VARUN Beverages Zimbabwe says repatriation of funds from Zimbabwe remains an issue, but the company has managed to live with what is within the country.
The company, which is headquartered in India, is among the many foreign companies and foreign shareholders who have struggled to repatriate their returns due to the country’s foreign currency situation.
“Repatriation is an issue, but we have to live with what is within the country, we are managing and Government has been helpful to what they can help us with,” Ravi Jaipuria, the company’s chairman, told Business Weekly on the sidelines of an event to commission a new line at its main factory in Harare on Thursday.
Varun Beverages made a foray into the Zimbabwean market in 2018, injecting US$50 million to set up a beverage manufacturing plant in the capital. Initially, the projected capital expenditure to install the plant was pegged at US$30 million, but soared to US$50 million as the country reeled under severe foreign currency shortages.
At the time, Jaipuria, indicated that while he was not looking to repatriate dividends to India soon, the company required significant amounts of foreign currency to import raw material, which could also drive its five-year plan to spend US$150 million establishing additional bottling lines and food processing units.
However, the Reserve Bank of Zimbabwe (RBZ), has said it is considering among other plans issuing a tradable financial instrument as part of solutions to settle outstanding foreign legacy debts, which continue to weigh down the books of most local firms.
Following the reintroduction of the Zimbabwe dollar in June 2019, Finance and Economic Development Minister Mthuli Ncube called on all banks representing companies with legacy debts to transfer the domestic currency portion of the “blocked funds” to the apex bank for payment or settlement at a rate of one-to-one to the US$.
By August 2020, the central bank said it had approved as much as US$1,2 billion of the legacy debts, but the respective debtors, however, still had the obligations on their books.
The central bank’s foreign currency auction system, according to several companies, has improved the ability of investors and companies to repatriate their funds.
Jaipuria noted that while the company has been able to access foreign currency from the auction system, it was not enough to cover its foreign currency requirements.
“The auction system gives us part of, but it is not enough, however, overall, the banks are supporting us and we are growing our business and we are growing at a reasonably fast pace,” he said.
Jaipuria said the company has been in Zimbabwe for the past four and half years, and has spent about US$60 million and is looking to invest another US$10 to US$15 million.
“We believe in Zimbabwe, we have done extremely well here, the business investment is paying off, and we are looking at further investment because we are running short of products because demand is much higher than what we are producing.
“So we will expand our capacity and ensure that Zimbabwe does not have to pay too much in foreign currency because we are doing backward integration so that a minimum foreign currency is required,” he said.
He noted that Zimbabwe is now a fantastic market, largely as a result of the economic stability and growth.
“As a result, we have put pricing at the right amount and people are able to afford our product,” he said.
Jaipuria indicated that the company is further looking at investing in solar energy as well as the agro-industrial sector.
The company commissioned a US$12 million packaged drinking water line with a production capacity of 15 million bottles a month, which it believes lays the foundation of the fourth phase of Varun Beverages investment in The Plastic closure plant with an annual capacity of 500 million pieces.