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NewsDay

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Foreign loans excite National Foods

Business
MILLING firm, National Foods Limited (Natfoods) says a recent decision by the banking system to offer loans in foreign currency will boost its operations.

BY FIDELITY MHLANGA

MILLING firm, National Foods Limited (Natfoods) says a recent decision by the banking system to offer loans in foreign currency will boost its operations.

Banks had restricted lending to Zimbabwe dollar loans since 2019 when the country reintroduced the domestic currency following a decade of a multi-currency regime.

However, hyperinflation, which reached a post dollarisation high of 839% in July last year, forced the financial sector to a rethink, with several banks now loaning out United States dollars to deserving clients.

While inflation has since started trending southwards, Zimbabwe’s currency remains fragile, with business preferring to trade in the greenback.

In a trading update for the three months from January to March 2021, the firm said stability in the trading environment was sustained by the foreign currency auction system and the ability to sell in foreign currency.

“Liquidity in Zimbabwe dollar terms remained constrained, necessitating precise management of working capital models, particularly over the seasonal peak demand period (December–March),” Natfoods said.

“The banking sector is beginning to offer US$ facilities, a most welcome development in view of the lower inflation and the very high cost of Zimbabwe dollar borrowing. The resultant price stability following the introduction of the above measures saw a sustained and continued reduction in inflation. The price stability, along with increased real incomes in certain sectors of the economy saw an improvement in consumer demand. This resulted in strong growth in volumes across the product portfolio with the exception of the maize category.”

Natfoods said the country had enjoyed an excellent cropping season, with production of most key grain crops expected to significantly exceed the levels achieved in recent years. On the back of this harvest, Natfoods expects to source all of its maize requirements locally over the coming 12 months.

The company said while local wheat was currently being planted, indications were that output would improve.

“The 2021 local wheat will be delivered in October/November, and wheat imports will be required until this point to supplement the remaining stock from the 2020 harvest. National Foods will again support local wheat contract farming, with target planting set at 5 300 hectares,” it said.

Natfoods volumes for the quarter, at 131 000 tonnes, decreased by 2,4% compared to last year.

The firm said the maize division had a difficult year due to substantial volumes of maize meal imports from South Africa.

Volumes in the flour division grew by 46% on a year-to-date basis.

“Turning to the outlook, the improved harvest should drive further improvements in consumer spending power. This should result in sustained volume momentum in all categories with the exception of maize, where it is expected volumes will be impacted by increased retentions at a household level,” Natfoods said.

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