By Alois Vinga
PREVIOUSLY fixed exchange rates at the now-defunct interbank market have been blamed for the total loss of $107 million posted by piping materials producer, Pro-Plastics in this year’s first six months.
The interbank foreign exchange market was launched by the Reserve Bank of Zimbabwe (RBZ) in February 2019 in a bid to liberalise the trade of foreign currency.
The platform became unpopular after exchange rates remained stagnant at 1:25 for more than a year.
However, in June this year, the RBZ replaced the interbank market with Foreign Exchange Auction system.
The entity’s chairman, Greg Sebborn has attributed the huge losses to the inefficiency within past policy positions.
“After the deduction of taxation, both current and deferred, the group recorded a loss for the period of $107,267,800. The result was primarily a result of a fixed exchange rate applied to foreign currency receipts prior to the introduction of the currency auction system towards the end of June,” he said.
Sebborn said while a financial loss was recorded for the period, cash flows remained robust.
Turnover for the period reduced by 18% to $196 million from $238 million in the prior year.
Similarly, volumes retreated by 18% in the period. This was as a result of a combination of the relocation process to the new plant and the adverse effects of the COVID-19 induced lockdown.
Despite the group managing to get a special waiver as an essential service provider to operate during the lockdown period, demand was adversely affected since some sectors of the economy service were in full lockdown.
In addition, consumer spending power was curtailed and as a result, a number of projects were put on hold. This resulted in the performance of the business being severely affected in the greater part of the period under review. Partial recovery was only experienced in the last two months of the first half.
However, the decision by the RBZ to allow the use of free funds locally has given the company a sigh of relief after registering foreign currency receipts in the last three months.