Zimbabwe govt owes SeedCo US$40m

Seed Co Limited is reeling from a severe liquidity crisis after the government, its biggest shareholder, failed to pay a staggering US$40 million for seed deliveries made over the past 18 months, the company revealed this week.

Speaking at an analysts' briefing, Seed Co chief executive officer Morgan Nzwere said the delayed payments, spread across various government departments and programmes, had significantly affected the company's cash flow and daily operations.

"We are owed about US$40 million when you add up all the government debt. It's housed in different categories - direct government, ARDA, the winter wheat programme, the Ministry of Agriculture, and so on - over a period of 18 months," Nzwere said.

Despite the challenging financial position, Seed Co declared a US$2,3 million dividend for the first time in five years, a cautious move considering the liquidity constraints.

"We have to watch the cashflow. You can't declare a big dividend and then fail to run operations," Nzwere warned. "This is why we are being conservative."

The government's failure to honour its obligations, he said, was stifling the seed producer's ability to plan and invest confidently, particularly at a time when demand for seed is surging both locally and regionally.

Nzwere said while Seed Co has engaged authorities in pursuit of a payment plan, progress remains slow and unpredictable.

"What normally happens is that they only pay when they want to make new seed orders - sometimes just before the planting season. So, we hope they will make a payment soon," he added.

The company's revenues, however, grew by over 90% during the reporting period, buoyed by increased sales volumes and a stronger export performance. Total sales volumes rose by over 50%, with export volumes accounting for 33% of the growth.

"Our volumes grew significantly in Zimbabwe, and we were happy to be selling mostly in US dollars this year. Payments received were largely in hard currency, and even ZiG payments maintained their value," Nzwere noted.

Seed Co also saw strong performance in maize, wheat, and small grain seeds, driven by increased demand, particularly in drought-hit regional markets responding to the effects of the El Niño phenomenon.

"The maize seed sales exceeded budget due to regional demand. Wheat and small grains also grew as farmers adjusted to climate change," said Nzwere.

He added that the company continues to face pricing pressure due to exchange rate disparities and undercutting by competitors.

To strengthen its position, Seed Co is expanding its research and development programme with a focus on tailoring seed varieties to specific regional environments.

"We're working on unique products for various markets. Our success this year has also been supported by strong demand from export destinations where some of our business units didn't have sufficient stock," said Nzwere.

As the company pushes ahead with regional expansion and product innovation, it remains constrained by the outstanding government debt - a challenge Nzwere hopes will soon be resolved to unlock the company's full growth potential.