Zimbabwe consumer companies primed for rich pickings

Zimbabwe’ National Foods has two major shareholders: Innscor Africa Limited 37.45% and Tiger Brands 37.45%. SUPPLIED

Zimbabwe’ National Foods has two major shareholders: Innscor Africa Limited 37.45% and Tiger Brands 37.45%. SUPPLIED

Published Jul 9, 2024


Chuffed by relative pricing stability and its new currency holding ground against major and regional currencies, Zimbabwean consumer companies could benefit from firmer consumption despite overall macro-economic weaknesses.

Zimbabwe’s projected economic growth for 2024 has been weighed down by the impacts of the El Niño phenomenon, which has occasioned drought with knock-on effects on the agricultural and agro-processing sectors.

The agriculture sector is thus anticipated to decline by 4.9%, dragging overall gross domestic product (GDP) growth down to 3.5%.

Coupled with falling international commodity prices, especially for lithium and platinum group metals (PGM), exports are also set to be affected by between 0.5% and 0.7% this year, according to government data.

However, analysts at IH Securities yesterday said “strong underlying productivity and an increasingly dollarised trading environment powered by the informal sector have supported volumes performances” in Zimbabwean consumer companies. Remittances are also set to drive consumer power.

“While the outlook for consumer spend might be weak based on the performance of primary sectors, we believe there might be pockets of liquidity bolstered by the $2 billion (R36.1bn) remittance line and the gold subsector,” said the IH Securities analysts in a note on the consumer sector in Zimbabwe.

However, they added that consumption of Zimbabwean manufactured goods “will likely be geared towards essentials given limited spend” within the year.

“We are skewed towards consumer-facing stocks that have ability to generate a significant portion of revenue in US dollars, have good management practices as well as consistent dividend payouts,” they said.

Companies that have reported strong volumes in Zimbabwe include beverages manufacturer, Delta, Innscor and Tiger Brands’s associate unit, and National Foods, Zimbabwe’s largest food manufacturer.

On the downside, Zimbabwe’s population remains largely rural, informalised, with low income.

The country’s working poverty, as defined by the employed populace living below $2.15 a day had grown from 20.17% in 2013 to 35.35% in 2023, with the majority of wages falling in the $272 to $362 range.

Zimbabwe’s central bank has projected economic growth for Zimbabwe at 3.5% making it the third consecutive year of economic slowdown.

Even then, attainment of this year’s growth projection is hinged on sustained exchange rate stability and fiscal discipline.

The International Monetary Fund (IMF) recently said Zimbabwe’s new currency, the Zimbabwe Gold (ZiG) had fostered some stability in value.

Business executives are also of the view that the country’s fiscal and taxation framework has been hurting local manufacturers by pushing up their costs.

In its recent quarterly trading update, National Foods said the change in legislation for the taxation of basic commodities such as maize meal, flour, salt, and stock feeds from being “zero rated” to “exempt” has resulted in an escalation in the company’s costs by 3%.

Delta also said implications of the recently introduced sin tax on sugar content in beverages in the 2024 fiscal year had amounted to $46.3m for the company.

“While the operating environment has indeed been challenging, consumer-facing companies that have established direct route to market into the US dollar-rich informal sector such as Innscor and Delta have weathered the conditions better than most sectors,” the IH Securities report said.