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One of the largest listed companies in Zimbabwe, the commercial viability of Econet Wireless Zimbabwe is under threat due to the falling local currency and the effects of the Covid-19 pandemic, has emerged.
Last week, Econet pleaded with its suppliers to cut costs by 20%, citing the unfavorable operating environment that had been made worse by the Covid-19 outbreak.
A senior official at the telecommunications giant said the request to providers was motivated by the understanding that the economic situation had become a threat to the business.
“The entire slowdown caused by the Covid-19 pandemic has resulted in a slowdown in business,” the official said.
“During the shutdown, cities were silent and phone use was reduced.
“Most of the business of phone use that we get comes from people who do business, and these were mainly on WhatsApp.
“We can see that while most sectors of the economy are not shooting, it also affects people’s use of phones, so it doesn’t matter if we talk about how we need a cheap rate, etc.
“It will reach a point where people cannot call because they have been fired and that will affect us.
“In that sense, if the size of the economy, for example, was $ 10 billion and shrinks to $ 4 billion, it also means that our potential income will decrease because of that factor.”
A memo to Econet’s suppliers that leaked on social media last week showed that the company was pleading with its suppliers to reduce their charges by at least 20% as of May 1.
“As Econet, we operate in a regulated industry where our rates are significantly reducing the upward movement in our operating costs, threatening the viability of our business,” wrote Sharon Marufu, head of Econet’s supply chain.
“Therefore, we must take drastic measures now to safeguard the business and ensure that we remain viable so that we can continue to offer our services to our customers and retain our suppliers.”
The suppliers selected in the memorandum are understood to provide fuel, trucks, retail space, and base station land.
The official, who spoke to Standardbusiness, said that if suppliers refused to cut their prices, Econet could choose not to renew their contracts once they expire.
Econet is pushing for mobile operators to be allowed to charge fees tied to the US dollar.
“Our biggest concern is that some of the boys don’t even understand it in this government,” said the official.
“They don’t understand the extent of the number of problems they are in.
“Since last year, although the local currency has been devalued up to 25 times, our rates have not increased by the same rate.
“Even inflation has gone up and they are currently talking about 680%, but our rates are regulated and have not followed the exchange rate while supplier costs keep going up.”
