Econet demand for forex continues to bulk
ECONET Wireless Zimbabwe (EWZ) has hinted that it will continue to find opportunities to access foreign currency to finance its tasks immensely reliant on forex. Companies in the telecommunications sector are significantly dependent on imported equipment and accessories that makes their forex demands high.
In the trading update for the third quarter to November 2022, EWZ group company secretary, Charles Banda, said the mobile network operator will continue to rummage for initiatives that will assist the organisation to secure foreign currency required for delivery of the latest technology. The modern technology enables the business to offer world-class services to its clientele.
Foreign currency is needed to settle foreign obligations mostly with vendors who provide equipment and systems used to run the network.
Locally, demand for payment in foreign currency has also been on the increase compounded by incessant power outages that now compel the business to rely on alternative sources of power like diesel generators whose fuel is procured largely in US dollars to power base stations.
According to EWZ most base stations run on electricity but have lately grown to rely on diesel generators due to load-shedding, making it hard to provide quality services.
Reserve Bank of Zimbabwe (RBZ) has been doing its part by availing some of the foreign currency, but of course, that has not been enough, given that operating costs continue on the rise.
In its first quarter trading update last year, Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ) implored the government to consider prioritising foreign currency allocations to mobile network operators as operating costs continue to increase surpassing revenue growth due to inflation.
However, this is coming at a time when the RBZ monetary policy statement indicated that the structure of currency composition in transactional activities in the retail and wholesale sectors averagely stood at 66 percent US dollar sales.
Banda, the EWZ group company secretary highlighted that the local telecommunications industry has overall been struggling to meet the capacity and coverage demands of consumers as capacity enhancements and routine maintenance remained severely constrained by the lack of access to foreign currency to service foreign network suppliers.
“The Group will continue to seek opportunities to access foreign currency upon which the majority of our initiatives are dependent. As our customers demand better digital experiences in line with global trends, we will leverage our experience and culture of innovation to respond to these demands.
“Although the business continued to witness an increase in demand for its services, foreign currency availability for servicing our foreign suppliers has continued to be a major challenge and has hampered our ability to implement much needed network maintenance expansion,” Banda said.
Banda highlighted that the growing use of the USD in the local economy was likely going to grant more access to the sought after foreign currency.
“Whilst the Company has started to see growth in the proportion of USD denominated sales to local customers, we have observed that other consumer facing businesses are now selling more than 60 percent of their products and services in US dollars. If this trend continues, we expect it to ease our challenges in terms of paying key suppliers,” he added.
Telecommunications sector remains fundamental to the country’s economic growth given that it is an essential enabler for other sectors as envisioned by the National Development Strategy 1 (NDS) thus need to enhance aspects that prop up the sector’s performance.
But the relentless power outages and increase in fuel prices have seen market players lose revenue in real terms as working capital continues to grow at a rate that exceeds income growth, leading to reduced network investment.
The Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ) has repeatedly bemoaned the recurring load shedding saying it was exacerbating glitches in the network distribution process.
According to POTRAZ director general, Dr Gift Machengete, mobile network operators have been experiencing power outages for several hours per day.
“The increased power blackouts have posed a serious challenge to operational efficiencies, impacting the overall quality of service and raising the cost of service provision,” said Machengete.
However, despite challenges, EWZ revenue improved by nine percent in inflation-adjusted terms compared to the same period in prior year.
Improvement in the company’s income was credited to volume growth in voice and data uptake, albeit tariffs which were overwhelmed by raging inflation in the period.
Voice and data volumes for the nine months to November 2022, grew by 32 percent and 46 percent respectively compared to the previous year notwithstanding challenges.
Meanwhile, the general sentiment in the local telecommunications sector is that the current telecom tariffs remain below regional benchmarks, hence the underinvestment in the sector.