Old Mutual Zimbabwe Group says it was not involved in buying foreign currency on the local foreign currency markets, in view of significant cash outflows that was notable during the half-year to June 30, 2019.
During the period under review, the Zimbabwe authorities banned the use of selected foreign currencies in domestic transactions, and made the “Zimbabwe dollar” the sole legal currency for tender, which effectively put paid the multi-currency system that had been in place since early 2009 through Statutory Instrument 146 of 2019.
According to Old Mutual group CEO Jonas Mushosho, the move may have caused a run on investments and savings held with the group as individuals and firms needed to settle their United States dollar liabilities.
Said Mr Mushosho recently: “The outflows were not because Old Mutual was buying currency on the market, but a lot of our customers who had parked money with us withdrew their money in order to buy foreign currency on the interbank market.
“But we can understand the need because people had a huge backlog of foreign liabilities that needed to be paid and in addition there were some entities that needed to settle their legacy debts by paying straight to the central bank.”
With the Government implementing a number of significant currency reforms over the past few months, a critical issue that has come to the fore is the preservation of value for issues such as legacy debt, RTGS balances, and pension fund values, among others, to allow for a smooth transition.
Players, such as pensioners, long-term insurance policyholders and investors are presently incurring losses on their investments as the bond notes and RTGS dollar systemically loses their value and purchasing power, and therefore value.
And although the diversified financial services group has outlined a number of measures to ensure value preservation for its clientele, Mushosho acknowledged that the company can only do so much in a hyper-inflationary environment.
“The operating environment remains challenging in view of near-term currency uncertainties, inflationary pressures and acute foreign currency shortages.
“Despite these anticipated challenges we still believe that there will be opportunities for growth and improvement. We intend to identify and leverage on opportunities to further enhance our performance and competitiveness.
“For the second half of 2019, we will continue to focus on . . . minimising the risk of loss of value to our customers and shareholders,” said the CEO.
“I must mention through that in a hyperinflationary environment it is never possible to totally protect or cushion customers from the loss of value, but we seek to minimise that.”