• The government hiked interests rate by 120 bps to 200% in June
  • SeedCo’s revenue advanced by 36% in Q1’2022
  • However, sales volumes went down by 18%

Harare - Seed producer giant, SeedCo Limited Zimbabwe says the Central Bank’s policy rates of 200%, which are also a global record high are a hindrance to the financing of the productive sectors of the economy. 

In a trading update for the first quarter ended 30 June 2022, the Group said Zimbabwe’s operating economic environment remains tense given the recent interest rates hike with the upcoming 2023 harmonised elections making it increasingly uncertain. 

“The Zimbabwean socio-economic environment remains challenging with hyperinflation continuing, no respite to the wide disparity between the official and alternative market exchange rates while the recent hike in interest rates is making productive financing unviable,” the Group said.

“The operating environment is also increasingly becoming uncertain with elections scheduled next year.”

The government hiked interest rates by 120 basis points in June 2022 as it battled to curtail speculative borrowing and rent seeking behaviour mainly from the private sector which was undermining the local currency by fuelling black market activities. 

However, the 120 bps hike made borrowing very expensive for the productive sectors of the economy as they have to pay large interest rates to banks.

The government is also not likely to review the rates downwards as the latest Monetary Policy Statement reviewed that the current Bank policy rate of 200% will be reviewed in line with developments in monthly inflation, which is likely to remain above the roof. 

Meanwhile, despite the headwinds, the Group’s revenue grew by 36% compared to the same period in 2021 on the back of price adjustments to preserve value in view of the general increase in the cost of doing business.

Operating profit increased by 3.3 times during the quarter under review from a loss position encountered in 2021.

“The return to profitability is attributable to margin recovery which margins however remain under pressure due to official and alternative market exchange rate disparities whose negative effect on the cost of doing business cannot always be sustainably recouped through local currency selling price adjustments,” the Group said.

However, total sales volumes for the quarter decreased by 18% from the corresponding period last year with wheat seed making up just under 90% of total volume sold which is typical for the period under review.

“The volume decline is because of a 13% reduction in wheat seed sales due to stringent measures applied on farmer selection by input funders and no repeat early legume and sorghum sales during the 1st quarter as happened during the same period in FY22.”

Going ahead, the Group expects volatility to continue in the economic environment. However, the Group said it has adequate stocks both in Zimbabwe and on the continent to contribute meaningfully to primary food production subject to favourable climatic and economic conditions

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