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ZWG acceptance still a challenge says Hippo Valley
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Hippo Valley Estates Limited (HVEL), one of Zimbabwe's sugar producers, has raised concern over the continued rejection of the Zimbabwe Gold (ZWG) currency in the market despite relative exchange rate stability.
The sugar producer noted that while the official devaluation of 43% in September 2024 had brought sanity to the market, the local unit is still struggling to gain acceptance. Exchange rates have remained relatively stable since then, with both the official and parallel markets trading within a narrow range of ZWG28,00 to ZWG34,00 against the US dollar.
In a trading update for its first quarter period, the company said the challenge lies not in exchange rate fluctuations but in the unwillingness of many market players to transact in ZWG.
"While the ZWG currency has shown relative stability since the significant devaluation experienced at the end of September 2024, it faces significant challenges, particularly in gaining widespread acceptance," the company said.
HVEL highlighted that tight liquidity conditions and the currency mix dilemma when trading in ZWG left it with excess balances in local currency while grappling with USD shortages. The company added that most suppliers, especially in the informal sector, continue to prefer the US dollar due to its perceived stability, further complicating business operations.
Despite the currency hurdles, HVEL's operational performance showed resilience. The company reported a 15% increase in cane supply from its plantations, buoyed by a stronger milling crushing season. Cane quality also improved, with the Estimated Recoverable Crystal rising from 11,30% to 11,46%.
The company acknowledged some start-up challenges at its mill but said recoveries were strong, with a cane-to-sugar ratio of 8.49 compared to 8.50 the previous year and just short of the 8.75 target. Private cane deliveries, however, dipped slightly as some supplies were diverted to the Triangle mill during the start-up phase.
HVEL also cautioned that inflationary pressures and shifting global trade policies continue to drive up input costs, posing risks to future operations despite the encouraging production performance.
The sugar producer noted that while the official devaluation of 43% in September 2024 had brought sanity to the market, the local unit is still struggling to gain acceptance. Exchange rates have remained relatively stable since then, with both the official and parallel markets trading within a narrow range of ZWG28,00 to ZWG34,00 against the US dollar.
In a trading update for its first quarter period, the company said the challenge lies not in exchange rate fluctuations but in the unwillingness of many market players to transact in ZWG.
"While the ZWG currency has shown relative stability since the significant devaluation experienced at the end of September 2024, it faces significant challenges, particularly in gaining widespread acceptance," the company said.
HVEL highlighted that tight liquidity conditions and the currency mix dilemma when trading in ZWG left it with excess balances in local currency while grappling with USD shortages. The company added that most suppliers, especially in the informal sector, continue to prefer the US dollar due to its perceived stability, further complicating business operations.
Despite the currency hurdles, HVEL's operational performance showed resilience. The company reported a 15% increase in cane supply from its plantations, buoyed by a stronger milling crushing season. Cane quality also improved, with the Estimated Recoverable Crystal rising from 11,30% to 11,46%.
The company acknowledged some start-up challenges at its mill but said recoveries were strong, with a cane-to-sugar ratio of 8.49 compared to 8.50 the previous year and just short of the 8.75 target. Private cane deliveries, however, dipped slightly as some supplies were diverted to the Triangle mill during the start-up phase.
HVEL also cautioned that inflationary pressures and shifting global trade policies continue to drive up input costs, posing risks to future operations despite the encouraging production performance.
Source - NewZimbabwe
