The country’s biggest cigarette manufacturing company, British American Tobacco (BAT) Zimbabwe, says it failed to repatriate US$15,1 million in offshore dividends during the previous financial year, compounding its liabilities, as the foreign currency crisis worsens, the Zimbabwe Independent can report.
This comes after BAT Zimbabwe registered its US$22 million legacy liabilities with the Reserve Bank of Zimbabwe (RBZ), as the company anxiously seeks to clear the debt off its books. The liabilities comprise foreign dividends and other offshore payments. Zimbabwe’s private sector is saddled with external loans it has failed to service due to a crippling US dollar shortage, which has seen it reintroduce local currency and ban transactions in forex.
BAT Zimbabwe’s head of legal and external affairs, Mdu Lokotfwako, said the cigarette manufacturer had approached the RBZ to expedite the payment of the foreign debt that includes outstanding dividends.
“We are in the process of registering our outstanding historic foreign liabilities comprising of foreign dividends and other foreign payments with our bankers in terms of the RBZ directive relating to settlement of legacy debt. Unpaid foreign dividend is about US$15,1 million of our total legacy debt,” Lokotfwako told the Independent in emailed responses.
Last year, BAT Zimbabwe said it was looking into ways of utilising dividend funds belonging to its major shareholder, British American Tobacco Plc, following the local company’s failure to repatriate pay-outs.
This included ploughing the funds back into the business to preserve value.
Treasury last month indicated it would use Brady bonds to expunge approximately US$1,2 billion worth of external private sector legacy debts as government moved to restore investor confidence in the country.
Brady bonds are bonds that are issued by the governments of developing countries and are the most liquid in emerging market securities. BAT added that the company’s operations had been hampered by the growing foreign currency crisis where the cigarette manufacturer is struggling to pay for packaging materials.
“Like any other company in Zimbabwe, we are facing challenges with respect to making payments for our packaging materials. We continue to actively participate on the interbank through our bankers,” Lokotfwako said.
Lokotfwako said the quality of Zimbabwean tobacco had been hampered by the protracted dry spell during the 2018/19 agricultural season.
“Zimbabwe produces a reasonably competitive and good quality crop. The leaf from Zimbabwe is used to blend some of the leading brands globally due to its fine flavour. Having said that the 2019 crop in particular was affected by a prolonged dry spell experienced during the farming season which compromised the yield in some areas of the country,” Lokotfwako said.
During the year under review, the company registered a 14,6% increase in after-tax profit to ZWL$8,5 million from ZWL$7,4 million the previous year, for the half-year ended June 30, 2019 driven by an increase in revenue generation.
BAT recorded a 20% decrease in volumes on the back of reduced consumer disposable incomes due to economic hardships being experienced in the country.
Revenue grew by 48% due to price increases in order to cover rising costs, while gross profit increased by 61% to ZWL$23,5 million from ZWL$14,6 million the previous year driven by positive impact of raw materials purchased at lower costs.