BY TAFADZWA MHLANGA
CASSAVA Smartech Zimbabwe Limited (CSZL) realised foreign exchange losses of $506 million for the half year ended August 31, 2019, due to the continuous depreciation of the local currency.
Cassava Smartech Zimbabwe Limited focuses on mobile money, digital banking, insurtech and on demand services, offering insurance, finance, health, education, agriculture, e-commerce, social payments.
“The continued depreciation of the Zimbabwe dollar against the United States dollar had a significant impact on our financial performance as we had to recognise foreign exchange losses amounting to $506 million,” said CSZL’s board chairperson Sherree Shereni, in a statement accompanying the company’s financial results for the half year ended August 31, 2019.
The depreciation of the Zimbabwe dollar was due to the currency being reintroduced as the sole legal tender despite lacking adequate foreign currency, mineral or market backing.
“This translation loss was exacerbated by the decision in the financial year ended 28 February 2019 to account for all debentures as though they were all US dollar denominated instruments,” Shereni said.
“The group has net foreign liabilities amounting to US$45 million, of which US$30 million comprise the group’s 50% portion of the debentures issued when the group was still part of Econet Wireless Zimbabwe Limited.”
In corporate finance, a debenture is a medium- to long-term debt instrument used by large companies to borrow money, at a fixed rate of interest.
During the year ended February 28, 2019 Econet made an offer to debenture holders to convert 1 166 906 618 debentures into new ordinary shares at a conversion of 93,3 new ordinary shares to every 100 debentures.
The move was meant to increase the company’s capital.
“The first six months of the current financial year have been challenging for the group and the Zimbabwean economy as a whole,” Shereni said.
“The operating environment is characterised by a rapidly weakening Zimbabwe dollar, the re-emergence of hyperinflation and foreign currency shortages which have made it almost impossible to settle our critical foreign obligations,” Shereni said.
Shereni added that incessant power cuts and fuel shortages, further negatively impacted on the group’s performance.
In the period under review, CSZL posted a profit of ZWL$3,2 million and the revenue was ZWL$946 million for the half year.
Earnings before interest, tax, depreciation and amortization was ZWL$28 million.
General administrative and other expenses were $113,12 million.
Assets were $3,31 billion.
The group did not present the comparative 2018 financial results for the period under review because CSZL only came into existence in November 2018 following its unbundling from Econet.
Shereni said the group was hoping to enhance the Stewart Bank’s digital platform and was expecting the EcoCash platform to stabilise by year end following some upgrades made to the latter.
This comes as many EcoCash users were having trouble using the mobile money platform after the upgrades.
Mobile money subscribers for the period under review were 10,6 million while the EcoSure insured lives were 2,8 million for the six months. Stewart Bank customers were 1,8 million for the period under review.
During the period, the short-term insurance business, Moovah active policies were