Harare – Premium African financial services group, Old Mutual Limited has said 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.
The Group said 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% at 176%, 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.
Consequently, Old Mutual has excluded results from Zimbabwe operations as well as Adjusted Headline Earnings (AHE) from the Group’s trading update for the 6 months ended 30 June in which results from operations is expected to between a decrease by 1% and an increase of 4% compared to the comparative period.
Adjusted Headline Earnings (AHE) is expected to increase by approximately 6% to 12% mainly driven by higher shareholder investment return in South Africa.
Due to the ongoing economic volatility, Zimbabwe’s economy has since been predicted to be heading into a recession in 2019 by reputable institutions such as IMF and the World Bank, while government recently admitted that the economy is growing into a negative.
Zimbabwe’s economic woes are characterised by a combination of factors among them foreign currency and cash shortages, high inflation, biting power cuts, fuel supply gaps and a deterioration in the value of local currency.
Old Mutual said until such a time the Group is able to access capital by way of dividends from its Zimbabwean business it will be managed on ring fenced basis.
The ability to access capital is exacerbated by the volatility that hyperinflationary economy and the reporting there of introduces,” the Group said.
“This adjustment has been applied from 1 January 2019 and we have restated comparatives to reflect this decision.”
Equity Axis News
Raynold Mhotseka is a Journalism and Media Studies student at the University of Zimbabwe. He serves as a news writer at financial research firm, Equity Axis where he is currently on attachment. He can be contacted through the following email links, email@example.com and firstname.lastname@example.org.