Nampak's Zimbabwe unit is scrambling for a way out of a potential fall-out with its financiers and international suppliers after the central bank failed to raise foreign currency to liquidate its foreign payment obligations, with the packaging, plastics and metalbox products manufacturer sinking into a pre-tax loss.
According to the Reserve Bank of Zimbabwe, US$1.2 billion (R18bn) has been evaluated from 730 applications out of 1080 requests by companies with foreign debts.
The Zimbabwe government is taking over foreign currency debt on local companies’ books after ruling out usage of foreign currency in 2019.
However, some foreign suppliers to Zimbabwe have had “299 transactions with a value of (US)$861million” rejected for “double-dipping” and “lack of supporting” documentation. Nampak had said last year that it was due to receive (US)$57m from the Reserve Bank of Zimbabwe in settlement of a legacy debt.
Yesterday John van Gend, group managing director for Nampak Zimbabwe, said it would deepen negotiations with banks and suppliers to sustain raw materials and financing.
“The board is evaluating various options to address the negative equity position brought about by the material expenses which arose through the failure of the country to have sufficient foreign exchange to meet the requirements of liquidating the blocked funds (foreign) debt,” said Van Gend. “Further development of export markets are expected to provide sufficient foreign exchange and raw materials to maintain and continue day-to-day operations.”
Sales for the year under review quickened to ZWL666.3m compared to ZWL529.4m a year earlier, while the trading income position before adjustments for the period doubled to ZWL148.7m. However, the company has recorded a loss before tax of ZWL1bn against a profit before tax position of ZWL58.5m the year earlier.
Nampak Zimbabwe attributed the loss before tax on material expenses of ZWL1.4bn, comprising of foreign exchange losses amounting to ZWL686.4m after the central bank failed to settle the company’s foreign trade payables. It also suffered an impairment on an expected credit loss provision of 85percent on the “financial instrument hedge” held with the RBZ.
“The decision to impair the financial hedge was in line with the approach adopted by the major shareholder, Nampak Limited (South Africa) and was guided by the prevailing economic challenges and financial uncertainty. The company, like other Zimbabwean manufacturers, is battling crippled access to foreign currency resources for importation of critical raw materials."
According to Van Gend, the debilitating economic climate in Zimbabwe “is likely to continue in the negative unless the authorities do more to change course in favour of fundamental market” realities.