eBusiness Weekly
Business Writer
Covid-19 induced interruptions to economic activity, as well as the pressure from various regulatory pronouncements, weighed down heavily Cassava Smartech’s results for the half year to August 2020.
Apart from the restrictions and slowdown in business activity brought by the coronavirus outbreak, the period under review was fraught with many regulatory challenges for the Group.
Coupled with inflation hit disposable incomes, Cassava’s cash cow, EcoCash, was affected by regulatory changes, restrictions and Government directives.
The directives include a revision of customer transaction limits, suspension of certain user and transaction categories, banning of multiple wallets for individuals.
Revision of mobile money limits and permissible transactions as well as suspension of some EcoCash user categories and functions were also some of the changes likely to have had a significant impact on the revenue outturn that has been reported by the Group.
The Group recorded a revenue decline of 34 percent to $5,4 billion for the six months ended August 31, 2020 down from revenue of $8,2 billion prior year comparative.
In inflation – adjusted terms, mobile money business’ revenue amounted to $3,5 billion, down 43 percent from prior year comparative.
Steward Bank was slightly better after its revenue tumbled 38 percent to $963 million.
Only the InsurTech business and other unnamed segments registered growth with contributions of $763 million and $346 million respectively.
The top line decline was in line with the decline in transaction volumes, according to the Group.
EcoCash revenue contribution, at 63 percent was 10 percentage points was lower than last year’s contribution of 73 percent, as a result of both macro-economic factors and regulatory changes that took place during the period under review.
The decline was also a result of contribution from the exponential growth in the Insurtech and On Demand Services (ODS) business units.
Management is, however, of the opinion that while the regulatory measures currently undertaken have had an impact on the operating model of the EcoCash business, the financial impact on the Group has not been material to affect the ability of EcoCash, nor the Group as a whole, to continue as a going concern.
Management believes Group’s revenue diversification strategy is bearing fruit spurred by the exponential revenue growth in the Insurtech and the ODS business units.
“The contribution of the Fintech business units to the Group’s revenue in the period under review, decreased in line with the revenue diversification strategy of the Group,” reads part of the statement accompanying the results.
This is a validation of the Group’s smartech business model which augurs well for its future outlook, wrote chairman Sherree Shereni.
Cassava’s future will focus on digital solutions.
The Group says it has taken advantage of the accelerated digital thrust to come up with new products and services that better respond to the evolving needs of customers.
The Core Banking System Upgrade at Steward Bank is due to be completed in December 2020 and will be instrumental in driving the bank’s digital agenda.
“The upgrade will also enhance regulatory compliance initiatives, whilst enhancing Steward Bank’s ability to offer a wider scope of services on its digital platforms,” wrote Shereni.
She added that the new EcoCash system now has capacity to complete 450 transactions per second from an average of 200 transactions per second before the upgrade.
Meanwhile, Cassava recorded an exchange loss of $2.4 billion for the period under review.
The exchange loss was in respect of the
foreign obligations that the Group currently has.
Foreign liabilities at the end of the period amounted to US$40,1 million, of which US$ 31.4 million comprise of the Group’s obligation with respect to the debentures issued by Econet Wireless Zimbabwe Limited prior to the demerger in 2018.
As a result, the positive inflation adjusted EBITDA of $1 billion was reversed into an operating loss of $1 billion after accounting for monetary adjustments of $953 million.
