Zimbabwe’s biggest tech company, Econet Wireless Zimbabwe says the foreign currency squeeze is contributing towards an overall liquidity crunch stalling its 5G network roll-out programme.
The company recently launched the first 5G network in the country and while the intention is to increase 5G coverage, Chairman James Myers said limited access to foreign currency remains a huge impediment to the company’s capital-intensive programmes.
“We’re limited in our ability to meet network upgrade requirements due to continuing issues related to accessing foreign currency to maintain the necessary Capex investment,” Myers said in an update for the year February 28, 2022.
He added that the situation impacts the company’s ability to roll out to previously underserved areas.
However, despite the challenges, the company did manage to upgrade networks to improve consumer-carrying capacity and deployed ten green base stations.
Myers said the company had also upgraded 100 sites across the country from 3G to 4G in an effort to expand 4G coverage.
He said: “Although the upgrades were in line with our continuing process to digitalise our network, they are far less than what is required to achieve our objectives.”
Presenting the group’s performance for the period ended February 2022, Myers the company’s infrastructure investments during the period were affected by the liquidity crunch in the country.
Telcos already pay 10% excise duty on revenue, in addition to 14.5% VAT and 3.5% in other levies and taxes.
Econet stated: “These taxes are generally higher than the African average and have the impact of increasing the connectivity costs for consumers.”
The company also bemoaned the country’s free-falling local currency- which has lost more than two-thirds of its value against the greenback this year. Soaring inflation has piled on pressure on consumers.
An excerpt from a statement released by the company reads: “Econet uses the Reserve Bank of Zimbabwe auction rate for reporting purposes. In the period under review, the exchange rate to the US dollar moved from ZW$84 to ZW$124 (compared to figures for the year prior of ZW$18 to ZW$84), a depreciation of 48%.”
This resulted in exchange losses arising from foreign currency-dominated obligations decreasing from ZW$22.8-billion to ZW$5.1-billion, resulting in an incremental profit of ZW$17.7-billion.
However, immediately following the end of the financial year, an exchange loss of about ZW13.4-billion was incurred when the official rate was devalued from ZW$124 to the US dollar to ZW$338, a depreciation of 172%, thereby eroding the gains made by the company in the year ended 28 February 2022.
The company said: “It was highly susceptible to the exchange rate movement because it imports equipment and software for operating purposes, which means that any exchange rate significantly impacts its ability to invest in new equipment.”