Tanganda Tea Company, Zimbabwe’s leading grower and producer of tea and coffee, is set to expand its regional footprint to bolster export proceeds and mitigate the impact of foreign exchange surrender requirements on forex revenue.
The move follows the company’s growth in export revenue, despite facing challenges due to the El Nino climate phenomenon in the quarter under review.
While export revenue showed resilience, the company reported a decrease in volumes, attributing it to the El Nino impact.
Tanganda highlighted that export proceeds are currently subject to a mandatory 25 percent liquidation at official exchange rates, imposing a substantial tax on the top line. This, they argue, hampers competitiveness and the ability to reinvest proceeds for value addition and export growth.
In response to these challenges, Tanganda aims to expand its export receipts, generating the necessary foreign currency for importing crucial raw materials and equipment.
The company experienced a significant boost in packed tea exports to the region, especially to the Democratic Republic of Congo, with a notable 100 percent growth.
Despite the success in export destinations, the sales volumes of packaged tea saw a 14 percent decline, reaching 475 tonnes compared to 549 tonnes in the same period last year. Tanganda acknowledges the need for sustainable market diversification to further expand its regional market.
The agricultural sector in Zimbabwe, including tea production, is grappling with the effects of El Nino, leading to a 19 percent decline in bulk tea production volumes. Tanganda, however, managed an 18 percent growth in bulk tea export volumes, attributed to improved logistical arrangements.
The company highlighted challenges affecting sales, including supply-side issues such as packaging constraints and power outages.
“Not withstanding that the customer order book is full, a combination of packaging supply constraints, power outages and managing customers to reduce defaulting customers’ risk are among the factors that resulted in a reduction in sales volumes,” the company said.
Tanganda has undergone operational changes diversifying into horticultural products such as macadamia and avocados. The company expects healthy harvests of avocados and macadamia towards the end of the second quarter.
Tanganda reported a 9 percent decline in revenue to US$5 million from US$5.5 million in the quarter ending December 31, 2023, compared to the same period the previous year.
In its outlook, the company said, “The operating environment is expected to remain volatile and complex due to continued inflationary pressures, currency instability, escalation of costs and reduced consumer disposable incomes.”
