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NatFoods bemoans limited ZWG acceptability
10 Dec 2024 at 07:09hrs | Views
Zimbabwe's listed food manufacturer, National Foods (NatFoods), has expressed concern over the limited acceptability of the Zimbabwe Gold (ZWG) as a medium for sourcing raw materials, highlighting the challenges faced by businesses in adjusting to the new local currency.
Introduced on April 8, 2024, the Zimbabwe Gold (ZWG) was initially pegged at a premium of US$1:ZWG13.80, backed by US$575 million worth of hard assets, including foreign currencies, gold, and other precious metals. However, the local unit's value has significantly tumbled, with its premium on the parallel market falling sharply. This prompted the Reserve Bank of Zimbabwe (RBZ) to devalue the currency by 43% just four months after its launch.
In its annual report for 2024, NatFoods noted the continued limited acceptance of the ZWG in key sectors, which has hindered the company's ability to source raw materials. The report stressed that many critical commodities, such as fuel, power, raw materials, and human capital, as well as certain statutory payments, continue to require settlement in United States dollars.
"The market remains limited in its ability to transact with the ZWG," NatFoods stated. "While we welcome the addition of the ZWG to the multi-currency basket, the success of this initiative will depend on further supportive measures, including seamless interchangeability between currencies, which will increase market acceptance and the use of the new local currency."
Despite these challenges, the company reported a solid performance for the year, with total volumes increasing by 6% year-on-year to 585,000 tons. The growth was largely driven by the Maize and Stockfeed divisions, which saw strong demand. However, this was offset by a decline in the Down packing division, which was negatively impacted by rising raw material prices in the rice category. The price increase followed an export ban on rice from India and the imposition of VAT on locally sold rice.
NatFoods reported a 5% increase in revenue for the year, totaling US$359.36 million, in line with volume growth. Gross margin in absolute terms increased by 13% to US$81.64 million, driven by procurement and operating efficiencies. These efficiencies led to a 3% reduction in the bill of materials per ton compared to the prior year, although average selling prices across the group fell by 1%.
Looking forward, the company stressed the need for collaborative efforts to bolster the acceptability and stability of the ZWG in the broader market, with a focus on enabling smoother transactions and greater use of the local currency across sectors.
Introduced on April 8, 2024, the Zimbabwe Gold (ZWG) was initially pegged at a premium of US$1:ZWG13.80, backed by US$575 million worth of hard assets, including foreign currencies, gold, and other precious metals. However, the local unit's value has significantly tumbled, with its premium on the parallel market falling sharply. This prompted the Reserve Bank of Zimbabwe (RBZ) to devalue the currency by 43% just four months after its launch.
In its annual report for 2024, NatFoods noted the continued limited acceptance of the ZWG in key sectors, which has hindered the company's ability to source raw materials. The report stressed that many critical commodities, such as fuel, power, raw materials, and human capital, as well as certain statutory payments, continue to require settlement in United States dollars.
"The market remains limited in its ability to transact with the ZWG," NatFoods stated. "While we welcome the addition of the ZWG to the multi-currency basket, the success of this initiative will depend on further supportive measures, including seamless interchangeability between currencies, which will increase market acceptance and the use of the new local currency."
Despite these challenges, the company reported a solid performance for the year, with total volumes increasing by 6% year-on-year to 585,000 tons. The growth was largely driven by the Maize and Stockfeed divisions, which saw strong demand. However, this was offset by a decline in the Down packing division, which was negatively impacted by rising raw material prices in the rice category. The price increase followed an export ban on rice from India and the imposition of VAT on locally sold rice.
NatFoods reported a 5% increase in revenue for the year, totaling US$359.36 million, in line with volume growth. Gross margin in absolute terms increased by 13% to US$81.64 million, driven by procurement and operating efficiencies. These efficiencies led to a 3% reduction in the bill of materials per ton compared to the prior year, although average selling prices across the group fell by 1%.
Looking forward, the company stressed the need for collaborative efforts to bolster the acceptability and stability of the ZWG in the broader market, with a focus on enabling smoother transactions and greater use of the local currency across sectors.
Source - NewZimbabwe
