• The Group said lack of proper plan to deal with informal market threatens economic growth

  • Revenue grew by 68%

  • PAT was down by 9%

Harare- ZSE-listed, Medtech Holdings Limited says the lack of sound economic pronouncements and incompetence from policymakers is driving the economy backwards and if not corrected, the volatility within the economic environment is deemed to continue.

In the financial statements for the year ended 31 December 2021, the Group said the country lacks sound economic fundamentals that are eager to fight inflation, and scarcity of foreign currency and also said government ignorance of groups like Zimbabwe National Chamber of Commerce (ZNCC) and Confederation of Zimbabwe Industries (CZI) on economic matters is worrisome.

The Group said the government should put in place policies that promote formal economic activities through incentivizing producers and exporters which in turn plays a pivotal role in job creation and pouring the much-needed foreign currency into the country.

According to the Group’s financial statements, incentivising the producers and exporters calls either for the dumping of the foreign currency proceeds surrendered to the government by the local producers and exporters which is hindering productivity or reducing them so that producers earn more of their foreign currency.

Currently, exporters relinquish 40% of their foreign currency to the RBZ while producers 20%. However, the retention thresholds have somehow fuelled the informal market activities as most companies resorted to the parallel market for the greenback at inflated Zimbabwe dollar prices contributing to high inflation.

 The group said, “the competitiveness of the informal sector is largely unhindered by policy pronouncements resulting in the informal players becoming an increasing threat to the formal economy.”

The group added, “Inflation has accelerated rapidly during the year, most recently reported at 132% in May, and will probably continue to do so with a lack of positive policy pronouncements having been witnessed thus far,”  in a statement accompanying the full-year financials.

The group said the government’s adamant about ZNCC and CZI bits of advice has contributed largely to the economic disorder currently being witnessed.  CZI and ZNCC recently called on the government to dump the auction system until it is fully equipped and also, either reduce the 40%-20% retention thresholds charged on exporters and producers or completely dump the retention thresholds, which the call government paid no attention to.

The two lobby groups decried that the two retentions were demotivating producers and exporters, the partners who play a pivotal role in job creation and availing of foreign currency through increased exports and increased productivity.

“The management of exchange rates has seen a widening gap between the official rate and the parallel market rate, and this disparity has effectively been a tax on exporters and remitters of US Dollars to other local companies through the 40% and 20% surrender requirement, whilst also effectively being a subsidy to importers.”

“The result has been a disincentive to the country’s exporters and local manufacturers – contrary to what we would ordinarily expect to see,” said the Group.

Commenting on the efficiency of the auction system, the Group said, “Worsening delays in the payment of successful auction bids have hampered operations and resulted in increased working capital demands. At the year-end successful auction bids to the value of US$ 465,000 were unpaid”.

Meanwhile, turnover grew by 68% to ZWL 953 million from ZWL 567 million with the headline earnings per share advancing by 57% ahead of full-year 2020.

“The businesses managed well on hedging mechanisms and this, along with a reduction in the real selling price of goods, fewer stockouts and a reduction in competition from grey imports and smuggled goods drove an increase in the volume of sales by 110%,” said the Group.

Profit after tax was positive at ZWL 101 million but slightly below 2020 margins of ZWL 111 million by 9% while total comprehensive profit for the year closed at ZWL 261 million from ZWL 112.6 million last year.

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