Ariston decries RBZ’s 25pc retention policy

ARISTON has bemoaned the Reserve Bank of Zimbabwe (RBZ)’s 25 percent export retention growing disparity between the interbank rate and the fair market rate used by suppliers.

Analysts say the foreign currency surrender requirements thresholds instituted by the central bank impede exporting businesses’ ability to enhance internal operations, export capacity growth and diversification.

On October 23, 2023, RBZ announced an exchange control directive that standardised “foreign currency retentions thresholds on all exports to 25 percent across all sectors of the economy removing all special dispensations granted to some sectors of the economy.

According to the apex bank, the move is meant to enhance foreign exchange resources needed to settle national and international expenses that normally require foreign currency.

Companies say these high retentions inhibit their ability to acquire imported machinery and accessories that need foreign currency.

On the other hand, Zimbabwe’s dollar continues on a free fall streak as inflation has yet again begun to show its ugly head in the economy.

Foreign exchange rates are spiralling out of control on the parallel market, the local unit has slid to a range of $16 000 and beyond against the US$1 as of yesterday, while the official exchange rate is hovering around $10 152 to the greenback.

This pricing disparity is apparently causing havoc in the local market, particularly for service providers and retailers.

Analysts are concerned and they have implored the relevant authorities to step forward and reign in the rampant exchange rate movements and disparities before it is too late.

Local hyperinflation is a cancer that has caused an unreasonable spike in raw materials, energy and labour prices all to the detriment of companies that end up forking out more for inputs.

This subsequently leads to a reduction of competitiveness and lower profit margins for companies.
Retailers in particular continue to be in a fix as they are not able to price above the government-prescribed margins.

Ariston company secretary, Nkosilothando Ncube, in a trading update for the first quarter to December 2023, exhorted the government to adjust the foreign currency retention thresholds and address the growing gap between the official and parallel market exchange rates.

“The economic environment continued to be challenging, especially for exporting agricultural businesses as the 25 percent RBZ export retention coupled with the significant disparity between the Interbank rate and the fair market rate used by suppliers became very significant.

“This disparity is making some export lines unviable due to loss of value on the 25 percent RBZ retention.

‘‘It is hoped that the authorities will implement positive policies that will support the growth of exporting businesses.

“The local environment continues to be characterised by further dollarisation of the economy, increasing inflationary pressure and liquidity challenges,” said Ncube.

Analysts are of the view that the Government must explore other innovative revenue collection strategies targeting particularly the hard-to-tax informal sector where more USD are circulating outside the formal channels.

Local think tank, Zimbabwe Coalition on Debt and Development (ZIMCODD) says these high foreign currency surrender requirements are unreasonably distressing exporters.

Operationally, Ariston’s tea sales volumes increased 12 percent to 529 tonnes ahead of 473 tonnes achieved in the comparative period last year.

The volumes were 20 percent ahead of the 440 tonnes sold last year.

“To protect value, more tea sales are being channelled into the local market as the 25 percent RBZ export proceeds retention is having a significantly negative effect on the tea business’ profitability,” she said.

132 tonnes of macadamia nuts were sold in the period under review, which is 415 percent ahead of 26 tonnes sold in the prior comparable period.

This was on account of higher production volumes due to the sale of stocks held at prior year period end.

Ariston indicated that it was well positioned to take advantage of improvements in macadamia selling prices for the forthcoming season.

Poultry sales were in line with production volumes.

Notably, the current reporting period saw a shift in Ariston’s product composition, with bananas being the sole offering which differs from the past were the offering included potatoes.

The firm said the exclusion of potatoes was a strategic decision to conserve dam water for seed crop irrigation, anticipating the impact of an El Nino season.

Ariston’s trading update demonstrates a commitment to adapting to market conditions, prioritising quality, and navigating challenges strategically.

In its outlook, the company said: “The 2023/2024 agricultural season is expected to receive lower than normal rainfall and the group will mitigate the impact of low rainfall through heavy reliance on its irrigation systems.

“Early indication is that demand for macadamia nuts will be firm. However, it is still too early to have a view on the market prices, although sales of our early drop nuts have been at an improved price compared to prior year’s for similar quality.”-ebusinessweekly