Ayan Trading Limited (Ayan), the Mutare-based importer of Mariana rice, says it is set to receive US$10 million worth of letters of credit (LCs) from the Reserve Bank of Zimbabwe (RBZ) to guarantee payments to international suppliers.
Ayan -- which supplies over a quarter of Zimbabwe's 200 000 tonne annual rice demand -- sent its workforce on unpaid leave in August following acute foreign currency challenges which resulted in suppliers refusing to deliver rice to the firm. The company currently has a US$6 million foreign payments backlog.
Finance director, Ntokozo Moyo, on Monday told The Financial Gazette that the company had now recalled all its workers following clearance of a portion of its foreign payments backlog.
"We had sent our workers home on unpaid leave because we had stopped receiving supplies as a result of failing to pay foreign suppliers. However, to date we have managed to pay about $1,5 million to suppliers with the assistance of the Reserve Bank of Zimbabwe" Moyo said.
"In fact, we are also expecting to receive LCs worth $10 million around next week from the $600 million Afreximbank (African Export and Import Bank) facility."
The firm has been receiving US$300 000 weekly which only covers 20 percent of its US$6 million monthly requirements -- under an allocation system put in place by the central bank to manage the allocation of foreign currency to the industrial sector and other critical areas of the economy for imports.
"We have since moved from this position thanks to the Afreximbank facility. In fact, we anticipate rice prices to go down in the coming months. Prices were being pushed by the inability to pay suppliers. As it stands we expect supplies to start coming in by the 15th (of October) which essentially means we will go back into production," he said.
The firm has been failing to meet this demand on the back of payment challenges.
The Grain Millers Association of Zimbabwe says demand for rice has surged 300 percent from 50 000 tonnes per year in 2007 to 200 000 tonnes per year in 2016.
Moyo said the hard currency shortages had "dealt a heavy blow to us as a manufacturer and even affected market share".
"However, we are optimistic that by December we will have gained lost ground," said Moyo.
During a closed door meeting with RBZ governor John Manguya last month, retailers informed the central bank that local firms risked mass closure if foreign suppliers were not paid.
"As it stands at the moment, we may end up retrenching because we are not producing. Our employees are home on unpaid leave and suppliers won't deliver to us, so the situation is dire... Prices will obviously go up," Moyo had said in the meeting.
However, Mangudya had assured them the situation was likely to improve as the country had started drawing down on a US$600 million nostro stabilisation facility.
The RBZ has been working on a number of initiatives to meet forex requirements for productive foreign payments. The US$600 million Afreximbank facility is complemented by a US$150 million letters of credit facility to support importation of critical raw materials and products such as fertilisers and feedstock for the manufacturing of cooking oil.