Zimbabwe: Cassava Suffers Zwl$ 2.4 Billion Exchange Losses

Diversified tech-solutions company, Cassava Smartech Zimbabwe Limited (Cassava) suffered exchange rate losses amounting to ZWL$ 2.4 billion in the six months to August an indication that the rapid depreciation of the Zimbabwe dollar during the period complicated matters for local companies with external obligations.

The exchange rate losses were just below half the company's revenue for the period which stood at ZLW$ 5.4 billion.

The Zimbabwe dollar- for the greater part of the period under review was rapidly depreciating against major currencies until end of June when government introduced the Foreign Currency Auction System which managed to contain the run-away exchange rate.

"Exchange losses continue to weigh-down on business performance, with an amount of ZWL2.4 billion having been recorded in the period under review in respect of the foreign obligations that the Group currently has,"

"Foreign liabilities at the end of the period amounted to US$ 40.1 million, of which US$ 31.4 million comprise of the Group's obligation with respect to the debentures issued by Econet Wireless Zimbabwe Limited prior to the demerger in 2018," said Cassava Chair, Sheree Shereni.

Meanwhile, the Group revenue declined 34 percent to ZWL$ 5.4 billion during the period against ZWL$ 8.2 billion realized during comparable period in 2019.

"This was mainly as a result of the COVID induced interruptions to economic activity, as well as the pressure from various regulatory pronouncements, both of which had a significant impact on the revenue of the Group,"

"EcoCash revenue contribution, at 63% (2019 : 73%) declined, both as a result of macro-economic factors and regulatory changes that took place during the period under review, as well as contribution from the exponential growth in the Insurtech and digital On-Demand-Services business units," said Shereni.

In May this year, the Reserve Bank of Zimbabwe ordered the Group subsidiary-Steward Bank to stop payments into its Ecocash Private Limited's Mobile Money Trust account as part of measures to contain the rampant abuse of the facility for illicit foreign currency deals by money changers.

Whilst transaction volumes also declined during lockdown, the lifting of COVID restrictions and subsequent opening up of the economy from August 2020 saw a notable recovery of volumes across all platforms, the Group said.

Going forward, the imminent completion of Steward Bank's systems upgrade in December, together with the just completed EcoCash system upgrade, will be key to digital inclusion focus for the Group.

The new Ecocash system now has capacity to complete 450 transactions per second from an average of 200 transactions per second before the upgrade.