Enactment of Statutory Instrument 127 of 2021 (SI 127 of 2021) and delayed disbursement caused fragile recovery for rubber and chemicals specialist GB Holdings.
Financial Director Patrick Munyanyu, in the trading update ending 30 September 2021, says the delayed disbursement of approved auction bids threatened the relative stability of the exchange rate and general price levels.
“Further, the enactment of SI 127 of 2021 had the inevitable effect of constrained pricing of output while input costs had a parallel rate base,” Munyanyi says.
“This anomaly effectively rendered local products uncompetitive against imports thereby negating the fragile recovery since the beginning of the year.”
Besides the SI 127 GB Holdings’s operating profits margins were under severe pressure due to the strengthening of the rand against the United States dollar which resulted in increased raw materials costs.
The violent riots in South Africa and the subsequent cyber attack also conspired in the disruption of logistical flows of raw materials resulting in reduced consumption of the company’s products.
Munyanyi says, “In addition rapid dollarization in the economy and the consequent basing of local costs on unofficial rates further reduced profitability when compared with same period prior year.”
COVID -19 pandemic pandemic also perstisted negatively impacting the company.
Despite challenges GB Holdings managed to increase volumes for both the chemicals and rubber divisions by 31% and 48% respectivily.
The firm also expects tyo operate profitably for the rest of 2021 although at a reduced levels compared to 2020.
“The rubber division is expected to maintain its recovery path and its out turn will depend on improved logistical flow of raw materials following the intermittent disruptions at the raw materials suppliers factories,” Munyanyi says.
GB Holdings also expects the chemicals division to recover after lockdown measures shut off its traditional markets.
SI 27 that was passed on 26 May 2021 set out penalties for businesses that refuse to accept payment in the Zimbabwean Dollar at the ruling auction market rate.
Key provisions of the SI also include measures that prohibit businesses from selling goods and services or quoting them at an exchange rate above the ruling auction market rate, issuing buyers with a Zimbabwean Dollar receipt for payment received in foreign currency and giving buyers a discount for paying in foreign currency.
