Inflationary pressures across the region weigh Simbisa’s regional operations

Listed fast food chain, Simbisa Brands, says inflationary pressures across the region are weighing on its regional operations, at a time the group is looking at consolidating its market share across the African continent.

According to the group, regional operations continue to be affected by high inflation levels, currency devaluation and supply chain disruptions, but remains upbeat of maintaining its expansion.

“The operating environment remains challenging and the group has responded by streamlining the operations to focus on the highest-return brands,” said group chief executive officer Basil Dionisio in an update for the full year to 30, June 2023.

For the Kenya market, despite the World Bank projecting a 5 percent growth for 2023, the past financial year has been marred with economic pressures stemming from tightening monetary policy with record-high interest rates, a slowdown in public investment, higher electricity and fuel prices and persistently high inflation, which is projected to average 7,8 percent in 2023, up from 7,6 percent in 2022.

After losing an average of 9,2 percent of its value against the US dollar year-on-year in H1 FY 2023, the Kenyan Shilling’s depreciation quickened in the second half of the financial year to an average of 15,2 percent year-on-year.

In Zambian market, the Kwacha remained volatile against the US dollar, depreciating 26 percent from 1 July 2022 to 31 March 2023, although it appreciated 17 percent between 31 March 2023 to 30 June 2023, which was ahead of the conclusion of the debt restructuring plan with the International Monetary Fund (IMF).

The script was the same in Mauritius and Ghana, where inflation reached a peak of 12,2 percent in December 2022, the highest level since November 2006 in Mauritius, while the Ghanaian Cedi came under intense pressure in the year under review, depreciating 42 percent between 1 July 2022 and 30 June 2023. This reflected portfolio reversals and lower FDI inflows, while demand pressures increased.

These factors have largely weighed on the group’s regional operations, which saw 21 counters closed in the region during the FY 2023 financial year.

However, the group remains committed to growing its footprint in the region, particularly in Kenya, where growth opportunities remain abundant.

“As such, 44 new counters were rolled out between 30 June 2022 and 30 June 2023, of which 34 were opened in Kenya.

“Customer counts in the regional business increased 2,5 percent in FY 2023, weighed down by lower customer counts in Ghana, which remains under significant economic strain,” said Dionisio.

Despite local currency devaluation against the US dollar, the group maintained real average spend in the region, which was up 1,7 percent versus prior year, through nominal menu price increases necessitated to keep pace with inflation. Resultantly, top-line growth of 4,2 percent was achieved in the regional division.-ebusinessweekly