Old Mutual to manage capital from Zimbabwe business on ring fence basis

 Old Mutual to manage capital from Zimbabwe business on ring fence basis
Published: 22 August 2019
Old Mutual Limited (OML) says capital raised through repatriation of dividends from its Zimbabwe business will be managed on a ring-fenced basis. This came at a time when the local economy is bleeding from the inflationary pressures and shortage of dollars.
The diversified group has a primary listing in South Africa and in Zimbabwe. Old Mutual has a diversified financial services offering and is a leader in insurance, property as well as equity investments.
OML operates in 14 countries in two continents and recently had to forgo its UK listings and other businesses. It also demerged Nedbank as part of a major organizational restructuring exercise.

In a trading update, for the first of 2019, the group concluded that the southern African nation was a hyperinflationary economy and made a decision to account for it as such.
However, the group said the 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.
OML noted that it applied hyperinflation accounting from October last year and used the Zimbabwe Consumer Price Index (CPI) to inflation adjust reported numbers. With that, 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," it said, adding that the adjustment has been applied from the beginning of the year and have restated comparatives to reflect this decision.
- FinX
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