HARARE – Zimbabwe’s market regulator is engaging with the central bank over new regulations requiring companies to report financial statements in the country’s gold-backed currency, a move that could lead to hyperinflationary accounting and increased business costs.
The Securities and Exchange Commission of Zimbabwe (SECZ) is in discussions with the relevant authorities regarding the directive, Zimbabwe Stock Exchange (ZSE) Chief Executive Officer Justin Bgoni confirmed on Monday.
Earlier this month, Reserve Bank of Zimbabwe Governor John Mushayavanhu ordered all ZSE-listed companies to use the Zimbabwe Gold (ZiG) currency for financial reporting, effective immediately, including for 2024 audited statements. He defended the decision, citing the growing use of ZiG, which now accounts for 30% of transactions in the economy, while the US dollar dominates the remaining 70%.
Since 2023, listed firms have been permitted to report financial results in US dollars due to the local currency’s instability. Many companies, including leading beverage manufacturer Delta Corporation, have already switched to dollar-based reporting.
However, financial institutions have raised concerns over the mandatory adoption of ZiG. ZSE-listed FBC Holdings warned that the move could bring “accounting complexities, inflation translation risks, investor concerns, and regulatory challenges.” The company highlighted the need for adjustments to accounting software, financial models, and auditing processes, as well as the application of International Accounting Standard (IAS) 29, which governs financial reporting in hyperinflationary economies.
FBC Holdings urged authorities to reconsider, suggesting a more flexible approach. “Given that the ZiG has demonstrated instabilities in the past, a hybrid system where businesses choose the most relevant currency would be more practical,” the institution stated.
The ZiG, introduced in April 2024, marks Zimbabwe’s sixth attempt at establishing a stable local currency since 2009. However, the unit has already lost 95% of its value due to exchange rate fluctuations, prompting a devaluation in September.
Zimbabwe’s challenging economic environment has also contributed to the departure of global accounting firms Deloitte LLP and PwC LLP from the country.
— Source: Bloomberg
