Masholds MD outlines forex strategy

ZIMBABWE Stock Exchange listed property market firm, Mashonaland Holdings Limited says it is pursuing a strategy that will help it expand its footprint into markets trading pre-dominantly in the United States dollars.

Masholds’ US dollar revenue made up 20% of total turnover during the year ended December 31, 2021.

The firm says it will be targeting opportunities in the tourism and hospitality industry, which is one of the biggest foreign currency earners in the country.

Annual tourism revenue reached about US$3,5 billion in 2019, before the Covid-19 outbreak two years later unsettled scores of operators.

Still market players remain confident of the sector’s prospects.

Many see a rebound in the industry as governments’ interventions put the pandemic under control.

Masholds managing director (MD), Gibson Mapfidza told this publication that the company also intended to expand its residential portfolio holdings from the current 4% to 15%.

Mapfidza said returns in US dollars were compelling.

In addition, he said the strategy the firm was taking was crucial in helping the country address growing housing shortages.

“Most transactions within the residential market, whether freehold or leasehold sales, are taking place in the more stable currency as well,” the Masholds MD told Standardbusiness.

“So, increasing our investments in the housing market enables us to do well whilst doing good.

“As we diversify our portfolio, we deliberately target to grow our footprint within the sub-markets and geographies trading predominantly in the US dollar currency.

“Our high appetite in new developments requires us to generate more revenue in US dollars as building materials are being sold predominantly in that currency.

“Most of the businesses generating US dollar revenues operate in the retail sector of the economy.

“Our diversification thrust is meant to progressively grow our 7% current portfolio retail weighting to 30% as per our model portfolio mix.”

However, the Masholds MD bemoaned arbitrage in the sector, which has been buoyed by persistent disparities between the Reserve Bank of Zimbabwe (RBZ)’s foreign currency auction system rates and those obtaining on the black market.

These disparities were tempting some of the company’s tenants to pay rentals in Zimbabwe dollars, yet they generate US dollar revenues.

“Given that we incur US dollar costs in our construction projects, the arbitrage negatively affects our business model,” Mapfidze said

“Whilst the economy and the property market specifically are faced with perennial challenges, the property market still provides opportunities for growth and favourable returns.

“The challenge for investors has been the policy inconsistencies and yet the nature of the asset class, unlike equity portfolios, is such that it cannot be re-modelled quickly enough to re-align with the ever-changing policies. As such, a stable economy and a consistency policy framework would greatly improve performance.”

He said there had been a lot of arbitrage in the property market brought about by the unsustainable gap between the RBZ auction rate and parallel market rate, which is solely used by building materials suppliers.

What it means, according to Mapfidza is that the general building fabric deteriorates over time as property owners receiving rentals at the RBZ auction rate cannot keep up with building maintenance requirements priced at the parallel market rate.

The short-term occupier gains through the arbitrage, thus affecting the long-term functionality and liveability of the buildings.