eBusiness Weekly
Business Writer
South African-based Old Mutual Group says it has “ring-fenced” its Zimbabwe operation in view of failure to access dividends from its Zimbabwean unit which is operating in a hyperinflationary environment.
In a recent trading update, the parent company says financial results from Old Mutual Zimbabwe have been moved from the group’s results from operations (RFO) and adjusted headline earnings (AHE).
Said the group: “During the first half of 2019, the group concluded that Zimbabwe was a hyperinflationary economy and made a decision to account for it as such.
“This decision was supported by a rapid increase in the inflation rate, which at the end of June 2019 was far in excess of 100 percent at 176 percent, the significant deterioration in the traded interbank RTGS dollar exchange rate over the period and the lack of access in Zimbabwe to foreign currency to pay foreign denominated liabilities.
“We have applied hyperinflation accounting from October 1, 2018 and used the Zimbabwe Consumer Price Index (CPI) to inflation adjust reported numbers.
“The results, net assets and cash flows are then translated into rand at the closing rate of 1 RTGS to 2,13 ZAR.
“The closing rate used to translate the December 2018 results was 1 RTGS to 4,35 ZAR.
“Until such time as we are able to access capital by way of dividends from our business in Zimbabwe, we will manage it on a ring fenced basis. Consequently, the results of this business have been removed from RFO and AHE.
“The ability to access capital is exacerbated by the volatility that hyperinflationary economy and the reporting thereof introduces. This adjustment has been applied from January 1, 2019 and we have restated comparatives to reflect this decision.”
