Govt must open up the market in a way that is reasonable for everybody to access foreign currency freely, without prohibitive regulations.
Plastic manufacturer Proplastics remains optimistic of a bright future regardless of the foreign currency woes and numerous other problems that the country continues to face. Business reporters Melody Chikono and Kuda Chideme (ZI) this week caught up with Proplastics CEO Kuda Chigiya (KC) to discuss this and other issues. Below are excerpts of the interview:
ZI: You indicated that you do not foresee improvement in the foreign currency availability situation. Besides this issue, what other problems are you facing?
KC: At the moment I think the shortage of foreign currency is the single largest challenge. The other internal ones are within our control and as management we have strategies in place to deal with them as and when they arise.
Last year, we were actually getting full allocations from the Reserve Bank of Zimbabwe (RBZ), but that dried up by the time we were trying to find strategies to cover the gap from the non-availability of foreign currency from the central bank. We actually incurred supply gaps that may amount to a month’s supply of sales that translate to about US$1,5 million worth of sales that we have lost in the first half.
ZI: Some companies have been struggling to remit dividends to their offshore shareholders. What’s your position?
KC: We have significant shareholders that require dividend payouts in hard currency and it’s a challenge going forward, but we have also noticed that our foreign shareholders have also interests in the local market. It is our hope that the situation will return to normal so that they can reap the benefits of investing in our business. At the moment we do not owe them anything. We have paid them using their local accounts.
ZI: You indicated about 70 to 75% requirements of the new factory you are constructing are forex-funded. How much are you looking at?
KC: The factory construction itself is approximately a US$6-million project. You are looking at not less than US$4,5 million going into forex requirements.
ZI: What has been the impact of plastic imports on your business?
KC: There is still filtration. The borders are still porous. It is our hope that the powers that be put control mechanisms in place, such that we can bolster our capacity and finish such projects as the factory construction that we are carrying out. This will enable us to complete it within a short period of time. That is the reason why such punitive measures should be put in place and we should ride on them.
They are meant mostly to protect us, with the intention of making us more competitive. Once we are competitive, we then open up the borders and compete with other markets.
ZI: Concerning capital, do you have any capital raising initiatives on the ground or you are content with the capital you have.
KC: At the moment, with the support that we are receiving from our bankers and the performance of the business in general, we will be able to pull all the capital requirements without having to resort to sourcing new financiers.
ZI: What are your capex requirements at the moment?
KC: Currently, most of the capital is work in progress and we are sitting at just under US$800 000 United States dollars. Our bankers have been very supportive and the US$800 000 that is sitting in work in progress has already been paid for.
ZI: Let’s talk about your capacity utilisation. What are you sitting at and what’s your outlook?
KC: Because of the initiative that was put in our plant, in terms of maintenance, our availability is at 93%, which is quite commendable, so the plant is ready to run at any given time. In terms of utilisation, we are at around 60% .
Because the economy has been slow in general, utilisation is demand-driven, so as soon as demand starts picking up and return to normalcy, we foresee our capacity utilisation improving significantly.
ZI: What’s your comment on the current political environment in line with your business?
KC: It is very unfortunate and I think it is sad. As a business we require normalcy. We have been in this situation for a long time, we have suffered enough. It is our wish that we have a normal and favourable trading environment that allows this economy to grow. We pray for the powers that be to come to an arrangement that will ensure that the economy is back on its feet again.
ZI: What are recommendations to government, specifically in line with your kind of business?
KC: Our recommendation to government at the moment is that we require foreign currency and it is not available in the market. When it is available, it is very expensive.
They must open up the market in a way that it is reasonable for everybody to access foreign currency freely, without prohibitive regulations.
ZI: concerning turnover what’s your outlook and what has been the drivers to an increase in the turnover in the current period.
KC: Management has out a lot of initiatives in terms of engaging our customers directly through B2B, customer relationship management, key account management. It is that level of one on one engagement that has managed to see us getting orders from customers irrespective of the pricing between us and the foreign suppliers.
So it goes down to the efficiency and the customer level agreements that we have with our customers that make them repeat doing business with us.
We are quite ambitious. Overall, from the previous year we are looking at a growth We are looking at growth of 56 % from the previous year that will give us turnover of about US$25 million.
ZI: You spoke about Zambia as your export market. Is it the only one you have?
KC: Zambia is a low hanging fruit. Its distance and convenience of Zambia it gives us the opportunity to leap from much more easier than other territories like DRC Malawi and Mozambique.
In the long run we are looking at broadening our market we actually begin those initiatives. At the moment we are carrying out market survey in Zambia to see its competitive dynamics. That will be followed by DRC and Mozambique. Then we can see exactly strategically where we are going to focus on in terms of exports.