Economic difficulties persist in Zimbabwe: Seed Co...

Economic difficulties persist in Zimbabwe: Seed Co

Nyashadzashe Ndoro

Zimbabwe Stock Exchange-listed seed producer, Seed Co Limited, has stated clearly that the business environment in Zimbabwe continues to be difficult due to shortages of both foreign and local currency coupled by the seemingly unending inflation.

In its trading update for the third quarter ended 31 December 31 2023, Seed Co said, while the agricultural business is facing adverse weather conditions attributed to the El-Nino effect, the economy itself is not performing properly.

The group said delayed rains and the anticipated effects of the El-Nino phenomenon led to a 28% decline in total seed sales volume in Zimbabwe in the third quarter. Revenue in ZWL rose 41% due to increased USD-denominated sales against the depreciating exchange rate.

“Economic difficulties are persisting in Zimbabwe, characterised by shortages of both foreign and local currency, leading to exchange rate-induced inflation and a dominance of the informal economy over the formal sector. Compounding these challenges, the current agricultural season is experiencing adverse weather conditions attributed to the El-Nino effect, further exacerbating economic strains,” the company said in an update signed by group secretary, Tineyi Chatiza.

“In the third quarter, the total volume of Zimbabwe seed sales witnessed a 28% decline compared to the corresponding period in the preceding year, a consequence of delayed rains and diminished enthusiasm for cropping due to the El Nino phenomenon.

“The increase in revenue, whether assessed historically or adjusted for inflation, aligns with increasing proportion of USD denominated sales against the pronounced depreciation of the exchange rate and the resulting inflationary impacts,

“The enhanced profitability outcome can be credited to the restoration of profit margins and the alignment of the exchange rate with open market forces experienced in the better part of the first half.”

The group, however, noted that Zimbabwe is actively working to establish consensus for the implementation of this year’s National Budget while simultaneously addressing the stabilization of the foreign exchange market, curbing inflation, and restoring business confidence.

“Throughout the region, economies are also grappling with challenges such as shortages of foreign currency inflationary trends, and escalating interest rates.

“From an operational perspective, the delayed rains this season led to increased demand for small grains and legumes, extending into the last quarter of the financial year in Zimbabwe and neighbouring countries. This demand for small grains holds significant potential to clawback annual sales volume performance not only in Zimbabwe but also in neighbouring countries.

“Regionally, record sales in East Africa and certain parts of Southern Africa were registered, which is anticipated to mitigate the overall impact of decreased trading in some Southern African markets that adversely affected by El-Nina. conditions,” Seed Co added.