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Investors put off by inflation, Dawn

DAWN Properties Ltd says investors are still interested in the property market but they are dissuaded by the high risk caused by the country’s galloping inflation.

“>The listed property concern said in the interim, the level of development and associated risks continue to rise to unmanageable levels in sympathy with inflation.

“This trend has constrained our growth initiatives,” Farai Rwodzi, the chairman of Dawn said in the company’s unaudited financial results for the year ended September 30.

“Currently indications are that the market has appetite and cash to invest in brick and mortar and this augurs well for a capital raising exercise,” he said.

“However, in the view of the hyperinflationary environment the potential loss in value of the proceeds is discouraging,” Rwodzi said.

He said maintaining the status quo in the short-term was a more viable option. Recently the Central Statistical Office announced an increase in the inflation rate of 51,2 percentage points to 411% last month.

Reserve Bank of Zimbabwe governor, Gideon Gono, has shifted his inflation forecasts for year-end from between 20-35% earlier this year to 280-300%.

Rwodzi said volumes were likely to remain depressed in the foreseeable future although revenues would benefit from the higher foreign exchange rate.

He said the decision by the monetary authorities to gradually move to a market economy would stimulate production if appropriately supported by other measures and all stakeholders.

Last month Gono phased out the foreign currency auction, which economists said was not operating profitably due to too much interference and introduced the interbank rate system.

Dawn is listed on the Zimbabwe Stock Exchange and is a subsidiary of hotel and leisure group, Zimsun.

The company’s revenue for the six months ended September 30 grew ahead of costs with an improved cost to revenue ratio of 43% compared to last year’s ratio of 64%.

“Our revenue streams are set to improve in the second half when we expect all lease agreements to have been rationalised in line with the market,” Rwodzi said. – Staff Writer.

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