eBusiness Weekly
Kudzanai Sharara Taking Stock
The mid-year earnings season is in full swing with several companies having reported results for the period ended June 30, 2018. Some of these results, especially those from the banking sector, are for the half year while a few are full year financials.
How was the operating environment?
According to statements accompanying results, there is a general consensus among executives that ongoing domestic policy reforms and firm commitments towards re-engaging international capital have set the tone for a firm macro-economic recovery. The political change that took place at the end of last year is starting to transform the country’s economy as business and investment attraction take centre stage.
However, there are still underlying challenges in respect of foreign currency constraints which continue to restrict capacity to service cross border payments and availability of cash.
This has been a common theme across the economy and highlights the urgent need for policies that seek to address the foreign currency challenges. In my view, foreign currency availability remain a key success factor for business in general.
Export oriented policies as has been introduced by the central bank need to be strengthened and fine-tuned so that the cost-benefit analysis will favour the latter.
Policies that seek to attract foreign direct investment would also be key as inflow of funds will encourage the flow of funds in and out of the country. Right now there is hesitation among foreign investors with regard the ability to repatriate funds and the sooner this gets fixed the better.
Then there is also the issue of the huge import bill that has doubled over the years, and the appetite to import both finished and unfinished goods continues to soar putting immense pressure on nostro balances and choking industry’s ability to service cross border payments. Add to the woes, a budget deficit which continued to increase and crowd out fiscal space.
Going forward, business believes that despite current economic difficulties, the country offers good prospects for sustainable growth over the medium to long term outlook.
It is also believed that full implementation of macro-economic policy reforms will yield inclusive sustainable economic growth over the medium to long term horizon.
We have already seen benefits of some of these reforms, particularly in the mining and agriculture sector where strong contributions to economic recovery have been noted.
Gold deliveries for the six months to June reaching a reported 21 tonnes, and tobacco production for the 2018 marketing season reaching an all-time record of over 245 million kilograms.
What is performance like?
No disappointments as yet! Most listed entities that have reported so far recorded double digit growth rates on both the top and bottom line.
While the revenue line is susceptible to price distortions or inflationary pressures, most businesses also recorded double digit growth rates in terms of volumes which is a good indicator that business is growing.
For some companies, sales volumes would have been much higher had they not faced supply challenges.
The banking sector also witnessed double digit growth rates amid a substantial shift of business from traditional banking channels to electronic platforms with significant participation in transactional banking business by non-traditional players.
Questions however, still linger on whether companies are creating value or witnessing value destruction given the currency distortions?
