Tanganda Tea Company considers move to US dollar-denominated VFEX amid currency volatility concerns 

ZIMBABWE – Tanganda Tea Company Ltd., Zimbabwe’s largest tea producer and distributor, is evaluating a potential shift from the Zimbabwe Stock Exchange (ZSE) to the United States dollar-denominated Victoria Falls Stock Exchange (VFEX) to mitigate currency volatility impacts on its market valuation.  

The board of directors announced that it would hold discussions on the proposed move, intending to take advantage of the VFEX’s stable currency environment and incentives—a strategy adopted by an increasing number of Zimbabwean firms. 

Tanganda re-entered the ZSE on February 3, 2022, with an initial market capitalization of US$134.29 million.  

However, since then, currency instability has significantly impacted the company’s valuation, which dropped to US$21.67 million as of Monday.  

This marks a substantial loss of around US$112.62 million, primarily driven by economic shifts, including the Zimbabwean dollar’s discontinuation and the introduction of the Zimbabwe Gold (ZiG) currency in April. 

The VFEX, operating in US dollars, is gaining traction as a viable alternative for local companies, providing a more stable trading environment and an opportunity for firms to stabilize share prices and attract foreign investors. 

In an update to shareholders, Tanganda’s board indicated that it would present the VFEX migration proposal at an upcoming extraordinary general meeting.  

The board also plans to propose a capital raise of about US$7.7 million through a renounceable rights offer, expected to support the company’s expansion and operational resilience.  

“The transactions, if successful, may have a material effect on the company’s share price,” Tanganda advised, urging shareholders to exercise caution with share dealings. 

The VFEX’s increasing appeal comes as the ZSE faces declining performance.  

Despite a 21.68 percent nominal market capitalization increase to ZiG72.75 billion last month, the ZSE’s real-term value dropped 14.65 percent to US$2.17 billion, emphasizing the challenges of currency instability in the Zimbabwean market. 

Tanganda’s capital raise aligns with its broader growth strategy, targeting exports of key products like avocados, macadamias, and tea.  

The company’s third-quarter update for the period ending June 30, 2024, highlighted El Niño-induced drought and fiscal policy shifts as notable challenges but emphasized that efficiency measures are underway to boost yields and manage costs. 

During the quarter, Tanganda reported a 9 percent decline in bulk tea exports, down to 4,505 tonnes compared to the previous year.  

Revenue for the nine months ending June fell by 5 percent, totaling US$14.5 million, a decline from US$15.3 million the previous year.  

Despite these pressures, the company affirmed that demand for its packed tea products remains strong both locally and regionally, with ongoing efforts to diversify its markets and ensure sustainable growth. 

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