HomeBusiness DigestInflation sabotages Masimba Holdings projects

Inflation sabotages Masimba Holdings projects

MASIMBA Holdings Ltd says inflationary pressures have forced the group to temporarily shelve some of its key projects and also slowed down the pace of execution on other projects as the situation continues to take its toll on operations.

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Zimbabwe’s year-on-year inflation surged 97,85% in May with economists projecting a 450% by year end buoyed by the introduction of the Zimbabwean dollar on Monday.

Masimba CE Canada Malunga told businessdigest on the side-lines of the company’s AGM last week that the company had identified some opportunities but had seized them yet owing to rising inflation.

Malunga said they had agreed with clients to slow down or suspend some projects in order to suit their cash flows.
“We have identified some of those opportunities and they have been delayed by clients because of the continued inflation that continues to build up,” Malunga said.

“For example, where a project had been estimated to cost say US$5 million as at December or November 2, all of a sudden that project is now estimated to cost between ZWL30 million and any other number that I cannot determine at this stage.”

He added that the company had shifted its focus towards balance sheet preservation through investing into real assets, property, equipment and land banks.

Malunga said the company’s balance sheet was now strong with an enhanced capacity.

He noted that Masimba’s capital expenditure and capital in work in progress amounts to US$1,2 million, adding in the in event of any upturn in the economy, the company would be able to seize the opportunities.

In the 5 months to May 2019, Masimba’s revenue improved by 21% to ZWL17,4 million on prior period while gross profit was slightly up by 14% compared to prior year of 13% mainly attributable to improved efficiencies.

Despite the prevailing economic conditions, the company had a lot of construction related to opportunities but the liquidity risk was now forcing the company to conduct stress test on its key markets in order to gain market share.

A stress test is an analysis or simulation designed to determine the ability of a given financial institution to with stand an economic crisis.

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