Commits to investing in stronger currencies
Capitalises on favorable exchange rate movements for supplies
Sefalana Holdings has affirmed its commitment to investing in stronger currencies as a means to safeguard the overall Pula return for its shareholders. The company’s Australian arm has provided exposure to a robust currency, the Australian Dollar, effectively countering potential vulnerabilities associated with the ZAR and serving as a partial hedge. Over the 26-week period ending on October 29, 2023, the Australian Dollar strengthened by 1.2%, while the rand remained relatively stable.
Mitigating foreign exchange risk plays a pivotal role in Sefalana’s strategy, as highlighted by Finance Director Mohamed Osman. He disclosed that the company incurs outgoing payments ranging between R70 million and R100 million monthly. Osman explained that Sefalana capitalises on favorable exchange rate movements to negotiate better rates with suppliers, utilising spot or forward contracts. However, he said accessing sufficient cash for these transactions can be a challenge, particularly when dealing with smaller banks.
Osman underscored that even a 1% enhancement in foreign exchange margins translates into substantial benefits for the company. Sefalana’s operations extend to Zambia, where the kwacha posed the greatest exposure for the group, experiencing a 16% depreciation. However, the group’s overall foreign exchange exposure for the half-year period remained manageable.
During this period, Sefalana recorded a retranslation loss of P0.9 million, a notable improvement from the translation loss of P12.9 million in the corresponding period marked by heightened volatility. The company emphasises that currency values are subject to constant fluctuations, and retranslation gains and losses are typically transient, reflecting in other comprehensive income and losses in accordance with IFRS guidelines.
The group said diversification into neighbouring countries over the last eight years has helped it maintain the Group’s overall performance, noting that each economy has presented its own opportunities and put forward its unique challenges. “Our business models have been tailored to each economy accordingly.”
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