Zimbabwe firms shore up inventories, build cash reserves Covid-19 fourth wave swirls

Zimbabwean companies are shoring up inventories and building up cash reserves in preparation of business disruption from a possible fourth wave of Covid-19, and against any further deterioration in foreign currency accessibility on the local market.

A fourth wave of Covid-19 has already been projected for South Africa and has also forced some European countries into fresh lockdown restrictions. Zimbabwean companies, have also started to prepare for a possible upsurge in Coronavirus infections and deaths.

At the same time, they continue to face foreign currency access challenges, and this possible double impact could worsen operations and revenue generation, hence the provisioning for inventories and cash balances.

Tjeludo Ndlovu, the group chief executive officer for Edgars Zimbabwe – which opened two new Jet stores in Zim during the quarter to the beginning of October – said “uncertainty caused by the pandemic is likely to continue due to emerging new variants of the virus and vaccine efficacy” challenges.

“We are taking steps to exercise rigorous management of inventory levels, closely monitor all aspects of the trade receivables portfolio and optimising our funding mix to meet the needs of the business,” he said.

Movement restrictions arising out of the third wave of Covid-19 infections, “curtailed foot traffic into stores during this trading quarter” for Edgars Zimbabwe. This resulted in “lost sales” as well as production time in addition to exerting pressure on settling “fixed operating costs”.

To counter this, Edgars Zimbabwe said it was, “alive to opportunities presented to expand both our brick and mortar and online footprint and develop a resilient business model that will withstand the impact of future shocks”, and disruptions such as the Covid-19 pandemic.

Other Zimbabwean companies such as Cafca, a division of South African group,CBi Electric, are ramping up volumes as a way of building up inventories to cater for possible business disruptions from foreign currency accessibility challenges.

The company also says that “cash is being set aside to cater for the (foreign exchange) auction system requirement and the impact that future hyperinflation may have on having to finance working capital” requirements.

Because of this, the Zimbabwe Stock Exchange listed Cafca, has deemed it “prudent” to recommend against declaring a dividend while efforts were under way to boost volumes.

“We have budgeted for a modest increase in volumes in 2021/2022 against the background of uncertainty in the foreign currency availability and pricing and the impact of increased competition in our regional markets,” the company said in a commentary accompanying its financial results for the year to end September.

Export volumes for the period were 16 percent stronger while the relaxation of Covid-19 restrictions helped to boost local sales volumes by about 57 percent.