Zimbabwe | ZSE

The first half of the year proved a challenge to the sector at large on account of Covid-19 depressed economic activity and runaway inflation whilst yields remained negative in real terms, although up in nominal terms. The operating environment improved in the second half of the year on slowing inflation and relaxation of the restrictive lockdown measures. The Bank’s total deposits grew by 331% y/y driven by a 298% growth in local currency deposits to ZWL$4bn. First Capital Bank reported a 776% growth y/y in interest income from ZWL$74.64mn to ZWL$635.85mn. We estimate that yield in interest bearing assets lifted from circa 13% in FY20 to circa 24% in FY21 as cost of funding remained benign versus nominal interest rates. Notably, income from loans and receivables from banks and investment securities fell in real terms,contributing only 5.28% to the topline from 19.5% in the previous comparable period. The bank’s npl ratio trended below industry average at 0.16%. Interest expense grew 17.6% , however overall net interest income still grew695% y/y.

According to a recent statement released by the Monetary Policy Committee (MPC), annual inflation rate declined from 837.5% in July 2020 to 240% in March 2021 while monthly inflation fell from a peak of 35.53% in July 2020 to 2.26% in March 2021. The MPC affirmed its commitment to implementation of sound monetary policies in order to sustain the current disinflation trajectory and ensuring a conducive macroeconomic environment for investment and growth. Among the resolutions made to achieve the aforementioned goals is the maintenance of current conservative monetary targeting framework (targeting 22.5% quarterly reserve money). The MPC is also maintaining Bank Policy Rate and Mediumterm Bank Accommodation Facility rate at 40% and 30% respectively.

Despite consumer pockets still being somewhat strained within the period, the notably more stable operating environment underpinned a rebound in volumes of 25% to 264,000 tonnes h/h. Volumes for the flour division increased by 56% albeit off a low base, after two consecutive periods in the red with growth being experienced both in the baker’s and prepack flour segments. Maize meal volumes were weak at a 23% decline relative to the prior period despite expectations of strong demand due to the drought. The dip in maize volumes was credited to market adjustments that took place following the conclusion of the subsidy program, as well as intense competition from imported maize meal.

The operating environment eased as COVID-19 induced restrictions were relaxed and inflation declined giving rise to a relatively stable local currency. With the stabilising currency, TV Sales & Home re-introduced credit sales allowing the company to defend market share and grow volumes (debtors’ book grew 130% y/y). TV Sales & Home volumes were up 40%; sales were also driven by growth in the store network. Equity accounted earnings mainly comprised of earnings from Restapedic Bedding (grew 231.29% y/y).

Influenced by a relatively stable macro-environment, volumes in the majority of Innscor’s operating units closed the period in positive territory. For the Mill-bake segment, the Bakery division experienced a 26% increase in volumes as flour availability improved, volumes however are still trending below historical norms. Volumes at National Foods yielded a 25% uptick to 264,000 mt owing to improvements in the trading environment whilst Profeeds recorded a 18% improvement in feed volumes, with the segment focusing on diversification of its operations.

The Global economy is expected to expand by 4% in 2021 despite delays in COVID-19 vaccines distribution, while Sub-Saharan Africa GDP is expected to close the year at 3.1%. Governments and central banks are likely to maintain stimulus packages and different monetary and fiscal policy measures which include reducing interest rates and purchasing assets to inject liquidity into the financial system. Debt is expected to keep rising for most countries.