Ashly DhaniBusiness Writer
The Zimbabwe Stock Exchange-listed seed producer, SeedCo Limited, says the country continues to present a tough operating environment for business, compounded by the adverse effects of the El Nino-induced drought among other matters.
According to SeedCo, the environment is fraught with fiscal and tight monetary policy challenges emanating from authorities’ stance as they seek to enhance local currency and exchange rate stability.
Measures instituted by the Reserve Bank of Zimbabwe (RBZ) include an increase in statutory reserve requirement for foreign currency demand deposits from 15 percent to 20 percent.
This is likely to reduce the money supply available for lending and investment which may slow down aggregate demand and economic growth.
According to analysts, an increase in reserve requirements may lead to higher interest rates that might make borrowing for companies and individuals more expensive.
The central bank also introduced a policy where at least 50 percent of tax obligations are to be paid in ZiG on Quarterly Payment Dates (QPDS).
As such, companies that earn revenue in foreign currency may face increased currency exchange risk when converting their earnings for tax obligations and fluctuations which has potential to increase their taxation burden.
Recently, the RBZ announced that it will continue with a tight monetary policy stance to sustain the ongoing exchange rate and inflation stability.
As for SeedCo, in addition to the aforementioned challenges, El-Nino phenomenon, delayed rains and diminished enthusiasm for cropping last year led to a 28 percent decline in seed sales volumes, compared to the preceding year.
Generally, climate change is making droughts more frequent and severe globally, threatening food security and this has brought negative ripple effects in agro-based economies like Zimbabwe.
“Zimbabwe’s economic environment remains strained by fiscal challenges, exacerbated by the adverse effects of the recent El Niño- induced drought, a tight monetary policy aimed at stabilising the newly introduced Zimbabwe Gold (ZiG) currency and external economic pressures.
“These factors create a challenging business climate,” said SeedCo Limited group secretary, Tineyi Chatiza, in the first quarter trading update to June 2024.
However, in the trading update SeedCo, indicated that it is counting on substantial seed stock to satisfy the 2024-25 summer cropping season in the local and export markets.
“Despite these hurdles, the group is well-positioned for recovery in the upcoming season, supported by more than adequate stock levels carried over from the previous season.”
This comes amid expectations of a La Nina which is usually associated with a good rainfall during the 2024-25 summer cropping season.
Operationally in the first quarter, SeedCo saw a 15 percent increase in total seed sales compared to the same period last year, largely due to strong local winter maize sales and exports.
According to SeedCo, wheat and barley volumes remained consistent with previous year.
Resultantly the revenue grew 17 percent year on year to US$13, 1 million in the first quarter of 2025 from US$11,2 million realised in the first quarter of the 2024 financial year.
Operating profit grew 20 percent year on year to US$5,4 million from US$4,6 million realised in the first quarter of last year.
Bongani Ndlovu