Cement manufacturer PPC Zimbabwe says the introduction of the foreign currency interbank market by the country’s apex bank will help fight inflationary pressures that were beginning to have negative impact on the business operating environment.
Last month, Reserve Bank of Zimbabwe (RBZ) governor Dr John Mangudya announced the introduction of an inter-bank foreign exchange market in the country that saw the formalization of trading of the country’s fiat currency, the RTGS balances and bond notes with US dollars and other currencies.
“We view the introduction of a formalised floating foreign exchange market as a positive development toward curbing the high inflation and excessive premiums created by the parallel exchange rates,” said PPC Zimbabwe.
“The exchange market should result in a more efficient allocation of foreign currency, removing the distortions that were impacting the market, and facilitate the repatriation of cash in the medium to long-term.”
In respect of the move by the central bank to establish an inter-bank forex market, it was determined that the Real Time Gross Settlement (RTGS) dollar will become the functional currency in Zimbabwe, with the initial rate being 2.5 RTGS $:1 US$, and that all foreign liabilities or legacy debts and declared dividends, will be treated separately after registering such transactions with the exchange control department of the RBZ.
PPC Zimbabwe has said in terms of its internal processes, a full impact assessment including systems alignment is underway, and that the Public Accountants and Auditors Board (PAAB) is expected to pronounce on the impact of the monetary policy statement.
The latter, particularly relating to the determination of the effective date of conversion to the RTGS $ being October 2018 or February 2019.
PPC Zimbabwe reported a cash balance of US$63 million at the end of September 2018 which was reduced to US$60 million by a debt repayment at the end of February 2019.
“The initial rate of 2.5 RTGS $:1 US$ applies only to a portion of the US$60 million cash balance, amounting to US$30 million to US$35 million.
“The remaining balance including US$16 million in dividends and US$5 million rights offer proceeds, qualifies as legacy debt due to PPC RSA which is awaiting repatriation.
“In terms of group liquidity, PPC Zimbabwe is excluded from covenant calculations,” said the cement producer.
The company has reported that EBITDA margins remain within the previously guided range of 30% – 35% for FY19.