SATE-OWNED telecom firm, TelOne, says government’s delay in paying its debt has caused a loss of US$7,4 million on its balance sheet as the local currency continues to depreciate.
The Zimdollar has lost value significantly this year against the United States dollar to reach $6 299,32 as of yesterday.
This loss in value has wiped a significant chunk of the debt that government owes TelOne, resulting in the firm losing significant value in real terms.
In a statement yesterday following its annual general meeting (AGM), TelOne said the loss of value was significant given that government accounted for over 50% of its debtors’ book.
“Government accounts for 51% of the total debtors’ book of $42,8 billion at May 31, 2023. Government owed TelOne $20,5 billion as at May 31, 2023, from $6,6 billion as at December 31, 2022,” TelOne said during its AGM.
“A significant portion of this debt, about $8 billion, was accrued prior to March 31, 2023 when the debt was an equivalent of US$8,6 million, however due to the depreciating Zimdollar against the US dollar, the balance has since declined to an equivalent of US$1,2 million which translates to a loss of US$7,4 million in real value terms.”
TelOne said it was now pushing for timeous settlement of bills in order to preserve the value of money and allow the company to settle its obligations.
The revelation by TelOne confirms that government is benefiting from the loss of value of the local currency as it is reducing its domestic debt akin to when Statutory Instrument (SI) 33 of 2019 was promulgated in February 2019.
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In this piece of legislation, it was declared that debts accrued in United States dollars before the SI was published would be settled at a one-to-one rate in the local currency.
This led to billions of dollars in domestic debt owed by government to local creditors being wiped out.
TelOne said dealing with its debt would allow the firm to be able to seek fresh investment for capitalising the firm.
“TelOne has legacy loans amounting to $268,4 billion (US$394 million). Confronted with capitalisation needs of US$50 million per annum, TelOne continues to search for an investment oasis on the back of legacy loans that have had a negative effect on the business’s financial statements,” TelOne said.
“Resultantly, this situation has adversely affected TelOne’s ability to attract external funding, particularly capital expenditure for transmission network deployment. For the period ending December 31, 2022; the business had funded capital expenditure of US$9 million using internally generated resources.”
However, TelOne said foreign currency generation from business operations was impacted by customer who settled their bills in local currency along with shortages of foreign currency on the auction market.
“This diminished the business’ ability to fund capital expenditure towards network expansion and upgrades,” it said.
TelOne is working on unlocking value through property portfolio, disposing redundant network equipment and engaging private players through public-private partnerships to fund network equipment deployment to raise capital.
“The company will continue to pay attention to the unique challenges and opportunities presented by the current operating environment,” the firm said.
“While network maintenance and expansion remain key to ensuring service delivery to our customers guided by our strategic pillars as follows: 25% market share; 30% reduction in overhead expenses; expansion of the optic fibre network from 4 796km to 10 000km; development of new data centric products; and championing of infrastructure sharing.”