• Revenue declined by 8%

  • Loss for the year was ZWL 650.5 million

  • Operating tax expenses rocketed to ZWL 1.2 billion from ZWL 453.5 million

Harare- Zimbabwe’s largest seed company, SeedCo Limited says it remains pessimistic about the 2023 fiscal year as the challenging Zimbabwean economic situation is far from ending, a situation it says might be worsened by the upcoming 2023 elections. 

The Zimbabwean economic environment remains fragile coupled with huge exchange rate disparities between formal and informal markets, high inflationary pressures that are closer to hyperinflation regions and rapid devaluation of the local currency against major currencies, particularly the US dollar due to a lack of confidence and trust from the market. 

However, the Group in a statement accompanying its financials for the full year ended 31 March 2022 brought to light another dimension of upcoming elections on the possibility of further dampening the economic outlook. 

“The challenging Zimbabwean economic situation is not expected to end soon with increasing uncertainty because of upcoming elections next year,” the Group’s chairperson David Long said in a statement accompanying the full-year results. 

Zimbabwean election periods are characterised by violence based on history which scares away investors weakening the market confidence while the government normally resorts to the cranking machine, pumping more money into the market as it seeks to buy votes through the distribution of food mostly in rural areas, upsetting money supply. 

During the 2002, 2008 and 2018 elections, Amnesty International reported that freedom of expression came under increasing restrictions while Journalists and lawyers were arbitrarily detained, beaten, tortured and threatened for reporting on political or human rights issues or representing the victims of human rights violations.

These electoral developments hurt the country’s investment opportunities and bring the market into panic, which in the end hurts business performance. 

On the money supply front, based on history, Zimbabwe has a record of printing more money, upsetting the equilibrium principle of supply and demand balance, mostly to fund government initiatives towards elections.

Between 2012 August and 2013 August the election period, the money supply increased by 6% from US$3.6 million to US$3.9 million while from June 2017 and June 2018 another elections period which saw President Mnangagwa grabbing power, RBZ increased the money supply by 41% from US$6.5 billion to US$9.1 billion with a month on month increase of 6.84%. that, however, led to inflationary pressures during the year weakening market activity.  

It is against that background the Group remains pessimistic that if that happens again, the dire economy will be further put in a toilet given that exchange rates and inflation are already on an upward trend. 

“The continuation of the gap between official and alternative market exchange rates in Zimbabwe will however continue to weigh down real profitability as selling prices are linked to official rates while virtually all business costs track alternative rates,” said Long. 

Meanwhile, the Group’s revenue was 8% lower at ZWL 9.3 billion, than the prior year’s ZWL 10 billion. The decline in profit was attributed to volume reduction and pricing challenges. 

The year was characterised by pricing challenges caused by the exchange rate volatilities and Between March 2021 and 2022, data from RBZ showed that the local currency depreciated by 34%. 

Operating expenditure rose in response to market rate-based purchase prices. The rise was also partly attributable to payroll-related costs and depreciation on revalued assets and expenses that were billed at the market rate instead of the Interbank rate.

 Finance costs were 9% of revenue during the year under review up from 8% in 2021. 

“The appetite to borrow more was caused by a mismatch between receipts and payments arising out of delayed payments from Government schemes and a sharp increase in prices for both operating expenses and seed deliveries.”

Operating tax expenses rocketed to ZWL 1.2 billion from ZWL 453.5 million in the full year 2021. 

As a result, profitability during the year was unfounded with the Group incurring a loss of ZWL 650.5 million from a profit of ZWL 1.4 billion in the prior year. 

The contribution from associates and joint ventures to be circa a third lower than the prior year mainly due to the 35% reduction in profitability of the continental associate operations.

New acquisitions and revaluation of old assets resulted in the rise in property, plant and equipment.

“Notable among the additions was the artificial maize seed drying plant completed and commissioned during the year under review.”

 Inventories were higher than the prior year due to larger volumes of wheat seed held at year-end in preparation for the winter cropping season and the unsold maize seed stock carried over into the next trading year.

“The Group is better positioned to leverage its strong brand and intellectual property to actively participate in enhancing primary food production to plug supply gaps.”

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