ZSE listed companies struggle with hyperinflation, exchange rate volatility

A man holds old notes from one of various currencies to be introduced in Zimbabwe over the years.

The Zimbabwe Stock Exchange (ZSE) listed companies are facing trading hindrances in production and trading due to Zimbabwe’s hyperinflation and heightened exchange rate volatility, Bkays Money has learnt.

In their recent trading updates for the year ended 30 June 2022, listed companies like Hippo Valley Estates and Tanganda Tea Limited reported that hyperinflation, which increased to 191,6% in June 2022, and exchange rate volatility has made their operating trading environments challenging.

“While efforts continue to be made to liberalise the currency regime, to ease liquidity challenges and address inflation, economic conditions remain challenging,” Hippo Valley Estates Chief Executive Officer Mr Aiden Mhere said.

For Hippo Valley Estates, total industry sugar sales into the domestic market for the quarter ended 31 June 2022 closed at 84 228 tons (2021: 91 645 tons), which decreased by 8% compared to the same period in the prior year, largely due to reduced production as well as purchasing power constraints experienced by customers.

“The price realisations in both local and foreign currency on the local market suffered negatively from the adverse exchange rate dynamics on the currency. Management continues to align local prices to changes in cost structures where possible,” Mhere added.

On the other hand, Tanganda Tea Company Secretary Mrs Kodzanai has reported a decrease in production volumes and packed tea sales due to such a challenging operating environment.

“Production volumes were 7% below the same period the prior year. Packed tea sales volumes remained resilient though 5% below prior year due to global shipping and supply crisis and depressed disposable income on the domestic market,” she said.

Hyperinflation, together with low disposable income in Zimbabwe, has eroded purchasing power in Zimbabwe, while the heightened exchange rate volatility has made companies struggle with imports hence a trading challenge for companies.

However, companies like Hippo Valley Estates and Tanganda Tea Company are optimistic about their trading and production future in Zimbabwe after having registered little positive performances for the period under review, although inflationary pressures are expected to remain on the rise.

“Inflationary pressures are expected to remain on the rise, driven mainly by the continued exchange rate depreciation and the general rise in global inflation. The Company is focusing on cost management to mitigate the adverse impact of rising inflation and exchange rate volatility to profit margins. The Company is, however, optimistic about its prospects during the last quarter of the financial year,” Mrs Kodzanai said.