PPC bullish on Zim currency reforms

PPC South Africa is bullish about the recent monetary policy changes in Zimbabwe, saying they are a positive development towards curbing inflation.
Three weeks ago, central bank governor John Mangudya announced the establishment of an inter-bank foreign exchange market in Zimbabwe to formalise the trading of local bank balances and bond notes — which have been denominated to RTGS dollars — with US dollars and other currencies.
“We view the introduction of a formalised floating foreign exchange market as a positive development toward curbing the high inflation and excessive premiums created by the parallel exchange rates,” the cement producer said.
“The exchange market should result in a more efficient allocation of foreign currency, removing the distortions that were impacting the market, and facilitate the repatriation of cash in the medium to long-term,” PPC said.
Following the governor’s pronouncements, the RTGS$ has become the functional currency in Zimbabwe, with the initial rate being 2,5 RTGS $:1 US$. All foreign liabilities or legacy debts and declared dividends, will be treated separately after registering such transactions with the exchange control department of the reserve bank. PPC reported a cash balance of $63 million at the end of September 2018, which was later reduced to $60 million by a debt repayment at the end of February 2019.
The company said the initial rate of 2,5 RTGS $:1 US$ rate applies only to a portion of the $60 million cash balance, which will now amounts to between US$30 million and US$35 million.
“The remaining balance including US$16 million in dividends and US$5 million rights offer proceeds, qualifies as legacy debt due to PPC RSA which is awaiting repatriation.”
The listed cement maker further indicated that its Zimbabwean unit maintains a good relationship with the monetary authorities and will persist in engaging the regulators and monitoring developments.
PPC said its Zimbabwean operation has remained resilient despite the challenges experienced in the economy over the last 12 months.
“The company has kept its pricing in line with inflationary increases in the economy and demand remains strong. “PPC Zimbabwe continues to follow a rigorous approach to liquidity management and cash preservation,” the company said.
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