{"id":412773,"date":"2020-07-02T08:14:45","date_gmt":"2020-07-02T06:14:45","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=412773"},"modified":"2020-07-02T08:14:45","modified_gmt":"2020-07-02T06:14:45","slug":"old-mutuals-share-price-is-a-key-focus-in-zimbabwes-currency-war","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/412773\/old-mutuals-share-price-is-a-key-focus-in-zimbabwes-currency-war\/","title":{"rendered":"Old Mutual\u2019s share price is a key focus in Zimbabwe\u2019s currency war"},"content":{"rendered":"

The share price of one of Africa\u2019s oldest insurers is taking centre stage in Zimbabwe\u2019s battle to bring order to its chaotic foreign-exchange system.<\/p>\n

In the latest in a series of attempts to stabilize its currency, the government wants to eradicate the Old Mutual Implied Rate.<\/p>\n

The gauge, used by domestic companies to determine the future cost of goods and services, calculates a potential forward rate for the Zimbabwe dollar by measuring the difference between Old Mutual\u2019s share prices in Johannesburg, London and Harare.<\/p>\n

The indicator is among many \u201ccontrived phantom exchange rates\u201d in use that \u201cconspire to defeat fiscal policy,\u201d the government said in a 26 June edict<\/a><\/strong>\u00a0that halted trading on the Zimbabwe Stock Exchange and stopped most mobile-banking transactions.<\/p>\n

The OMIR is one of multiple exchange rates Zimbabweans use daily to navigate the nation\u2019s myriad economic challenges, including annual inflation of almost 800%.<\/p>\n

A perennial shortage of cash means anyone who has physical banknotes is able to negotiate exchange rates with brokers who pay the funds onto mobile-money platforms. The brokers can then sell the hard cash at an even higher rate.<\/p>\n

That\u2019s resulted in a widening gap between the official rate of 63.7 per U.S. dollar, and the amount at which it trades on the streets of Harare, which is now at 100.<\/p>\n

\u201cPeople have relied on making money from buying and selling Zimbabwe dollars, and not from any real production,\u201d said John Robertson, an independent economist based in Harare. \u201cIt\u2019s what has created these distortions.\u201d<\/p>\n

The OMIR also feeds into the black-market Zimbabwe dollar rate, which the nation\u2019s bourse uses, along with the official rate, to determine the value of stock prices.<\/p>\n

\"\"<\/a><\/p>\n

Old Mutual, founded in Cape Town in 1845, is not involved in determining the rate.<\/p>\n

Market participants take the company\u2019s share prices in South Africa, the U.K. and Zimbabwe, convert each of them into the US dollar, which should typically trade near par.<\/p>\n

The finance minister, however, in March\u00a0restricted<\/a>\u00a0<\/strong>trading in the shares of Old Mutual and two other companies by making the stocks no longer fungible or regarded as being equal in value to those traded on other exchanges, in a bid to prevent outflows caused by the dual listings.<\/p>\n

Despite the move, investors poured into Old Mutual, using it as a proxy to the U.S. dollar because of its offshore listings, pushing the Zimbabwe-listed stock up 90% since the beginning of May.<\/p>\n

The shares in Johannesburg and London were little changed, resulting in the implied rate doubling to 122 as the gap between the securities widened.<\/p>\n

Suspend Listing<\/h3>\n

Authorities now want to eliminate the OMIR before allowing any trading to resume on the Zimbabwe Stock Exchange, people familiar with the matter said, asking not to be identified because the talks are private.<\/p>\n

The OMIR was the focus of various meetings on Monday between members of Zimbabwe\u2019s stockbrokers\u2019 association, the stock exchange, the Securities and Exchange Commission and the Treasury, the people said.<\/p>\n

Measures being considered include suspending Old Mutual\u2019s shares from the Harare-based bourse, having the securities traded only in dollars, or moving the listing to the Victoria Falls Stock Exchange, a market that will only trade in foreign currency once it opens later this year, the people said.<\/p>\n

Nick Mangwana, the government\u2019s spokesman, referred queries to the finance ministry. Several calls and text messages sent to Finance Minister Mthuli Ncube and central bank Governor John Mangudya seeking comment weren\u2019t answered.<\/p>\n

A representative for Old Mutual in Johannesburg asked for emailed questions and didn\u2019t respond to requests for comment.<\/p>\n

Discussions over the halting of trade on the stock exchange are ongoing and the outcome is still uncertain, SEC Chief Executive Officer Tafadzawa Chinamo said by phone.<\/p>\n

Zimbabwe Stock Exchange CEO Justin Bgoni said on Sunday that the bourse would wait for guidance from regulators.<\/p>\n

In comments at a briefing after a cabinet meeting on Tuesday, the finance minister said that stockbrokers should assure their clients that their investments in the stock market are safe and that the bourse will reopen once investigations are complete.<\/p>\n

\n

Read: South Africa\u2019s recession deepens as first quarter GDP sinks 2%<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

The share price of one of Africa\u2019s oldest insurers is taking centre stage in Zimbabwe\u2019s battle to bring order to its chaotic foreign-exchange system.<\/p>\n","protected":false},"author":59,"featured_media":408055,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[26],"class_list":["post-412773","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-headline"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/412773","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=412773"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/412773\/revisions"}],"predecessor-version":[{"id":412777,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/412773\/revisions\/412777"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/408055"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=412773"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=412773"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=412773"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}