Chairperson’s Statement
The success of our business is predicated upon the stability, efficiency and effectiveness of our technology platforms
Introduction
Cassava Smartech Zimbabwe Limited continues its development of innovative digital solutions to provide and improve convenience in the lives of people in Zimbabwe. Our model is built on providing digital solutions to the day-to-day challenges faced by our customers. Our understanding of the local market, the dedication and skill of our staff and the ecosystem that we have built afford us the advantage to continue creating value for our shareholders and support the economic development of Zimbabwe.
Regulatory Overview
Subsequent to the reporting date, there have been a number of regulatory pronouncements and policy changes mainly affecting our fintech business segment. We continue working with the authorities to implement processes and policies that enhance the integrity of the financial system. Whilst the forensic audit being carried out on Ecocash and other mobile money operators in Zimbabwe is yet to be finalised, in the best interests of our stakeholders, the board has taken the view to release the Group’s audited financial statements. As a good corporate citizen, we consistently strive to operate in compliance with all regulatory requirements and continuously upgrade our systems in order to address changes in our regulatory, operating and macro-economic environment.
Financial Reporting in Hyperinflationary Economies
Having assessed the impact of hyperinflation in the economy, the Public Accountants and Auditors Board (PAAB) advised that the conditions for adopting International Accounting Standard (IAS 29): Financial Reporting in Hyperinflationary Economies had been satisfied with effect from 1 July 2019. Both historic cost and inflation adjusted financial figures have been prepared and presented, in line with the requirements of International Financial Reporting Standards, in particular, IAS 29 and the recommendations from PAAB.
Financial Performance Review
Comparative Information
Cassava came into existence on 1 November 2018 and the financial year ended 29 February 2020 is Cassava’s first full year of operation. Comparative information presented is, therefore, showing 4 months performance up to February 2019. The inflation adjusted figures have been indexed for comparative purposes, by applying to the prior year historic cost numbers the inflation indices prevailing at the time.
Performance Review (Inflation Adjusted)
Despite the challenges in the obtaining operating environment, Cassava recorded a revenue of ZWL 4.6 billion, compared to four months revenue for the period ended February 2019 of ZWL 1.1 billion. Mobile Money and Banking businesses contributed 89% (FY19: 91%) of total revenue for the year. The decline in percentage contribution for the Fintech business segment reflects the positive effects of the group’s revenue diversification strategy. The ongoing transformation of the business within Cassava remains a priority as we work on scaling up the new businesses and diversifying our revenue earnings for sustainability. The growth was largely driven by the digital on-demand agriculture platform catering for both small holder and large scale commercial farmers, as well as the non-motor business for the short term insurance business unit. Our Life business (EcoSure) maintained solid performance, anchored on innovative digital on-boarding platforms, as well as enhanced product mix to cater for the cross profile of the segments we service.
Cassava recorded an increase in gross profit margin to 68% from 57% in 2019 and in the EBITDA margin to 29%, from 27% in the prior year. This increase occurred despite the pressure that the economic environment has continued to place on the business margins. To mitigate this, the business embarked on an elaborate cost optimisation drive to complement the revenue generation initiatives being implemented.
The continued depreciation of the Zimbabwe Dollar against the United States dollar had a significant impact on our financial performance as we realised foreign exchange losses amounting to ZWL 2.0 billion. At the reporting date, the Group had net foreign liabilities amounting to US$ 42.8 million, of which US$ 30.5 million comprise of the Cassava’s 50% allocation of the overall liability in the debentures issued by Econet Wireless Zimbabwe Limited.
The business revalued its property and equipment for the year ended 29 February 2020 as the associated value in Zimbabwe Dollars was no longer meaningful due to inflation. Most of the Cassava’s tangible and intangible assets were procured in foreign currency. Our revaluation approach is explained in the notes to the detailed financial statements.
The Directors are aware of the fact that certain distortions may arise due to divergent interpretation of specific economic factors that may affect the relevance and reliability of information presented in a hyperinflationary environment. These potential distortions are addressed in more detail in the Integrated Annual Report. Stakeholders are, therefore, advised to exercise caution in relying on these financial results.
Our Growth Strategy
The success of our business is predicated upon the stability, efficiency and effectiveness of our technology platforms. Cassava is cognisant that our customers entrust their confidence to us based on our continued ability to deliver a consistently high quality of service.
Cassava experienced a rapid increase in the volume and value of transactions being processed on mobile and digital banking platforms as more customers continued to favour these channels due to their convenience and availability. This necessitated the upgrade of the Ecocash platform in order to improve the ability to handle the increase in the volume and value of transactions, in line with the economic developments. As a result of the successful conclusion of this major upgrade, the experience of our customers as they use EcoCash has dramatically improved as measured by speed of transacting and the near 100% rate of successful transaction completion. In the next financial year, Cassava has also embarked on a banking system upgrade which will improve customer service whilst enhancing the bank’s operational efficiency. We always aim to have robust, world class digital infrastructure in line with our corporate thrust: Life is digital.
Cassava also continues to invest in enhanced security and monitoring tools for all our systems. Various new products and services were launched within our On-Demand Services (ODS) strategic business unit.
We also continue to invest in the core skills required to drive the business forward, with sustained development programmes running across all levels for a digital ready workforce.
Social Investment
Cassava has adopted the UN Global Compact 10 Principles on human rights, labour, environment and anti-corruption to advance the broader Sustainable Development Goals, as part of our commitment to continue actively participating in society and giving back to one of our most important stakeholders, the community. In the period under review, Cassava participated in a number of social transformation activities which included; Cyclone Idai disaster relief, Zimbabwe netball team sponsorship, offering free transport for doctors who were on strike, the Maisha cancer treatment fund, free water delivery to selected hospitals and basic computer literacy training for the under privileged girls.
Corporate Governance
We held our inaugural Annual General meeting on the 30th of October 2019. The Board of Directors would like to express its sincere gratitude for the support shown by our shareholders.
Pursuant to changes in the Board composition following the Company’s inaugural Annual General meeting, the Board Committees were duly reconfigured and further disclosures on the composition of the various board committees are included in the corporate governance section of the annual report.
It was with great humility that I accepted the appointment as Cassava Smartech Board Chairperson effective 17 December 2019. I thank my fellow board members for the confidence and faith placed in my leadership and will work with fellow board members and management to deliver on our promise to both shareholders and our customers.
Outlook
We are operating in a Volatile, Uncertain, Complex and Ambiguous (VUCA) environment which calls for new ways of managing risks whilst preserving shareholder value.
We will continue seeking opportunities that grow shareholder value and allow us to build a sustainable, competitive advantage in the market, based on the key strategic pillars which are staff engagement and development, customer experience, innovation, transparent and fair corporate governance practices, world class financial performance, sustained corporate social investment and enhanced risk management.
Appreciation
The Board would like to extend its appreciation to our customers who have continued to support us and made it possible for Cassava to deliver exceptional results despite the difficult operating environment. I also take this opportunity to thank our shareholders, strategic business partners and regulatory authorities for their support and continued trust in Cassava throughout the period. I would like to thank our management and staff for their unwavering commitment to the success of Cassava despite the difficult operating environment. The Board is confident that the team will continue to drive business performance to grow our business into the future.
Dividend Declaration
Cognisant of the prevailing macro-economic fundamentals and the need to hedge the Company against the negative effects of the foreign currency translation adjustments on the bottom line, the Board resolved not to declare a dividend for the year ended 29 February 2020.
On behalf of the Board
Mrs. Sherree Shereni
CHAIRPERSON OF THE BOARD
30 October 2020
Download the Cassava Smartech Zimbabwe Limited 2020 Annual Report.pdf
