One of Zimbabwe’s largest listed companies, Econet Wireless Zimbabwe’s business viability is under threat because of the free-falling local currency and effects of the Covid-19 pandemic, it has emerged.
Econet last week pleaded with its suppliers to reduce their costs by 20% citing the unfavourable operating environment that had been worsened by the outbreak of Covid-19.
A senior official from the telecoms giant said the plea to suppliers was motivated by a realisation that the economic situation had become a threat to the business.
“The whole slowdown that has been caused by the Covid-19 pandemic has resulted in a business slow down,” the official said.
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“During the lockdown, the cities were quiet and the usage of phones went down.
“Most of the phone usage business we get is from people doing business and these were mostly on WhatsApp.
“We can see that as long as most sectors of the economy are not firing, it also affects people’s usage of phones, so never mind about us talking about how we need an-economic tariff and so on.
“It will get to a point where people are not able to call because they have been laid off and that will affect us.
“In that regard, if the economy’s size, for example, was say US$10 billion and reduces to US$4 billion, it also means that our potential income will come down by that factor”.
A memo to Econet suppliers that was leaked on social media last week showed that the company was pleading with its suppliers to reduce their charges by at least 20% starting from May 1.
“As Econet we operate in a regulated industry where our tariffs are significantly trailing the upward movement in our operational costs, threatening the viability of our business,” wrote Econet chief supply chain officer, Sharon Marufu in the memo.
“We, therefore, need to take drastic measures now to safeguard the business and ensure we remain viable so that we are able to continue offering our services to our customers and to retain our suppliers.”
It is understood that the suppliers targeted in the memo provide fuel, trucks, shop space for retail outlets, and land for base stations.
The official, who spoke to Standardbusiness, said if the suppliers refused to reduce their prices, Econet might choose not to renew their contracts once they expired.
Econet is pushing for mobile operators to be allowed to charge tariffs pegged to the United States dollar.
“Our biggest concern is that some of the guys do not even get it in this government,” said the official.
“They do not understand the extent of how much trouble they are in.
“Since last year, although the local currency has been devalued by up to 25 times our tariffs have not increased by the same rate.
“Even inflation has gone up and they are currently talking about nearly 680%, but our tariffs are regulated and have not tracked the exchange rate while costs from the suppliers keep going up.”
Efforts to get a comment from Econet spokesman Fungai Mandiveyi were fruitless. – The Standard