Zimbabwe-listed companies get leeway to report financials in US dollars

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HARARE – Zimbabwe-listed companies are now allowed to report financials in US dollars as the economy rapidly dollarises, with the Zimbabwe Stock Exchange (ZSE) CEO revealing yesterday that corporate boards and shareholders have room to decide which currency to report financials in.

Zimbabwe uses a multiple currency regime that includes the Zimbabwe dollar, which is increasingly being sidelined for transactions, the rand and the US dollar. Listed companies have also been reporting an uptick in US dollar transactions, although the government insists on pegging prices in the local currency with the option of translating prices to US dollar using the official exchange rate.

“Reporting issues are for the board and shareholders… they can use any currency that they feel best represent the performance of their organisation. We are in a multicurrency country so that (financial reporting) could be in US dollar,” Justin Bgoni, the CEO of the ZSE, told “Business Report” in an interview.

Converting accounting sales has been problematic for Zimbabwean entities. On the one hand they are required to use the official exchange rate – which trails the more realistic street exchange rate – for their pricing but also have to pay their suppliers and vendors’ invoices quoted using the parallel exchange rate.

Moreover, exclusive sale of products and commodities is prohibited by the government. This has seen some formal companies lose competitive advantage to informal traders such as spaza shops, with big retailer, OK Zimbabwe CEO Maxen Karombo complaining of the unfair disadvantages formal stores are facing in the Zimbabwean economy.

However, against the backdrop of a rapidly dollarising economy, companies now have the leeway to report their financials in US dollars, although this is presenting further accounting and auditing headaches. Edgars Zimbabwe has had to delay publication of its financials over this.

“The board wishes to advise its stakeholders that following unanticipated delays in the finalisation of the review process by our external auditors, Edgars Stores Limited has sought and obtained approval from the ZSE to defer publication of the half-year financial. The delay is due to the prolonged audit processes caused by the change in functional and presentation currency from ZWL to USD,” Edgars Zimbabwe company secretary Sikhumbuzo Mate said in a cautionary yesterday.

Edgars will likely be among the first Zimbabwean companies to report earnings in US dollars when it publishes its delayed interim financials by the end of this month.

Thedias Kasaira, the managing director at Harare-based Imara Edwards Securities, said by phone that many Zimbabwe-listed companies were not yet reporting in US dollars because the bulk of their earnings are still in local currency.

“The minister of finance said we are in a multiple currency environment, so anyone can report in currency they feel like and the ZSE is also allowing it. Many companies have not been reporting in US dollars because they are not earning in USD… companies can only be reporting in US dollars if they are earning in USD,” said Kasaira.

Dollarisation of Zimbabwe’s economy has gathered pace in recent months, with analysts saying bank lending is now mostly in hard currency, while insurance and other companies are now also coming up with US dollar product offerings.

The Reserve Bank of Zimbabwe this week floated USD treasury bills, while analysts say bank lending is now also mostly in US dollar.