Chairman’s Statement
ECONOMIC OVERVIEW
The Zimbabwe economy is estimated to have contracted by 7% in 2019 (2018:+4% growth) due to subdued performance in the key sectors of agriculture, mining and manufacturing.
Agricultural output
shrank due to the drought in the 2018-2019 season and Cyclone Idai in March 2019. Despite recovery in global mineral prices, mining was negatively affected by power shortages and a drop in production volumes compared to 2018. The drought was a key factor in diminished national power output at the Kariba Hydroelectric Power Station. The economy was also negatively affected by continuing shortages of foreign currency and fuel.
Subsequent to the floating of the Real Time Gross Settlement dollar (“RTGS$”) against international currencies in February 2019, the Zimbabwe Dollar (“ZWL or $”) was introduced as a monocurrency in June 2019. The migration from a multiple currency environment to the mono-currency environment, which commenced with the introduction of the RTGS dollar in October 2018, coincided with a spike in year-on-year inflation to 42% in December 2018. The inflation rate continued to rise and closed the year at 521% in December 2019.
The mainstream equities market on the Zimbabwe Stock Exchange (“ZSE”) all share index increased by 57% (2018: 51%) for the year. The sub-inflationary performance was mainly due to diminished foreign investor interest as well as declining production volume performance by some major listed entities.
Notwithstanding the difficult operating environment, the Group invested in future growth across the business units and also expanded into new areas such as microfinance and funeral services which are closely aligned to its current operations.
MONETARY AND FISCAL DEVELOPMENTS
At the beginning of the year Zimbabwe was using a multi-currency system with RTGS bank balances and bond notes at an exchange rate of 1:1 with the United States of America Dollar (“USD”). On 22 February 2019, the Reserve Bank of Zimbabwe (“RBZ”) floated the local currency at an introductory rate of USD1:RTGS$2.5 through Statutory Instrument (“SI”) 33 of 2019. On 24 June 2019 the multi-currency system was abolished in favour of the ZWL as a mono-currency, through SI 142 of 2019.
These developments had various impacts on the Group with insurance subsidiaries precluded from writing local USD denominated policies with effect from 24 June 2019.
The Group was also exposed to foreign obligations relating to periods prior to 22 February 2019 (“legacy debts”) when the USD and RTGS$ were segregated. The legacy debts amounting to USD1.9 million which arose from retrocession premiums, regional claims and information technology costs were submitted to the RBZ for approval. These liabilities have been recorded in the financial statements at the interbank rate.
HYPERINFLATIONARY REPORTING
On 11 October 2019 the Public Accountants and Auditors Board (“PAAB”) issued pronouncement 01/2019 which advised that there was broad market consensus within the accounting and auditing professions that the factors and characteristics to apply International Accounting Standard (“IAS”) 29 – Financial Reporting in Hyperinflationary Economies in Zimbabwe had been met effective 1 July 2019. As a result, the financial statements show both inflation adjusted and historical cost information.
FINANCIAL PERFORMANCE
During the period under review, the Group achieved significant revenue growth but also faced increased operating expenses due to inflationary pressures.
Statement of comprehensive income
GPW decreased by 11% from prior year and increased in historical cost terms by 213% due to revision of sums insured in sympathy with the movement in the USD: ZWL exchange rate and the prevailing high inflation.
Rental income for the year amounted to $52.5 million and was ahead of prior year by 3% in inflation adjusted terms and by 203% in historical cost terms. The growth, relative to prior year, is due to quarterly rental reviews and increases in occupancy rates in retail and residential properties.
DIVIDEND
The Board resolved that a final dividend of ZWL0.35 cents per share be declared in respect of all ordinary shares of the Company, bringing the total dividend for the year ended 31 December 2019 to ZWL0.55 cents per share. The dividend will be payable on or about 12 June 2020 to all shareholders of the Company registered at close of business on 29 May 2020. The shares of the Company will be traded cum-dividend on the ZSE up to the market day of 26 May 2020 and ex-dividend as from 27 May 2020.
APPRECIATION
On behalf of the Board, I would like to extend my gratitude to all employees for a commendable performance in the current difficult economic environment. In addition, my appreciation goes to fellow board members, customers, regulators and other stakeholders for their contribution to Group efforts.
Oliver Mtasa
Chairman
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