The Sunday News
Roberta Katunga Acting Business Editor
THE implementation of a number of measures by Government to support the productive sector through reduction and removal of duty on inputs into production will benefit listed companies on the Zimbabwe Stock Exchange hence prices will react to that and subsequently improve turnover on the bourse. During the 2015 budget presentation, Finance Minister Patrick Chinamasa unveiled a number of measures meant to grow the economy which include a 12-month extension of the rebate of duty on imported inputs for use in the manufacture of clothing, suspension of duty on milk powder for local dairy industry, suspension of duty on wheat flour as well as reduction of excise duty on clear beer from 45 to 40 percent.
According to research analysts, this move would benefit companies such as Delta Beverages, Dairibord Zimbabwe, National Foods as well as Edgars and Truworths.
Lynton- Edwards stockbrokers research analyst Mr Kudzanai Sharara said with the revenue base seriously constrained the budget was always going to be about growing that revenue base as well as dealing with issues that have resulted in the collapse of industry.
“I think several companies like Delta, National Foods, DZLH, Truworths and Edgars will benefit from measures that were put in place. Volumes are expected to go up which would then translate to an increase in revenue and profitability.
Cheaper raw materials will lead to affordable price levels and thus stimulate demand for their products and prices on the market must react to that,” said Mr Sharara.
A market commentator based in Harare, who spoke on condition of anonymity, said the measures proposed by Government were good for any country as they would push more volumes and trigger reduction in prices.
“When volumes go up, there will be an impact on trending price and this will attract new shareholders for the company. Existing shareholders will also be anticipating good dividends,” said the commentator.
The commentator said for example Delta Beverages, which has 30 percent of market capitalisation, if its price increases; the market also reverses losses contributing to a higher turnover.
However, economist Mr Christopher Mugaga said implementing trade policy measures was not really what companies listed on the ZSE need as their primary challenges had nothing to do with trade.
He said the companies needed support more than protection.
“The trick is not contained in the trade policy; Government should provide support in terms of energy and water as well as settling the external debt that the country has. If companies are protected from imports, do they have enough capacity to meet demand,” said Mr Mugaga.
Mr Mugaga said the major challenges included high poverty levels, high cost of funding as well as unavailability of lines of credit.
“We need an ecosystem of measures and trade policy measure is just but a component of these,” he said.
In the event that the measures helped companies, Mr Mugaga said the effect on the local bourse would be increasing shareholder value as well as increasing turnover, improvement in earnings per share thus translating to a dividend growth.
Notwithstanding the support measures availed, the average capacity utilisation in the manufacturing sector has, however, declined from 39,6 percent in 2013 to 36,3 percent in 2014.
