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‘Discreet 2023 fiscal measures to boost listed firms’ performance’

Stock Exchange

A more discreet fiscal policy with liberal measures coupled with currency stability anticipated in the next year ahead of elections is expected to boost quoted companies performance although the core will remain weak due to fiscal instability, the Zimbabwe Independent has learnt.

Quoted companies like any other entities have been going through a myriad challenges buoyed by economic instability affecting productivity.

Lead adjudicator of the Zimbabwe Quoted Companies Survey, Respect Gwenzi, in his adjudicators note for the survey said a major macroeconomic factor which may have a bearing on financial performance for the remainder of the year, is the interest rate and currency stability.

“We also expect a more discreet fiscal policy with liberal measures, to kick in as we head into an election year. These factors are likely to help boost listed companies’ performance in the interim although fundamentally the core will remain weak due to fiscal instability. Earnings for the 2022 period were grossly affected by currency devaluation and reflected through monetary loss and unrealised gains on foreign currency denominated cash holdings. The 2021 financial period saw a decline in unrealised monetary gains or losses, due to a more stable environment,” Gwenzi said.

He said companies were able to access funding via the auction market which improved production and product availability during the period under review.

For exporting companies, Gwenzi said the firm global commodities prices helped drive earnings, which export competitiveness improved based on an easing currency. The growth in earnings was, however, lower particularly into 2022 and companies continue to face the same challenges and these are mostly centred on the macro environment. He said besides the macro environment challenges, the survey observed that companies the Zimbabwe Stock Exchange (ZSE) whose ranks lower compared to regional exchanges, including the Johannesburg Stock Exchange (JSE), Botswana Stock Exchange (BSE) and the Lusaka Stock Exchange (LUSE).

This year the quoted companies survey lengthened the review period from 12 months to 18 months and this was due to delay in the survey’s launch. The implication of lengthening the review period was that instead of covering the full financial year period to December 2021 or March 2022 for some companies, a further half year period review, covering January to June 2022 was included. These changes, Gwenzi said, were necessitated by the need to make the survey relevant in the context of latest published financials.

The publication of financial statements within mandated timeframes has improved in post-Covid-19 period, but a fraction of the companies still seek extensions for different reasons including change of auditors, consolidation of newly acquired business or changes in equity structure.

“While these are generic factors, our view is that the adoption of hyperinflationary reporting has increased the scope of work involved in the preparation of the financials resulting in some of the noted delays in the results publications,” he said

This is despite the fact that some exchanges, such as the JSE, have relatively way too big entities which would require more time to prepare financials.

“The departure from International Accounting Standards (IAS) and election to comply with SI 33 of 2019, has, by default resulted in ZSE listed companies reporting financials with an adverse audit opinion. These adverse opinions are market-wide and demands that users apply care when using the financial statements.

“However, from a different perspective, it becomes increasingly difficult for parties considering acquisitions, consolidation and basic valuations. The import of this move is that Zimbabwe companies may fail to attract new external investors for some time to come because of unreliable financial statements. This is however a pure endogenous policy factor divorced from individual entities’ control.”

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