- RTD segments recorded a mild 3% growth
- Zimbabwe embraced one of the worst blackouts ranging to 18 hours a day
- Company remains pessimistic about future due to elections fever and political polarisation
Harare- Wines and spirits producer and distributor, African Distillers’(Afdis) saw its Ready To Drink (RTD) category register the worst quarterly performance during the third quarter ended 31 December 2022 due to the recurrent blackouts that derailed operations during the period. RTD segment grew by 3%, the least from 41% growth registered during the same period last year. This was also the least performance as opposed to 16% and 19% growth from wines and spirits segments.
Zimbabwe experienced one of the worst blackouts in 2022 with some areas kept in dark up to 18 hours.
Excessive reliance on the Kariba dam, which the authorities are failing to avail funds for its expansion and heavy reliance on the outdated power plants at Hwange Power Station have caused the power utility, ZESA, to only provide a maximum of 800 megawatts to the national grid against 2500 megawatts.
Power consuming companies like Econet Wireless Zimbabwe and Caledonia has resorted to thew extensive use of generators and solar to power their operations.
However, many companies, not limited only to Afdis, RioZim and Ariston Holdings have been stunned by power shortages resulting in reduced production.
A 3% increase in RTD segment was the worst performance during the quarter as wines and spirits volumes shelved 16% and 19% ahead of the comparative period.
However, growth was spared by the wines and spirits segments which grew volumes by 16% and 19% respectively.
“Spirits category benefited from the focus on the affordable market segment as the business sought to regain share from cheaper and illicit products with wine volumes mainly driven by locally produced brands despite intense competition from imports,” the Company said.
The company registered a volume growth of 10% for the quarter and 11% for the nine months compared to prior year.
As a result, revenue for the quarter grew by 29% and 39% for the nine months in inflation adjusted terms over last year, necessitated by increased sales volume.
“The operating environment is envisaged to remain unstable however, management has put in place measures to exploit available opportunities to sustain market share, revenue and profitability growth.”
The outlook to full year 2023 in Zimbabwe remains dull due to ongoing inflationary pressures, rolling blackouts and foreign currency shortages at par. These, are exacerbated by the Russia-Ukraine war which is affecting the global supply chains courtesy of Russian blockade on Ukraine’s products and Western sanctions on Russia.
Within Zimbabwe, the situation is further risked by the election fever. Zimbabwe is set to hold parliamentary Nand presidential elections later in 2023. However, Zimbabwe elections are normally coupled with fiscal indiscipline (reckless expenditure by government to finance election campaigns).
The outcome will be excess liquidity of the Zimbabwe dollar on the market causing exchange rate disparities and inflation.
Arrests of main opposition parties, selective application of law to political parties to hold election campaigns and politicising national aid to buy votes and torture and intimidation of opposition members all brings the market into panic, thus, affecting companies’ performance.
Due to political polarisation and weak economic fundamentals in the 2018 election period, FDI inflows declined to US$0.28 billion in 2019 from US$0.74 in 2018 and further down to US$0.19 in 2020.
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