Zimbabwe Stock Exchange Listed entity Cassava Smartech Zimbabwe Limited (CSZL), which has business interests in mobile money, digital banking, insurtech and on-demand services, reported revenue of ZW$946 million for the half-year ended 31 August 2019.
The published results are inflation-adjusted, in line with International Accounting Standard 29 on Financial Reporting in Hyperinflationary Economies, as recommended by the Public Accountants and Auditors Board.
The results are the group’s first interim results as a stand-alone company, following its demerger from Econet Wireless Zimbabwe in December 2018.
The bulk of the revenue reported, amounting to ZW$723 million, came from its flagship mobile money business Ecocash, which has a subscriber base of 10.6 million.
The digital banking business under Steward Bank contributed ZW$181 million of the revenue while InsurTech contributed ZW$76 million. A record total of 2.8 million people are covered by insurance under one of the Insurtech businesses Ecosure.
Despite operating in a challenging operating environment the Group’s earnings were positive with EBITDA at ZW$28 million, while profit for the six months amounted to $3.2 million on a hyper-inflation adjusted basis.
In a statement accompanying the results, company Chairperson Mrs Sherree Shereni said the re-emergence of hyperinflation and foreign currency shortages made it very difficult to settle critical foreign obligations.
“This, together with incessant power cuts and fuel shortages, has negatively impacted the Group’s performance,” Mrs Shereni said.
The Chairperson also said the continued depreciation of the Zimbabwe Dollar against the United States dollar had a significant impact on the Group’s financial performance.
As a result of the weakening of the local currency, the company was forced to recognize foreign exchange losses amounting to ZW$506 million.
“This translation loss was exacerbated by the decision in the financial year ended 28 February 2019 to account for all debentures as though they were all US Dollar-denominated instruments,” reads the statement.
A translation loss is the loss that occurs when one exchanges one floating currency for another and then trades back into the first currency after it has become stronger. For example, suppose a person has 1,000,000 U.S. dollars and exchanges them for 500,000 British pounds; this means the exchange rate is two dollars per pound. Later, if that person still has those 500,000 pounds when the dollar has risen (quite dramatically) to one dollar per pound and exchanges them back to dollars, he/she has $500,000 instead of $1 million. In this case, the translation loss is $500,000.Financial dictionary
The Group has net foreign liabilities amounting to US$45 million, of which US$30 million comprises the Group’s 50% portion of the debentures issued when the Group was still part of Econet Wireless Zimbabwe Limited.
Despite the economic headwinds, the Group maintained its growth trajectory and experienced a rapid increase in the volume and value of transactions processed on mobile and digital banking platforms “as more customers continued to favour these channels due to their convenience and availability”.
In the period under review, Cassava launched several products and services, including Clean City Zimbabwe – an innovative and sustainable on-demand waste management solution riding on the VAYA Africa App. It also launched the Ecocash Bureau De Change – Zimbabwe’s first mobile bureau de change that provides a platform for one to sell foreign currency and verify bid exchange rates from the comfort of one’s phone. It further launched VAYA Tractor Services – an on-demand tractor and farming equipment services platform linking farmers to agricultural mechanisation equipment for smart farming solutions, critical in Zimbabwe’s agro-based economy.
The Group also embarked on a disastrous upgrade of its mobile money and digital banking platforms, with a view to increasing capacity, improving the customer experience, providing world-class value-added services and enhancing security controls.
The mobile money platform upgrade has since been completed, positioning the business to offer more services and a better customer experience to its customers going forward.