Old Mutual to Move Zimbabwe Listing as Currency War Escalates
(Bloomberg) -- Old Mutual Ltd. is poised to stop trading its shares on the Zimbabwe Stock Exchange, the latest step in the government’s efforts to bring order to its chaotic foreign-exchange market.
The insurer agreed to move its listing to a new bourse in the country that will only deal in foreign currency, three people with direct knowledge of the matter said. The deal came after talks on Monday between representatives of Old Mutual, the Treasury, the Securities and Exchange Commission of Zimbabwe and the ZSE, the people said, asking not to be identified because negotiations were private.
The government of President Emmerson Mnangagwa has blamed a plunge in the local currency on the 175-year-old insurer’s share price. Companies were using the so-called Old Mutual Implied Rate to determine the forward value for the Zimbabwean currency by using differences in the dollar values of the company’s securities in London, Johannesburg and Harare.
By eradicating the implied rate, the nation’s ruling party is seeking to end a multitude of exchange rates used by Zimbabweans to navigate the country’s myriad economic challenges. The government last week set new regulations to compel businesses to use a single exchange rate for pricing goods and services in a bid to tame inflation of 737% in a country battling with shortages of everything from food to fuel.
Tabby Tsengiwe, the Johannesburg-based insurer’s spokeswoman, didn’t respond to a call or a text message seeking comment. Finance Minister Mthuli Ncube didn’t respond to calls for comment.
Another meeting is scheduled for next week to resolve administrative issues and discuss the finer details, the people said.
A surge in Old Mutual’s Zimbabwe stock -- which like other shares was being used as a hedge against inflation -- widened the gap between its South African and U.K. securities, causing the OMIR to rise to 122. The Zimbabwe dollar has weakened to 72.1470 per U.S. dollar on a foreign-currency auction system that was introduced after a currency peg of 25 was dropped last month.
Terminating Old Mutual’s listing paves the way for dealing to resume on the Harare-based ZSE -- which was abruptly halted on June 28 -- once Zimbabwe’s Financial Intelligence Unit has completed a probe into trading on the bourse. It is still unclear when the stock exchange in the resort town of Victoria Falls will begin operating.
Old Mutual, which listed on the Zimbabwe Stock Exchange in December 1999, opened its first office in the country in 1902 and offers life, property and casualty cover, asset management, property development and banking services in the country.
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