Oliver Kazunga, Senior Business Reporter
ECONET Wireless Zimbabwe has declared a cash dividend of $10 million at 0.386 cents per share for the first quarter period ended May 31, 2017, reflecting the persistent foreign currency shortages in the economy.
In a dividend declaration notice, the Zimbabwe Stock Exchange-listed telecommunications company said:
“The company has declared a dividend of 0.386 cents per share amounting to $10 million for the first quarter ended May 31, 2017.
“In an effort to provide an expedient and convenient service, please be advised that we will continue to pay dividends through EcoCash to shareholders who have opted for this payment mode.”
It said payment of the dividend would be made on or before October 4, 2017.
Withholding tax will be deducted at a rate of 10 percent where applicable.
A financial analyst, Mr Nicky Moyo said the issuance of dividends by Econet was an indication of a balance sheet management.
“The declaration of dividend by Econet is purely a balance sheet management process that the company is going through at the moment.
“Econet is a capital expenditure driven company and this implies that it uses a lot of foreign currency to import equipment.
“Given the current foreign currency shortages in the country, Econet cannot just retain the cash it cannot use, hence the decision to have its shareholders retain their money in the form of dividends,” he said.
Mr Moyo said the declaration of the dividend by Econet during the period under review was not an indication of a positive performance on the stock market as all indices on the local bourse pointed to subdued consumer demand.
He said the quarterly declaration of dividends was the present trend on the ZSE as well the international capital markets.
An economic commentator Mr Trust Chikohora said:
“It is something unusual for a company to declare cash dividend before the interim period and in this case it may imply that Econet could have improved performance on its EcoCash business by pushing volumes, hence the declaration of the cash dividend.”
Mr Chikohora said last year the company might have not declared that amount during the same period because its cash position had not improved.
An economist, Dr Gift Mugano said generally if a company declares a dividend it’s an indication to shareholders and investors that it is a going concern.
“By declaring a dividend, naturally it is a signal to shareholders including international investors that the company is performing well and is a going concern, where they can also invest in,” he said.
In the dividend declaration for the quarter ended May 31, 2017, Econet said payments to foreign shareholders would be subject to exchange control approval and payment guidelines for foreign remittances.
“Foreign shareholders should appoint or make their own arrangements with a local bank of their choice to receive the dividend on their behalf and to facilitate remittance to them,” it said.
In an effort to provide an expedient and convenient service, Econet advised that it would continue to pay dividends through EcoCash to shareholders who have opted for this payment mode.
Non-corporate shareholders were also encouraged to provide their EcoCash details to addresses of the firm’s transfer secretaries.
In the full year results for the period ended February 28, 2017, Econet declared a dividend of 0.467 cents per share amounting to $12.1 million.