Fungibility suspension to ‘materially’ affect Old Mutual Zim share price

Mthuli Ncube

DIVERSIFIED financial services group, Old Mutual Limited (OML) has advised shareholders in the Zimbabwean unit that the fungibility suspension order on its shares would materially affect the share price.


Last month, to control the parallel market forex rate, Finance minister Mthuli Ncube placed a fungibility suspension order on Old Mutual, PPC Limited and Seed Co International Limited shares on the Zimbabwe Stock Exchange (ZSE).

“The fungibility suspension order suspends every exchange control authority, directive or order granted by any exchange control authority allowing the fungibility of the company’s shares listed on the Zimbabwe Stock Exchange until March 12, 2021. It does not affect transactions conducted on the ZSE on or before March 13, 2020 and in respect of which settlement was due by March 18, 2020,” OML said in a statement recently.

“The company’s understanding is that the shares listed on the ZSE remain tradable subject to the limitations introduced by the fungibility suspension order and the Securities and Exchange Commission of Zimbabwe’s related audit of transactions. This may have a material effect on the price of the company’s securities traded on the Zimbabwe Stock Exchange.”

The idea of the fungibility suspension order was to stop the tradability of these shares across all the stock exchanges they were listed on and prevent liquidity from leaving Zimbabwe through these shares.

This was also to prevent the derivation of the value of the United States dollar.

Out of all the ZSE counters that were issued fungibility suspension orders, Old Mutual is the one that is used to determine the value of the US dollar locally.

Unlike the other two counters, apart from being listed on other African counters, Old Mutual is also listed on the London Stock Exchange in the United Kingdom.

From this listing, the price of the US dollar has been determined in what has been dubbed the “Old Mutual Implied Rate” (OMIR) as officially the forex rate remains controlled.

However, the move has not worked as the OMIR has continued to be recorded and thus soar.

The move was akin to Treasury suspending the annual inflation rate from August 2019 to January this year to try and control yearly inflation, which again did not work.

The fungibility suspension order on OML Zimbabwe’s shares came at a time the impact of applying the hyperinflationary provisions of IAS 21 locally, in 2019, decreased the group’s profit.

“The impact of applying the hyperinflationary provisions of IAS 21 in the current year was a decrease in the group’s profit after tax of ZAR312 million (US$16,52 million) reflecting the difference in applying the average versus the closing exchange rate,” OML said in its financial year results ended December 31, 2019.

As a result of the hyperinflationary climate in Zimbabwe, the OML group said it remained exposed on its property assets, unlisted and listed investments.

Further, OML added statutory and regulatory restrictions from the Reserve Bank of Zimbabwe and Zimbabwe’s Treasury restricts the amount of funds that can be transferred out of Zimbabwe to the group as it is headquartered in South Africa.