Zimbabwe’s Delta Corp and Distell sound alarm ahead of country’s elections

Zimbabwean-listed companies fear the country’s upcoming elections will disrupt business owing to the highly charged electoral and polarised political framework, as well as possible policy uncertainties that could reverse volume and revenue-growth prospects.

Companies in Zimbabwe, among them units of South African corporates such as Nedbank, Tiger Brands, Pick n Pay and Distell, have been facing lengthy power outages and difficulties with a monetary sector in which the local currency is being sidelined

Delta Corporation, the country’s biggest alcoholic and non-alcoholic beverages manufacturer, as well as Distell’s associate unit, African Distillers, have reported stronger volume growth in the quarter to the end of December. This has been aided by growth in US dollar revenues.

“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,” Lydiah Mutamuko, the company secretary for African Distillers, which manufactures wines and spirits in Zimbabwe, said on Friday.

The political temperature has been rising in Zimbabwe, with political violence escalating. Authorities have detained opposition parliamentarians and activists for an illegal gathering in Harare.

In rural Murewa, police have made arrests after politically motivated violence erupted. Analysts warn that that such cases are likely to escalate as the election campaign period intensifies.

President Emmerson Mnangagwa will square off against younger rival Nelson Chamisa of the Citizens Coalition for Change in elections scheduled for later this year. The possibility that there may be an of escalation in violence is leaving business executives in Zimbabwe worried.

Delta Corporation, one of the biggest companies on the Zimbabwe Stock Exchange, is anticipating that the business environment will take a knock during the upcoming election period.

“The operating environment in Zimbabwe, although stable, remains challenging, as the country goes to the general elections scheduled for later in the year. There are uncertainties posed by the Covid-19 pandemic, the rapid policy changes, and the polarised political environment,” said Faith Musinga, an executive with Delta Corp.

Moreover, the financial out-turn in F23 could be “affected by the foreign currency tax assessments arising from differences in interpretation of legislation on the currency of payment of certain taxes”.

Other companies such as Econet Wireless have had to raise data and call tariffs to factor in an increase in the VAT rate for 2023.

Apart from the current uncertainties over the political and fiscal frameworks, some Zimbabwean companies have been delivering volume and revenue growth, especially during the just-ended December quarter, which encompasses the festive season.

For Delta, its Zimbabwe lager beer, soft drinks and other alcoholic businesses recorded a significant increase in the proportion of foreign currency sales during the quarter to beyond 70%.

The company said in a trading update that there had been “a corresponding increase in the purchases settled in foreign currency, as the economy dollarises”, with consumption benefiting from “increased mining activities and diaspora remittances” and government infrastructure spending.

To meet surging demand, Delta will commission additional packaging this year for its lager beers division. The company is also investing in additional production capacity for its sorghum-based opaque beer.

African Distillers, on the other hand, also “witnessed a significant increase in foreign currency transactions, which aided in the funding” of foreign supplies.

Its spirits segment grew by 19% in the December quarter as it clawed back market share from cheaper and illicit products. Wine volumes grew 16% over the same period, propelled by “locally produced brands despite intense competition” from cheaper imports.