond notes, or electronic money in accordance with the published timetable.

The proceeds, shall be deposited into a Steward Bank account. In exchange for the amount paid by local shareholders, the underwrite shall pay the equivalent of the amount contributed to the international receiving bank (Afreximbank).

“Those resident shareholders who follow their rights by paying into the designated local account shall be deemed as having discharged their obligations as set out in the rights offer circular.”

Econet added that in the event any resident shareholder sells its rights offer shares to non-residents, the foreign currency generated shall be remitted to the Reserve Bank of Zimbabwe and allocated towards the remittance of the money due to the underwriter.

The RBZ shall agree with the company on a schedule for the remittance of the money held on behalf of the underwrite over the period during which the foreign debt was repayable and in equal instalments.

This was however one of the issues that had been raised and could have come out of the meeting held on Monday. FinX understands that the ZSE met yesterday with the Securities and Exchange Commission of Zimbabwe, where it raised several additional issues. Some of the concerns include the removal of proxy voting restrictions after Econet has said that proxy forms of institutional investors must be accompanies by a resolution signed by the investor’s board.  It was felt that the requirement is impractical and costly in the time which had been provided.

ZSE also wants the debentures to trade freely either over-the-counter or on a licenced exchange and not subject to approval by a board of Trustees appointed by Econet. The board also want shareholders to be furnished with the terms of the underwriting agreement in order to determine whether all options to extinguish the debt are explored.

Econet was also called on to give justification and benefit to shareholders why the entire amount is being raised from shareholders when only $37 million of that amount is due in 2017.  Concerns were also raised on the transferability of shares across Ordinary and Class A shares and the need to give a breakdown on how many Class A shares and ordinary shares, the top shareholders hold.

Ideally, in a normal and efficient market, Econet should not disregard a regulatory directive but should ensure it satisfies all the issues that have been raised. Analysts say there is nothing urgent about the rights issue and any mature board would just defer the EGM. Already their actions have already caused a huge loss in value to minorities basing on the loss on the share price from 30c when the circular was published.

On its part, the ZSE has taken long to come up with a decision on the issue even when it had long emerged that there were anomalies in how the approval process of the rights issue was handled. This has exposed the ZSE as a disjointed organisation due to conflicting statements from the secretariat and the listings committee.

Zimplats concludes 10% equity sale under vendor financed loan structure

Zimplats concludes 10% equity sale under vendor financed loan structure

HARARE – Zimplats Holdings says its operating subsidiary, the Zimbabwe Platinum Mines (Private) Limited has concluded the issuance of a 10% equity stake to its Employee Share Ownership Trust.

In a statement Chief Executive Officer Alex Mhembere said the Trust acquired the 10% equity stake for $95 million which was vendor financed through a loan advanced by the company. The loan will be repaid from dividends declared by the company.

The ESOT’s beneficiaries are the permanent employees, excluding the executive directors and company secretary of the operating subsidiary.

“Zimplats wishes to announce that its operating subsidiary, Zimbabwe Platinum Mines (Private) Limited, has concluded a transaction in terms of which it has issued a 10% equity stake to the Zimplats Employee Share Ownership Trust.

“The subscription price payable by the ESOT for the 10% equity stake is $95 million which has been vendor financed through a loan advanced by the operating subsidiary to the ESOT. The ESOT will repay the loan from dividends declared by the operating subsidiary,” he said.

Mhembere said the ESOT will be beneficial to Zimplats in that it will secure and retain key skills and experience among the operating subsidiary’s employees to ensure continued long-term operational and production success.

Only yesterday, the platinum miner reported increased revenue for the quarter ended December 2016 at $139 million on the back of strong metal sales. Tonnes mined increased marginally from the previous quarter to 1, 735 million owing to sustained good operational performances across all the mines. But, tonnes milled decreased by 6% to 1, 6 million.

Local spending in Zimbabwe excluding payments to the government and related institutions for the quarter increased to $61 million from $27 million recorded in the previous.

Zim closes December stuck in negative inflation at -0.93%

Zim  closes December stuck in negative inflation at -0.93%


Zimstat / FinX

HARARE – Zimbabwe’s annual inflation rate for the month of December 2016, as measured by the all items consumer price index gained by 0.16 percent to -0.93 percent, from November’s rate of -1.09 percent.

“This means that prices as measured by the all items CPI decreased by an average of -0.93 percentage points between December 2015 and December 2016” said Zimstats today.

The marginal gain was on the back of price increases in selected food items such as bread and cereals, oils and fats, fish and sea food. Injection of additional liquidity through the introduction of bond notes also contributed to the increase which coincided with a traditional spending month. However declines in the prices of gas, liquid fuels, housing rentals, fruit, vegetables, milk, cheese and eggs ensured the country’s inflation remained in the negative.

Zimbabwe remains in deflation mode since 2014. According to the 2017 National Budget, the decline in domestic prices during 2016 was driven by a combination of continued weakening in domestic demand, depreciation of the South African rand against the US dollar, and subdued international oil prices.

In its October 2016 Global Economic Outlook, the IMF projected that Zimbabwe’s average inflation is expected to close the year 2017 at 4.6 percent, while the Zimbabwean government projects an average inflation rate of 1.1 percent.

The month-on-month inflation rate in December 2016 also gained by 0.04 percent to 0.06 percent, compared to November’s rate of 0.02 percent, meaning that prices as measured by the all items CPI increased at an average rate of 0.06 percent from November 2016 to December 2016.

The year on year food and non-alcoholic beverages inflation prone to transitory shocks stood at -0.95 percent, with gains noted on bread and cereals, fish and sea food, oils and fats, sugar and other products. Year on year non-food inflation stood at -0.92 percent.

Zimstats said that month-on-month food and non-alcoholic beverages inflation rate declined to 0.38 percent in December 2016, shedding 0.16 percentage points on the November 2016 rate of 0.54 percent. The month-on-month non-food inflation rate however gained by 0.13 percent to -0.09, compared to November 2016’s rate of -0.22 percent.

IMF bullish on global outlook

IMF bullish on global outlook

World output will relatively increase by 3.4 percent this year, compared to last year’slower growth of 3.1 percent, says the IMF World Economic Outlook update report released today.

“The baseline forecast for the global economy points to a pickup in growth over the
rest of the forecast horizon from its subdued pace this year, in the context of positive financial market sentiment, especially in advanced economies”, says the report. It however noted that the potential for disappointments is high, as underscored by repeated growth markdowns in recent years.

“After a lacklustre outturn in 2016, economic activity is projected to pick up pace in 2017 and 2018, especially in emerging market and developing economies. However, there is a wide dispersion of possible outcomes around the projections, given uncertainty surrounding the policy stance of the incoming U.S. administration and its global ramifications”, the report said. The April update of the report is expected to be more certain as more clarity emerges on U.S. policies and their implications for the global economy.

The report however said that the U.S. dollar appreciated in real effective terms by over 6 percent since August last year. A report published by Sagaci Research last year established that the US dollar is overvalued by 12 percent in Zimbabwe. This continues to affect the competitiveness of the country’s exports.

China is projected to post lower growth of 6.5 percent this year, compared to last year’s growth of 6.7 percent, as the Asian giant continues on slowing growth. This is likely to affect the demand for commodities and the prices as well. South Africa’s economy is also expected to post a modest growth of 0.8 percent while Sub-Saharan Africa will grow by 2.8 percent.


IMF, FinX

The IMF however sees a number of risks with the potential to constrain growth this year’s anticipated growth. “Increased restrictions on global trade and migration would hurt productivity and incomes, and take an immediate toll on market sentiment”, the report said.

The Fund said that, in many low-income economies, low commodity prices and expansionary policies have eroded fiscal buffers and led in some cases to a precarious economic situation, heightening their vulnerability to further external shocks.

“Emerging market and developing economies face starkly diverse cyclical positions and structural challenges. In general, enhancing financial resilience can reduce the vulnerability to a tightening of global financial conditions, sharp currency movements, and the risk of capital flow reversals”

“Economies with large and rising nonfinancial debt, unhedged foreign liabilities, or heavy reliance on short-term borrowing to fund longer-term investments must adopt stronger risk management practices and contain balance sheet mismatches”, said the report.

In low-income countries that have seen their fiscal buffers decrease over the last few years, the report highlighted that the priority is to restore those buffers while continuing to spend efficiently on critical capital needs and social outlays, strengthen debt management, improve domestic revenue mobilization, and implement structural reforms that pave the way for economic diversification and higher productivity.

“For the countries hardest hit by the decline in commodity prices, the recent market firming provides some relief, but the adjustment to re-establish macroeconomic stability is urgent. This implies allowing the exchange rate to adjust in countries not relying on an exchange rate peg, tightening monetary policy where needed to tackle increases in inflation, and ensuring that needed fiscal consolidation is as growth-friendly as possible”, said the report.

The report prescribed that over the longer term, countries highly dependent on one or a few commodity products should work to diversify their export bases.

Delta’s Q3 revenue down 10% as volumes remain subdued

Delta’s Q3 revenue down 10% as volumes remain subdued

HARARE – The rate of decline for Delta Corporation’s key Lager volumes slowed in the third quarter to December 31 but revenue fell 10% for the quarter and 9% for the nine months.

In a trading update, Delta said it had continued to experience subdued volume and revenue outturn in the quarter in spite of it being generally peak season.

“The group reports a particularly subdued volume and revenue outturn for the quarter. This is on account of depressed aggregate demand and intermittent product shortages occasioned by water supply disruptions.”

Revenue is down 10% and 9% for the quarter and the nine months’ period respectively.

Delta said Lager beer volume is 1% below prior year for the quarter and down 8% for the nine months. This reflects a slowed decline against 14% in the comparable year ago quarter. Sparkling beverages volume is down 11% for the quarter and 6% below prior year for the nine months.

“This category was adversely impacted by the increased imports from neighbouring countries which are covered by preferential trade protocols and are fuelled by the currency arbitrage opportunities”

Sorghum beer volume decreased by 4% for the quarter but up 2% for the nine months. The group said the decline in the quarter reflects the disruptions to production due to water cuts affecting the Chibuku Super plants at Chitungwiza and Fairbridge (Bulawayo). The new Chibuku Super plant at Kwekwe was commissioned in December while Masvingo is expected to start production in February 2017.

Delta is currently trading under caution with respect to the notice received from The Coca-Cola Company (TCCC) advising of an intention to terminate the Bottler’s Agreements with the group entities following the merger of AB Inbev and SabMiller and the joint Statement by TCCC and AB InBev indicating an agreement in principle that TCCC will purchase AB InBev’s interests in bottling operations in various markets.

Delta said the joint statement pronounced their strategic intent with no specific position having been reached with respect to Zimbabwe. “The board and the parties remain engaged on the matter. Shareholders will be advised timeously of any significant developments.”