SOUTH African packaging firm Nampak Limited’s chief executive Andre De Ruyter says the operating environment in Zimbabwe has remained unstable ever since the country introduced the RTGS dollar.


Nampak Limited operates in Zimbabwe through its subsidiary, Nampak Zimbabwe Limited, which manufactures and markets packaging products such as paper, plastic and metal packaging.

The company noted that the rand value-cash balances in Zimbabwe more than halved to R466 million compared to R1,2 billion at the end of September 2018, due to the introduction of the RTGS dollar which had an exchange rate of 2,5 to the US dollar, leading to a 60% devaluation in the currency against the US dollar.

“Zimbabwe is very difficult to read at this point in time. Following the introduction of the RTGS dollar as the formal official currency as opposed to the US dollar, there has been a devaluation in the currency…We have taken a very conservative approach to our cash, which we have got in Zimbabwe and we have written it down from R723 million (US$49 712 197) to R466 million,” De Ruyter said in an interview with CNBC Africa last week.

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At the end of the six months ending March 31, 2018, Nampak recorded cash on hand of R816 million (US$56 162 454).
“We have, however, got a hedge in place with a sovereign entity in Zimbabwe, which protects us on a 1:1 basis for the cash we have got. But as I have said, we have taken the conservative view, so there could be an upside to our cash in Zimbabwe,” De Ruyter said.

He said the US$57 million owed by Nampak Zimbabwe to Nampak International (“NIL”, a direct subsidiary of Nampak Limited) would be settled in quarterly payments over a three-year period from a US dollar denominated non-resident account established for the benefit of NIL.

“This represents approximately two thirds of the amount owing by NZL to NIL. Despite the aforementioned the group has made the election under IAS21: The Effects of Changes in Foreign Exchange Rates to include all its US dollar loans to its Zimbabwe operations as part of its net foreign investment,” Nampak continued.

IAS21 sets out how to account for transactions in foreign currencies and foreign operations in foreign exchange rates.

“We also supply packaging for the tobacco industry and that is a major foreign currency earner for Zimbabwe, which earns us forex to buy raw materials, so we are able to keep on operating in that country,” he said.

Nampak reported that liquidity from Zimbabwe remained very constrained, and raw materials were being funded by dollars provided by customers, as well as proceeds raised from export sales.