Delta Corporation calls on Govt to eliminate excess liquidity

ZIMBABWE’S largest beverages producer, Delta Corporation, has called on Government to implement measures that will eliminate excess liquidity in the economy without compromising national savings and market confidence.

The country is saddled with close to $10 billion electronic deposits, which the Reserve Bank of Zimbabwe has said are not backed by real money and are to blame for fuelling inflationary pressures.

Delta board chairman, Mr Canaan Dube, said in a statement accompanying the group’s financial results for the period ended 30 September 2018, that their company was supportive of the reforms being implemented by Government to transform the economy.

“The monetary and expansionary fiscal policies have brought the economy to disequilibrium. Government should take steps to sterilise excess liquidity without compromising national savings and market confidence.

“It is not enough for Government to acknowledge the fact, and pronounce policy changes but to show commitment and take steps to correct the situation,” said Mr Dube.

“The country needs to live within its means and implement business friendly policies to deliver the Zimbabwe we all want. The realisation by Government that excessive dependence on borrowings is not sustainable is a welcome development.”

Delta has said it will continue to act in a manner that is supportive of the reform agenda as announced by Government with business focused on capturing growth opportunities despite the macro environment being replete with risks.

“The shortage of foreign currency continues to materially disrupt the smooth operations of the business as evidenced by the periodic stock out situation in the market,” said Mr Dube.

He said Delta has maintained stable retail prices since 2013 and exceptional performance despite the currency shortages that have slowed some of its brands businesses.

He acknowledged rising consumer demand due to increased economic activity in mining and agriculture, expansionary fiscal and monetary policies. Mr Dube said during the period, Delta posted an exceptional performance notwithstanding the currency shortages that slowed the Chibuku and soft drinks businesses.

“Post the end of the reporting period, the fiscal and monetary policy pronouncements have been dampened by contradictory statements on the multicurrency framework. In addition, the two percent transaction tax took both business and consumers by surprise, raising policy risks and undermining market confidence,” he said.

Government is already implementing a string of austerity measures which have started bearing fruit on the fiscal budget deficit front while the two percent tax is also proving to be helpful in revenue generation.

Delta, however, said Government and regulators should engage stakeholders ahead of major policy pronouncements in order to maintain market confidence.

During the period under review, Delta’s operating income increased by 73 percent to $65,6 million over prior year driven by a 54 percent increase in lager beer volume and a buoyant Chibuku Super contribution in the sorghum beer category. Sparkling beverages were most affected by the inability to access foreign currency for raw materials. The company’s revenue also increased by 37 percent to $341,4 million compared to $250 million as at September 30, 2017.

In the period under review, the company recorded a profit before tax of $75,8 million compared to $43 million in the same period last year.