Brewer Delta hikes prices after govt rejects move to charge in US dollars

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Zimbabwe’s brewery giant, the Delta Corporation, has resorted to price hikes after its attempt to charge for its products solely in US dollars was rejected by the  authorities.

The Zimbabwean government said the private sector should not rush to choose the currency they think the whole country should adopt.

Delta, which is 40% owned by AB InBev and 14% by Old Mutual Zimbabwe, announced a 25% hike for its beer prices with effect from Monday. 

The move was seen by analysts as an attempt by the brewer to cushion its business against the escalating prices of local materials and services.

Hiking prices was, however, not the brewer’s first option.

Last week the company announced that it would no longer accept bond notes with effect from Friday January 4, and would charge exclusively in US dollars for its products.

Delta said at the time that its business had been adversely affected by shortages of foreign currency, which in turn resulted in it failing to meet customer orders.

“… all our foreign suppliers are unable to continue providing credit or meet new orders as some of them have not been paid for extended periods,” said Delta.

By end of September 2018, Delta owed its suppliers approximately $41m, while its major shareholder AB InBev was owed more than $53m in un-repatriated dividends.

Zimbabwe is in the midst of a foreign currency crisis, with a backlog in foreign currency payments to suppliers and creditors near $1bn.

Delta, which brews beer and also bottles Coca-Cola products, said the move to charge in foreign currency was meant to protect the investments it has made over the years.

“The company has invested in excess of $600m in plant and equipment, vehicles and ancillary services since 2009. There is need to protect this investment and ensure sustenance of all value chain partners.”

The government, led by Vice President Constantino Chiwenga, Reserve Bank of Zimbabwe Governor Dr John Mangudya and Finance and Economic Development Minister Professor Mthuli Ncube, however, rejected the move.

They said Delta and other private sector players should be patient while government works on fiscal consolidation.

“They should not rush ahead to choose the currency they think the whole country should adopt. They should just be patient, let us work together. That is really our message,” said Minister Ncube.