Chairman’s Statement
Operating Environment
The Government of Zimbabwe estimated economic growth for 2018 at 4%, down from an initial projection of 4.5%. Amongst other factors, this underperformance can be attributed to the challenges experienced in the supply and allocation of foreign currency, the misalignment of exchange rates in relation to the local currency and resurgent inflationary pressures in the wake of a pervasive multi-tier pricing regime.
Growth momentum was notable in the agriculture and mining sectors which are estimated to have increased in 2018 by 12.4% and 13% respectively. The agriculture sector benefited from a number of input support schemes whilst the El Nino induced weather patterns presented downside risk. On the other hand, a 33.9% increase in gold deliveries, a 9% increase in diamond extraction and a 7.4% increase in nickel output spurred growth in the mining sector.
Against the backdrop of a raft of monetary and fiscal policy measures announced in October 2018 aimed at addressing the distribution of foreign currency resources and rebalancing the fiscus by curtailing money supply whilst expanding the tax base through the introduction of the 2% Intermediated Money Transfer Tax, inflation rallied in the last quarter of 2018 to close the year at 42.09% on a year-on-year basis, rising from 3.52% in January 2018.
The level of capitalization on the Zimbabwe Stock Exchange increased by 123% from US$8.7 billion in January, 2018 to US$19.4 billion at 31 December 2018 as market players sought to hedge their positions against inflation risk.
The level of precipitation for the 2018/2019 farming season was well below long term averages, thus constraining growth prospects for 2019. The Government of Zimbabwe expects growth at 4% whilst the International Monetary Fund (IMF), in its April 2019 World Economic Outlook report projects economic recession for Zimbabwe with a growth projection of -5.2% for 2019. The government therefore faces a big challenge balancing out the threat of recession against its commitment to aggressive austerity measures.
Financial Performance
The Group recorded a full year profit of $21.8 million, representing a 54% improvement on the $14.2 million restated profit outturn for the full year in 2017. The financial performance of the Group is discussed in more detail in the Group Chief Executive Officer’s report.
Dividend
A dividend of ZWL 1.57 cents per share for the year ended 31 December 2018 has been declared by the Board.
Legal contingencies and regulatory issues
The Board remains hopeful that resolution to the long standing dispute between the Company and a shareholder, Transnational Holdings Limited regarding the ownership of a subsidiary entity, Intermarket Holdings Limited, will be achieved soon.
I am glad to report that significant progress has been made in dealing with issues raised in a Corrective Order initially issued on 7 March, 2017 and reviewed in March, 2018 by the Reserve Bank of Zimbabwe.
Directorate
Ms Thenjiwe Sibanda, Mrs Agnes Makamure and Mr Kangai Maukazuva were appointed to the Company’s Board on 1 March, 2019. I welcome them to the Group and look forward to their contribution to the Group’s affairs.
Outlook
As Government continues to pursue aggressive austerity measures and monetary reforms aimed at normalizing the economy in the medium term businesses will be hounded by the short-term transitional dislocations which include a high inflation outturn and adverse liquidity conditions, factors which are likely to result in balance sheet contraction in real terms. The Group will therefore, prioritise capital preservation in the execution of its strategies whilst cautiously taking advantage of any growth opportunities without overstretching the liquidity position.
Conclusion
I would like to take the opportunity to thank Board colleagues, management and staff and all other stakeholders for the contributions made in achieving the 2018 results.
Professor C. Manyeruke
Chairman
29 April 2019
