Cassava Smartech suffers ZW$27,5m exchange loss
ZIMBABWE Stock Exchange (ZSE)-listed digital solutions group Cassava Smartech said this week that it suffered ZW$27,5 million (about US$252 000) write-downs during the half year ended August 31, 2021 due to currency volatilities.
The firm said during the same period last year it reported ZW$3,7 billion (about US$33,9 million) exchange rate losses arising from trade-related and other payables.
Introduced in 2019, the local currency has suffered a confidence crisis due to Zimbabwe’s long history of currency volatilities.
The domestic currency collapsed in 2008 after hyperinflation hit 500 billion percent, according to International Monetary Fund estimates.
“Subsequent to the period end, the Zimbabwe dollar (ZW$) significantly depreciated against the United States dollar (USD),” Cassava board chairperson, Sherree Shereni said in a commentary to the financial statements.
“The reviewed condensed consolidated financial statements were authorised for issue on 16 December 2021 when the exchange rate was USD1 to ZW$ 108,67. The depreciation of the exchange rate from USD1 to ZW$ 85,91 at the reporting date, 31 August 2021, increases the impact of exchange losses recognised in the statement or profit and loss and other comprehensive income,” Shereni said.
The currency has also suffered its worst battering on the black market, where it is currently trading at over US$1:ZW$200, from about US$1:ZW$120 in January.
Apart from losses suffered by companies, individual incomes have been extensively eroded, with dire implications on disposable incomes and corporate revenues.
Companies have warned the government to take immediate action before the currency crisis spirals out of control.
The firm said it was scaling up investments into artificial intelligence to maintain an edge over competition.
Shereni said the strategy was anchored on a sound capital and liquidity position, which gives it capacity to improve customer support.
“(Cassava) will continue with its digital transformation journey and is optimistic about the future ahead,” Shereni said.
In the half year under review, the company reported a comprehensive loss of $662 million (about US$6 million) in inflation adjusted terms, an improvement from $2,4 billion (about US$22 million) in the same period prior year.
Cassava said the fintech business remained it’s largest contributor to revenue, constituting 80% of total revenue.
“Management continues to focus on revenue diversification as a strategy for revenue growth. The loss before tax reduced to $27,6 million (about US$250 000) compared to a loss before tax of $1,8 billion (about US$16,5 million) in the prior period on the back of revenue growth, reduced exchange losses and effective cost reduction initiatives that started during the prior year,” Shereni said, adding that management remains focused on leveraging technology to improve operational efficiencies.
Cassava said EcoCash, one of its key units, continued a steady growth trajectory with transaction values and wallet funding on an upward trend compared to the same period last year at 25% and 54%, respectively.
The group also said its banking unit, Steward Bank’s lending strategy yielded positive results as the 127% growth in the loan book from February 2021 spurred the bank’s 293% growth in interest income, compared to the same period last year.