Paper and packaging group, Nampak Zimbabwe has slammed a recent ban on the multi-currency system by government.
Government, through Statutory Instrument 142/2019, recently outlawed the use of multi-currencies in domestic transactions and reintroduced the Zimbabwe dollar as sole tender in the country.
In a recent trading update, the organisation’s company secretary, Keith Nicholson said that the fiscal and monetary policy measures implemented in the first half of 2019 by authorities have negatively affected the operating environment in the country.
“The exchange rate has depreciated by over 350 percent since the introduction of the interbank rate of RTGS$ 2,5: 1 USD in February 2019 and annualised inflation is now estimated to be in excess of 175 percent,” he said.
Nicholson said the continuing scarcity in foreign currency, coupled with rising inflation, presented a major challenge to the group at a time power shortages are having a severe impact on production.
“The introduction of SI 142 compounded the difficulties of sourcing foreign currency which is vital to import various raw materials, particularly paper for conversion to tobacco boxes.
“Sales for the Group finished the three month period above prior year, mainly due to inflationary pressures which boosted prices, especially by the conversion of export earnings at new inter-bank rates,” Nicholson said.
He said that volumes for the first half were down across all sectors of the business except for tobacco packaging which was bolstered during the year by export sales to Malawi.
The profits recorded for the period were attributed to inflationary pressures while demand for the company’s products remained strong but continued to be hampered by lack of raw materials.
During the period under review, networking capital decreased due to inflationary growth in inventories, trade and other receivables, and a hedging of the foreign creditors as a consequence of an arrangement reached with the Reserve Bank of Zimbabwe in terms of which amounts due to the majority shareholder’s procurement company have been placed in the Non-Transitory Foreign Currency Account.
Consequently, the group’s subsidiary, CarnaudMetalbox volumes declined by 18% compared to the prior year as raw material supply was constrained by the illiquidity in the market while at MegaPak volumes declined by 26% due to dampened demand from the beverage and cordials sectors and raw materials supply challenges.
“The economy is facing strong headwinds. It is unlikely that any meaningful relief will be forthcoming to the manufacturing sector until the critical constraints of foreign exchange and power supply are eased,” added Nicholson.