MANUFACTURING concern Proplastics says the use of the more stable United States dollar has turned around the company’s fortunes after the company had faced bottlenecks in accessing foreign currency from the formal auction system.
Authorities adopted a dual monetary system late last year after rising inflation had wiped the value of the domestic currency.
Since then, retailers and service providers have been preferring hard currency, with official figures indicating that over 70% of transactions in the economy are now being done in foreign currency.
Greg Sebborn, Proplastics chairman chairperson, said although challenges persist in the operating environment, the company expects demand to improve, underpinned by both public and private sector-initiated projects.
He said in 2022 the general macro-economic environment was turbulent, particularly in the first seven months of the year.
“Foreign currency shortages persisted, multiple exchange rates remained in place, and prices continued to increase. Inflation, which had slowed down in the prior year, rose significantly, and was reported at 244% by the end of the year,” Sebborn said in the company’s 2022 annual report.
“The settlement of foreign currency allocations from the Auction platform continued to lag and this caused significant pressures on the payment of suppliers of requisite raw materials. The Group had no option but to temporarily suspend participation on the Auction platform in the second half of the year and instead, focused on generating the much-needed foreign currency from internal resources.”
The official exchange rate deteriorated during the current year, closing at ZW$671:US$1 from a December 2021 rate of ZW$111.
This translated to a massive 504% increase and had a huge bearing on the significant exchange losses on foreign liabilities that the business recorded during the year.
“The group is working hard to ensure this risk is mitigated and the as Zimbabwean dollar interest borrowing rates remain high, the group has extinguished all its Zimbabwean dollar debts and opened United States dollar credit lines with the banks. In the same vein, participation on the Auction platform will be reduced as the Group utilises its internally generated foreign currency,” he added. — STAFF WRITER.