South African companies operating in Zimbabwe-winners and losers

Most South African companies with operations or business dealings in Zimbabwe are taking a tremendous hit from the economic crisis in the country, which has notably affected at least 20 of the 355 JSE-listed companies.

Those companies face, as do all of Zimbabwe, negative economic growth, hyperinflation, foreign exchange shortages, power outages, big recent hikes in fuel prices, erratic fuel supply, and a severe currency devaluation.

At the end of September, the International Monetary Fund said that inflation in Zimbabwe in August had reached an annual rate of almost 300%, the second highest in the world after Venezuela, and economic growth in 2019 would be “steeply negative” at an estimated contraction of 7.1%.

But of the 20 companies Business Insider identified with important dealings in Zimbabwe, a handful of them – all platinum mining companies – are doing well.

Here are the SA companies doing well in Zimbabwe…

Tharisa stands to benefit following the declaration of a special economic zone (SEZ) that will benefit Karo Zimbabwe, in which Tharisa has a 27% indirect stake. The SEZ covers special mining grants issued to Karo Zimbabwe in the Great Dyke and will see Karo’s platinum mining project entitled to numerous fiscal incentives.

Impala Platinum (Implats) owns an 87% stake in Zimbabwean company Zimplats. Zimplats chairman Sydney Mufamadi (who was a South African government minister from 1994 to 2008) in late October was quite upbeat and wrote in the Zimplats annual report that the future of the company remained bright despite the challenging environment. However, the devaluation of the Zimbabwe currency against the US dollar resulted in Zimplats recognising a net exchange loss of US$20 million for the year ended June 2019. Nevertheless, Zimplats reported a profit of US$144 million for the year ended June this year, which was its best result in more than four financial years.

Mimosa, a 50:50 venture between Implats and Sibanye-Stillwater, is also bearing up well and the mine reported a 21% hike in gross profit to R773 million for the year ended June. Johan Theron, an Implats spokesperson, says that the business environment in Zimbabwe had become “extremely challenging” over the past eighteen months. All the metal the platinum mining industry produces gets exported and paid for in US dollars, and these hard currency earnings have sheltered the sector from the storm, he added.

Anglo American Platinum owns the Unki platinum mine in Zimbabwe. Unki seems to be thriving as it reported record platinum metal production for the half-year ending June and operating profit for the same six months was R488 million up 15% from the prior half-year.

These are the five SA companies worst affected by Zimbabwe’s troubles

Nampak- The packaging company’s profit was cut by almost R3 billion during the year ending September due to the devaluation of the Zimbabwean dollar from 2.54 to 15.20 to the US dollar.

PPC- PPC Zimbabwe reported a one-third decline in volumes, while cement pricing was adjusted weekly due hyperinflation and the Zimbabwean dollar’s severe devaluation. Revenue declined by 54% to R497 million in the six months ending September from R1.076 billion in the prior six months in 2018.

Barloworld-Equipment distributor and automotive company Barloworld’s businesses in Zimbabwe are battling. The two equipment businesses, it has stakes in, are loss-making, and the Zimbabwean currency devaluation has significantly impacted its logistics business.

Pick n Pay- Pick n Pay is feeling the heat in Zimbabwe via its associate TM Supermarkets, which has 58 stores in the country. Pick n Pay’s share of the income of TM fell from R77.8 million in its interim period to 1 September 2018, to an R1.7 million loss for the same half-year in 2019.

Pepkor-In late November, Pepkor decided to exit Zimbabwe due to the macroeconomic challenges. For the year ended September, Pepkor’s Zimbabwean unit, which had 20 stores, reported a loss of R70 million compared with a profit of R11 million in the prior year.- Business Insider

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