Forex losses hit 2 telecoms firms
After-tax profits for two Malawi Stock Exchange-listed telecommunications firms continue being eroded by the continued weakening of the kwacha.
In its published financial statement for the year ended December 2022, Airtel Malawi plc said it made foreign exchange losses in the year amounting to K12.8 billion on the back of the weakening of the kwacha against major foreign currencies.
This compares unfavourably to the previous financial year when the impact of foreign exchange losses was K5.6 billion.
During the period, Airtel Malawi plc extended the maturity of $33 million (about K34 billion) external borrowings, which is due in September 2023.
Regardless, the firm’s profit after tax went up to K 36.9 billion from K32.3 billion mainly due to the increase in operating profit.
On the other hand, TNM plc published financial statements for the review period show foreign currency accounting losses of K1.53 billion, a rise from the previous year’s K1.2 billion as a result of devaluation of the kwacha in May 2022.
For TNM plc, the forex loss contributed to a decline in net profit after-tax by 118 percent to a loss of K1.76 billion from the previous year’s profit of K9.69 billion.
In a published financial statement co-signed by Airtel Malawi plc board chairperson Alex Chitsime and managing director Charles Kamoto, the firm said the economy and company is exposed to continued impact of kwacha depreciation and scarcity of foreign currency.
Reads the statement in part: “We continue to focus on investing and growing customers and revenue followed by containing cost and diversifying currency sourcing to mitigate the exposures.”
TNM plc, in its financial statement co-signed by board chairperson Ted Sauti-Phiri and audit committee chairperson Lekani Katandula, said the macroeconomic environment is expected to remain challenging, putting pressure on the group’s profitability.
Reads the statement in part: “The effects of Cyclone Freddy, volatile exchange rates, foreign currency scarcity and pressure on inflation will continue to increase the cost of our operations.”
The kwacha has consistently depreciated against major trading currencies since the second half of 2020 on account of the persistent shortage of forex although the Reserve Bank of Malawi (RBM) official dollar and Malawi kwacha middle exchange rate showed some stability at about K823 in the first quarter of 2022.
On May 27 2022, RBM devalued the local unit by 25 percent amid a crippling shortage of foreign exchange that has continued to date.
However, a year after the devaluation, misalignments in the foreign exchange market still prevail with figures showing a 49.61 percent spread between bank rates and the official rate.
The kwacha is trading at an average of K1 550 in authorised dealer banks against K1 036, which is the daily foreign exchange bureau rate published by the RBM. This is creating a spread of about K514.
In an interview on Monday, National Working Group on Trade Policy chairperson Frederick Changaya said that the forex shortage is also denying businesses opportunity to source and supply critical materials.
Changaya, who is also Applecore Grain and Milling managing director, said: “How can we expedite and enhance import substitution? As a people, we can agree to consume more of what is made in Malawi and forego ‘quality’ [which is just perceptual] for now.
“Not only will that save devaluation, it will create industries which in turn create jobs with meaningful real wages that rise.”
