Forex auction halves revenue

The recently introduced foreign exchange auction system has adversely affected export viability with the net effect being the halving of the Zimbabwe dollar export revenue.

A Bulawayo-based exporter, Zimplow, says its future is now uncertain because it was now relying on exports because of the decline in the local market.

The auction system was introduced in January in an effort to curb the thriving black market and also to give the central bank greater control on the flow of foreign currency.

The dollar firmed in the first month reaching a peak of about $3 500 to the greenback but is now down to $4 200.

It had been trading at over $6 000 to the greenback on the parallel market before the auction system.

Zimplow says its major Zimbabwe customers had also been affected by the new monetary policy and were finding it difficult to pay their debts to the company.

“The future is a question mark. These factors have combined to affect cash flows,” Zimplow says in its report for the six months to December.

It says local sales increased by 338.96 percent in dollar terms but volumes declined by 39 percent. The company earned $3.7 billion from local sales up from $853.4 million during the same period in 2002.

Exports, however, shot up from $581.8 million to $4.8 billion. Volumes increased by 33 percent.

Total revenue increased from $1.4 billion to $8.5 billion. Operating profit rose from $916.8 million to $6.5 billion with net profit at $4.8 billion, up from $640.1 million.

Zimbabwe sales now constitute 35 percent of volume, down from 54 percent during the same period in 2002.

South Africa had a poor season but this was offset by improved sales to Zambia and Namibia.

Export potential was increasing in the Democratic Republic of Congo and Angola.

But the company is facing stiff competition in East Africa from India and China as their products are cheaper.

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