Currency crisis costs Cassava $2 billion

TECHNOLOGIES giant, Cassava Smartech says it suffered $2 billion in exchange losses during its first full year of operations after the volatile Zimbabwe dollar struggled to hold its turf against the greenback.

Cassava was only four months old in February 2019 when authorities initiated radical currency reforms that ended with the return of the Zimbabwe dollar as the sole medium of exchange for domestic transactions in June last year.

But the currency hit turbulences as soon as it entered circulation, surrendering value to about US$1:$160 in the first quarter of this year, from US$1:$2,50 on introduction.

It has since regained lost ground after the introduction of a foreign currency auction market five months ago, which bolstered its recovery to about US$1:$81.

In a commentary accompanying the financial statements for the year ended February 29, 2020, Cassava said these volatilities affected its operations.

“The continued depreciation of the Zimbabwe dollar against the United States dollar had a significant impact on our financial performance as we realised foreign exchange losses amounting to $2 billion,” board chairperson, Sherree Gladys Shereni said on Friday.

She said revenues rose by 43% to $4,6 billion, compared to $1,1 billion during the four months to February 2019.

Mobile money and banking businesses contributed 89% of the revenues, from 91% previously.

Cassava’s gross profit margin rose 68% from 57% in 2019, while earnings before interest, tax, depreciation and amortisation margin defied Zimbabwe’s economic crisis, rising to 29%, from 27% previously.

Last week’s financial statements represented the group’s first full year of operations after coming into existence in November 2018.

Subsequent to its establishment, Cassava traded for only four months.

But the review period was difficult for the firm that superintends over Zimbabwe’s largest mobile money transfer outfit, EcoCash.

EcoCash ran into troubles with authorities, resulting in delays in releasing the financial statements.

“The business revalued its property and equipment for the year ended 29 February 2020 as the associated value in Zimbabwe dollars was no longer meaningful due to inflation. Most of the group’s tangible and intangible assets were procured in foreign currency. At the reporting date, the group had net foreign liabilities amounting to US$42,8 million, of which US$30,5 million comprises the group’s 50% allocation of the overall liability in the debentures issued by Econet Wireless Zimbabwe Limited,” Shereni said.

We are operating in a volatile, uncertain, complex and ambiguous environment which calls for new ways of managing risks while preserving shareholder value. We will continue seeking opportunities that grow shareholder value and allow us to build a sustainable, competitive advantage in the market, based on the key strategic pillars which are staff engagement and development, customer experience, innovation, transparent and fair corporate governance practices, world class financial performance, sustained corporate social investment and enhanced risk management.”