Harare – British American Tobacco (BAT) Zimbabwe is making strategic changes to adapt to challenging economic conditions, including shrinking sales and ongoing macroeconomic volatility.
For the nine-month period ending September, BAT Zimbabwe reported an 8% decline in sales volumes year-on-year, largely driven by persistent inflation and currency instability that have severely impacted consumer spending power. On Friday, the company cited “inflation and currency challenges” as key factors, with revenues for the period dropping by 37% due to reduced consumer spending and diminished disposable incomes.
“Zimbabwe’s operating environment remains complex and uncertain, with macroeconomic turbulence, monetary instability, and significant exchange rate distortions impacting business activity,” said Lovemore Manatsa, chairman of BAT Zimbabwe.
Despite these conditions, BAT Zimbabwe remains optimistic, actively reviewing its business model to secure long-term viability. During the review period, the company reduced operating costs by 33% year-on-year, implementing efficiency measures to manage rising costs.
To adapt to evolving market demands, BAT Zimbabwe also restructured its distribution approach, developing a “robust, future-fit model” to meet shifting consumer preferences. In response to Zimbabwe’s economic difficulties, the company introduced dual currency billing, allowing customers greater flexibility in their transactions, which has helped maintain business continuity.
Nonetheless, BAT Zimbabwe’s performance continued to be impacted by a “decline in sales volumes and foreign exchange losses related to monetary assets and liabilities,” resulting in a pre-tax loss of over $5 million.
In the broader tobacco sector, a recent drought reduced Zimbabwe’s tobacco production by 22%, from 296 million kilograms to 231 million kilograms for the 2023/2024 season. However, expectations for recovery are high, with the Tobacco Industry Marketing Board (TIMB) aiming for a 300 million kilogram output in the current season. This optimism is supported by an increase in seed sales; by September 11, approximately 1.25 million grams of tobacco seed had been sold, covering 208,450 hectares.
Assuming an average yield of 1,500 kg per hectare, analysts project an estimated harvest of 312 million kilograms, potentially boosting local cigarette production and strengthening Zimbabwe’s export earnings.
This forecasted rebound in the tobacco sector could provide a needed uplift for cigarette manufacturers like BAT Zimbabwe, offering a promising outlook amidst ongoing economic challenges.
Business Report