Chairperson’s Statement
INTRODUCTION
2020 has seen unprecedented changes in the way business is done globally because of the COVID-19 pandemic. These changes have reaffirmed the importance of our focus on digital solutions that address day to day problems for all Zimbabweans. Cassava Smartech Zimbabwe seeks to “serve where the need is greatest”, a mission which has driven us to provide appropriate and affordable digital solutions to the agriculture, transport and health sectors.
BUSINESS AND REGULATORY ENVIRONMENT
Statutory Instrument (“SI”) 85 of 2020, which was promulgated on 29 March 2020, allows local businesses to receive and pay for local goods and services using foreign currencies. Although the Group’s products and services are largely still being paid for in local currency, the SI has enabled the business to pursue foreign currency revenue generation opportunities for some of our services.
The Reserve Bank of Zimbabwe (“RBZ”) introduced the Foreign Exchange Auction System on 23 June 2020. The Group has been able to get some allocations on the auction system to meet some of our foreign currency commitments, albeit at a very small scale.
There have also been a number of regulatory directives issued by the RBZ during the period under review which have impacted our business. The directives include a revision of customer transaction limits, suspension of certain user and transaction categories, banning of multiple wallets for individuals. In compliance with SI 80 of 2020, EcoCash has now integrated with ZimSwitch, which the RBZ designated as a national switch. The Group has also applied to RBZ for EcoCash to be designated as a national switch.
We continue reviewing our tariffs, which are approved by the regulator, maintaining a balance between inflation, business sustainability and affordability to our customers. The regulator approved a tariff increase in August , which has had a positive effect on business performance. We expect the full effect of these changes to impact our financial performance in the second half of the financial year.
COVID-19
The COVID-19 pandemic has fundamentally changed the way people live, socialise and interact, leaving businesses to simply adapt to the “new normal”. Global capital markets have been severely impacted as a result of the various levels of lockdowns which were instituted the world over since March 2020.
Since the onset of the pandemic, the Group has prioritized the health and welfare of its staff, customers and other stakeholders. As a responsible corporate citizen, we are keenly aware that the health of our entire value chain is a critical component to our success as a business. For this reason, we have been actively engaged in campaigns, together with the Higher Life Foundation, Ministry of Health and Child Care and other partners, to build awareness and reduce the impact of the global pandemic on our customers. Our interventions included over 60,000 free community tests, funeral cover for health workers, fund raising using our mobile money platform and the digital bank, deployment of hand washing basins in communities, free PPE distribution, a toll free Dial-a-Doctor call centre and sanitization services to protect our customers and business partners.
The advent of COVID-19 has also accelerated our digital transformation journey, enabling us to realize cost efficiencies without loss of productivity. We have embraced virtual working by our staff and designed virtual access platforms to continue serving our customers. The Group has taken advantage of this accelerated digital thrust to come up with new products and services that better respond to the evolving needs of our customers.
OPERATIONS REVIEW
Customer Services Focus
Customer service is at the heart of what we do and the first half of the year was focused on improving customer experience as a way of ensuring that our customers’ needs are well taken care of. We focused on developing state of the art systems aimed at improving turn-around times for service delivery across all our brands. Our main aim is to provide responsive, timely service on a consistent basis in the most cost effective manner. During the first half, a number of automation projects were completed and we anticipate significant improvement in our customer service index as these innovations begin to yield results going forward.
Enhancing our technology platforms
The Core Banking System Upgrade at Steward Bank is due to be completed in December 2020 and will be instrumental in driving our bank’s digital agenda. The upgrade will also enhance regulatory compliance initiatives, whilst enhancing Steward Bank’s ability to offer a wider scope of services on its digital platforms.
The new EcoCash system, which we migrated to in the previous financial year, has stabilised and we are proud to announce that all issues that occurred during the change over were adequately resolved. The system now has capacity to complete 450 transactions per second from an average of 200 transactions per second before the upgrade.
FINANCIAL REVIEW
Having adopted IAS 29 (“Financial Reporting in Hyperinflationary Economies”), this review is based on our inflation adjusted financial results. The Group recorded a revenue decline of 34% to ZWL5.4 billion for the six months ended 31 August 2020 (2019 – ZWL8.2 billion). This was mainly as a result of the COVID induced interruptions to economic activity, as well as the pressure from various regulatory pronouncements, both of which had a significant impact on the revenue of the Group. Whilst transaction volumes also declined during lockdown, the lifting of COVID restrictions and subsequent opening up of the economy from August 2020 saw a notable recovery of volumes across all platforms. The full impact of this recovery will be felt in the second half of the financial year. Management focused on cost containment in order to preserve margins.
Exchange losses continue to weigh-down on business performance, with an amount of ZWL2.4 billion having been recorded in the period under review in respect of the foreign obligations that the Group currently has.
Foreign liabilities at the end of the period amounted to US$ 40.1 million, of which US$ 31.4 million comprise of the Group’s obligation with respect to the debentures issued by Econet Wireless Zimbabwe Limited prior to the demerger in 2018.
The contribution of the Fintech business units to the Group’s revenue in the period under review, decreased in line with the revenue diversification strategy of the Group. The Group’s revenue diversification strategy is bearing fruit spurred by the exponential revenue growth in the Insurtech and the Digital On Demand Services (“ODS”) business units. This is a validation of the Group’s smartech business model which augurs well for its future outlook. We will continue to leverage on innovation around on-demand technology platforms to ensure convenience for our customers and value for our shareholders.
EcoCash revenue contribution, at 63% (2019 : 73%) declined, both as a result of macro-economic factors and regulatory changes that took place during the period under review, as well as contribution from the exponential growth in the Insurtech and ODS business units. Steward Bank’s contribution has remained stable and is expected to maintain that revenue share on the back of the system upgrade project due to be completed in December.
OUTLOOK
Our mission is to provide solutions to Zimbabweans that address their everyday needs in an affordable and accessible way using technology. We are excited about the impact the digital customer interfaces launched in the first half, and those planned for launch in the second half, have had on enabling convenience for our customers. The imminent completion of Steward Bank’s systems upgrade in December, together with the just completed EcoCash system upgrade, are key to our digital inclusion focus. We are also excited with the emerging opportunities for the Agritech unit as we explore areas of expansion in this critical pillar of the economy.
Our business model driven by innovation, digitization, data analytics and diversification at its core, will remain the cornerstone of ensuring sustainability in the current challenging economic environment. We believe that will preserve and grow shareholder value by being responsive to the current and future needs of our customers.
APPRECIATION
The Board would like to extend its appreciation to our customers for their unwavering support and their confidence in our brands during these difficult times. Despite the difficult operating environment, our staff have remained committed to the success of the Group and continue to do so with excellence. I would like to take this opportunity to acknowledge their immense contribution even in the face of adverse macroeconomic and regulatory conditions. I also take this opportunity to thank our shareholders, strategic business partners and regulatory authorities for their support throughout the period. Together we can achieve greatness and the Board continues to count on each of you, our valued stakeholders, as it relentlessly drives strategies to grow our business into the future and fulfil our digital transformation promise.
DIVIDEND DECLARATION
Cognisant of the prevailing macro-economic fundamentals, the Board resolved not to declare a dividend for the Half Year ended 31 August 2020 and will review this position at the end of the financial year.
On behalf of the Board
Mrs. S. G. Shereni
Chairman of the Board
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