‘Irvine’s pleads to retain 100 percent’
Financial Gazette
27/2/2020
Irvines Zimbabwe is one of the largest protein food producers in the country. The company requires in excess of US$45 million to import its monthly requirements of inputs such as maize, soya beans but like most companies operating in Zimbabwe, failure to access foreign currency remains a threat to operations. Nelson Gahadza (NG), our reporter, spoke to the company chief executive, David Irvine (DI), about how the company is addressing these and other challenges. Below are excerpts of the interview.
NG: You spoke on the need to retain at least 100 percent of your export receipts, is this feasible considering government is also trying to raise the foreign currency?
DI: We are going to push export sales, but to be able to do it, I am going to need more inputs, such as seed, stock feed ingredients, money for the genetics. 1 want to put a guarantee to the Reserve Bank of Zimbabwe (RBZ) that any extra money that we get from the export retention is going to be put into this (inn and new technology in order to boost egg production.
Egg production is in short supply even though we are producing record numbers of eggs. 1 think we need extra 100 000 eggs a day and to achieve that, we need foreign exchange. We also need foreign currency to expand the refrigeration.
We want to increase the capacity of the hatcher and we have constructed the building from local inputs, but we now need incubators and they come from North America. These will add an extra 250 000 chicks per week and all those chicks will be in the commercial side.
NG: Are your foreign businesses not able to help you with the required foreign currency?
DI: No, it’s a totally separate business. Business here is owned by Irvine’s and Innscor Africa, and business in the region has third parties. The biggest party in the African business is Tyson Foods of America, who are the biggest meat producers in the world doing over 40 million chickens a week. We have a technical tie up with them. A number of our staff have had technical courses there. So I can’t move money belonging to other parties here.
NG: How much in terms of foreign currency do you require per month?
DI: Approximately, we need about US$45 million including for capital expenditure. We are struggling to bring in soya and maize which we are importing, but we have been able to maintain feed stock production at between 8 000 and 10 000 tonnes per month. Therefore, to maintain the production level, we require a lot of foreign currency.
NG: What is your comment on the issue of taxing of exports? DI: We are told that we are going to have to pay tax on exports, but I am not sure how that is going to work. It has not been implemented yet. If that is done, it is not fair. We need the exports more as a country. Government also need to incentivise them, give tax holidays for people doing it. in other words, if I export US$1 million, they are going to say the tax on that is 10 percent, US$100 000 in foreign exchange.
NG: What has been the impact of the re-introduction of the local currency to your business?
PI: The biggest problem that we have with local currency is that it’s not holding value. We are required by law to sell in Zimbabwean; dollars, but there is little cash around, and it all goes into the banking system. So if I need foreign exchange, I will go and buy at exorbitant rates.
NG: So would that make business sense to re-dollarise the economy?
DI: If we could be allowed to trade in US Dollar, it could make business sense. We were some time ago trading with both currencies, and it made sense and we were comfortable as a business. So, selling in the local currency has impacted our business hard. The biggest absorber of foreign currency in this company is the feed mill. Every input for the mill is imported. These include soya beans, maize other ingredients.
NG: How much of an impact has the decline in disposable incomes had on your operations?
DI: Disposable incomes in real terms are lower now and this has affected our sales. As you know most of our raw materials is imported, so it means a portion of the company’s base costs are indexed in US Dollar, but salaries are not. So if you could buy two chickens back then, you can now buy one, and it has a massive impact on demand. But despite that we are still producing at full capacity, be eggs, chicken or feed stock.
NG: What is your split in terms of exports and local sales?
DI: Currently its less than 10 percent exports, but we are making an effort to increase, our exports through .our colleagues in South Africa.