Tanganda Tea Company (Tanganda) has posted a nine percent decline in revenue during the first quarter (Q1) to December 2023 as the mandatory foreign currency liquidation scheme set by the Reserve Bank of Zimbabwe (RBZ) continues to dampen exporters’ earnings.
The company is a net exporter of bulk and packed tea as well as macadamia nuts and avocados but has been hamstrung by the mandatory liquidation of 25% of its foreign currency earnings into the local currency at sub-economical rates.
In its Q1 trading update, company revenue for the quarter under review of US$ 5 million was 9% below US$ 5.5 million achieved in the prior year.
“Export proceeds continue to be subject to 25% mandatory liquidation at subeconomic exchange rates. This implied significant tax on the topline reduces exporters’ competitiveness and their ability to reinvest export proceeds into value addition and growth in exports,” the company said.
The group said despite waning revenue its bulk tea export volumes grew by 18 percent to 1 274 tonnes from 1 076 tonnes achieved in previous year owing to improved logistical arrangements for more export shipments to be processed before the Christmas break.
However, packed tea sales volumes of 475 tonnes were 14 percent below 549 tonnes achieved in prior year.
Nevertheless, packaged tea exports into the region grew by 100 percent in response to the company pursuing and supplying an opportunity that arose to penetrate the Democratic Republic of Congo.
“Notwithstanding that the customer order book is full, a combination of packaging supply constraints, power outages and managing customers to reduce defaulting customers’ risk are among factors that resulted in a reduction in sales volumes.”
The company said the avocado and macadamia plantations which are under precision irrigation are looking healthy and the harvest of these crops will commence towards the end of the second quarter of the financial year.
With the group’s diversification of its regional markets for packed teas beginning to yield positive results, the mandatory liquidation policy remains the major stumbling block to realizing maximum profits from its export business.
The Central Bank is however adamant the policy will remain in place for the foreseeable future as it has so far managed to yield substantial amounts of foreign currency to meet the country’s external obligations.
