Delta Beverages Limited, a subsidiary of Delta Corp of Zimbabwe, said on Wednesday it will start accepting U.S. dollars as the only payment option for its soft drinks from wholesale and retail customers starting Friday, 4th January.
The company said that the move was necessary to protect its $600 million investment in plant and equipment, vehicles and ancillary services.
Zimbabwe has been experiencing foreign currency shortages for some time, and in 2009 abandoned its local Zimbabwe dollars for the U.S. dollar as a way to bring inflation under control. However, severe shortage of the physical U.S. currency has reduced the value of the dollar in people’s bank accounts compared with cash.
“Our business has been adversely affected by the prevailing shortages of foreign currency, resulting in the company failing to meet your orders and in the case of soft drinks, being out of stock for prolonged periods,” the beverage maker said in a letter to customers, adding that soft drinks had been out of stock for prolonged periods.
“Delta bottling plants have been running intermittently during the last six months due to the limited availability of imported raw materials,” said Patricia Murambinda, Delta Corporate Affairs Executive in November.
“Of late, the factories have been on shutdown since late November, as evidenced by the current limited market supply of soft drinks.
“We were availed a small allocation of foreign currency by the Reserve Bank, which will allow the plants to run for a week leading to Christmas.
“The shortage of forex is well articulated, and is beyond the control of the company. In short we are unfortunately heading for a dry festive period. We can only apologise to our valued customers and consumers,” she said.
Commenting further on the company’s decision to start charging its wholesale and retail customers in U.S. dollars, Delta said “The new fiscal and monetary policy framework in place since October 2018, does not provide for easy access to foreign currency by non-exporters. The company has only received limited foreign currency allocations from the banking channels, which have not been adequate to fund the import requirements. Resultantly all our foreign suppliers are unable to continue providing credit or meet new orders as some of them have not been paid for extended periods.
The company said it requires at least US$60 million to US$100 million in foreign currency per annum to import critical raw materials.
The sparkling beverages unit takes up at least 50% of these foreign currency requirements to pay for concentrate as well as packaging materials from external suppliers.
The company reported that it owes foreign suppliers US$41 million and that it was also unable to remit dividends to its foreign shareholders.
Delta dominates Zimbabwe’s beverages sector with its share of the market estimated to be upwards of 70%.
Varun Beverages, which is licensed to produce rival brand, Pepsi, as well as Miranda and Mountain Dew has only just recently entered the Zimbabwean market but it has not invested much in terms of capacity to fill in the gap in supply.