Since Emmerson Mnangagwa won the elections in 2018 in Zimbabwe, the already weak economy in the landlocked country in the South of Africa has even more declined and a severe economic crisis has hardly hit its inhabitants. People cannot even afford their beer as Zimbabwe’s newly-introduced currency has lost about four times its value against the US dollar over the past few months. Imported goods have become so expensive that companies have delayed investments and stopped importing raw materials from abroad.
Delta Corporation, one of Zimbabwe’s biggest beer producers which is part owned by AB InBev has now issued a trading update for the first quarter ended June 30 2019. The company reported a plunge in its lager beer volumes by 57%.Its sparkling beverages division suffered even a 79% sales volumes decline in the same period.
However, sorghum beer which is a cheap alternative to lager beer was slightly up in the quarter. The product is brewed with local raw materials and is therefore not as much affected by the devaluation of the currency.
“The Sorghum beer volumes grew by 2% versus prior year for the quarter ,” Delta said in its statement today. “Product supply has been consistent despite the difficulties in accessing imported packaging materials and services. There are concerns about the supply of agricultural cereals arising from the drought and the recent changes to the marketing policies.”
“For sorghum and barley Delta has not imported in the last 25 years hence saving scarce forex resources. Delta has been self-sufficient and secured these brewing grains from the contract scheme, Delta corporate affairs executive Patricia Murambinda said in June.
“As Delta, we offer farmers on the scheme technical services and farmer training and this has resulted in skills improvement, adoption of optimum production practices leading to improved productivity like yield and grain quality resulting in grower viability,” she said.
“The fundamental changes in the economy arising from the recent fiscal and monetary policies have significantly affected the business.” said the Zimbabwe Stock Exchange-listed beverage and booze maker. “The macro-economic changes have led to a surge in inflation and a fast depreciating exchange rate, which have resulted in the erosion of disposable incomes and reduced consumer spending.”
“Our product prices have not yet factored in the full impact of the depreciation of the exchange rate,” the company said. “Foreign suppliers remain cautious about Zimbabwe country risk thus compromising the smooth flow of imported materials.”
In January, Delta advised their wholesale and retail customers that it will now be selling its products in US Dollars. Shortly after, the government allowed electronical transfer of US dollars in order to dry up the black market (inside.beer, 5.2.2019). Later in April, Delta said it temporarily stopped the construction of its new Sorghum beer brewery in Rusape, 175 km south-east of Zambia capital Harare, due to currency restrictions in the country (inside.beer, 26.4.2019).
Despite the ongoing problems, the worst could already be over. Delta said that it already resumed full production. Acknowledging an improvement on the availability of foreign currency the company said that it still “remains a challenge, disrupting imported supplies into the value chain.”