RTG quits Mozambique as civil conflict escalates, govt cuts spending

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HARARE: Zimbabwe Stock Exchange-listed hotelier, Rainbow Tourism Group (RTG), has pulled out of Mozambique, citing a worsening political situation and cuts in spending by the government of that country.
Mozambique is in the throes of a civil conflict between the government and the opposition Mozambique National Resistance (Renamo) guerrillas, that has seen thousands of people, notably in Tete province, fleeing into Malawi since October last year, reminiscent of the previous civil war which started in 1975 and ended in 1992.
The southern African country, one of the world’s poorest, is also caught up in a debt scandal involving more than $2 billion in secret loans that came to light this year, leading to the International Monetary Fund suspending lending.
Mozambique’s currency was hit hard by the debt crisis and aid suspension, with the Metical losing nearly 40 percent against the dollar since January and economic growth slowing to below 4 percent.
RTG chief executive, Tendai Madziwanyika, told The Source on Wednesday, that the developments forced the group to exit the country as part of a strategy to wean off loss making operations.
The hotelier, which now operates six hotels from nine a few years back, would refocus on the domestic market.
Madziwanyika, who also closed the Beitbridge Rainbow Hotel in May, said RTG would close its Mozambique operations at the end of this month. The group was only six years into a 10-year agreement to run the hotel under a management contract.
“By September 30 we will be out of Mozambique,” the RTG CEO said. “The political disturbances are quite serious.”
“We have also been affected by falling global commodity prices, which have affected spending from the mining industry. The (Mozambique) government has also cut spending, which affects us directly because this is a very large conferencing venue. Aid has also been cut. The Mozambican currency has also been falling against the United States dollar,” said Madziwanyika.
He said the effects of a falling Mozambican currency was felt when the group translated revenues from the Mozambican operation into the greenback.
The operation posted a loss of $1,6 million in the previous financial year, he added.
The Rainbow Mozambique Hotel was the last of the group’s management contracts outside Zambia. RTG has recently pulled out of two units in Zambia, while it pulled out of the Democratic Republic of Congo about seven years ago.Advertisement

“We are not looking at regional at the moment. We want to consolidate our domestic operations first and when we are strong we can now look at expanding into the region,” said Madziwanyika.
He spoke ahead of the publication of the group’s half year results for the period ended June 30, 2016. The results are due for publication on Thursday morning.
During the review period, RTG reported a four percent rise in revenue to $11,8 million, from $11,2 million during the prior comparative period in 2015.
As a result of the discontinued operations, RTG posted a loss of $2,9 million for the half year under review, compare to a loss of $1,9 million during the prior comparable period.
Occupancy grew by 15 percentage points to 54 percent during the review period, from 47 percent at the same time last year.
Resorts improved occupancy levels by 10 percentage points to 56 percent, from 46 percent at the same time last year.
In May, RTG made the strongest indication of big changes to its Mozambican operations following losses.
Madziwanyika told a recent annual general meeting that the group will be taking “robust” decisions of the operation, although he did not say what action would be taken.