TOBACCO firm, British American Tobacco Zimbabwe (BATZ) has seen its long-standing blocked funds of US$16,35 million virtually wiped out after successive currency conversions left the firm with just US$475 recorded on its books.
The blocked funds, originally owed in respect of outstanding dividends and goods, were taken over by Treasury from the Reserve Bank of Zimbabwe (RBZ) in 2021.
However, instead of being settled, they were progressively eroded through the transition from the Zimbabwe dollar (ZWL) to Zimbabwe Gold (ZiG) in April 2024 and then to the United States dollar in August 2024, drastically reducing their value.
Effectively, BATZ has been left prejudiced, with a multi-million-dollar foreign currency claim reduced to a token balance.
“The Reserve Bank of Zimbabwe (RBZ) approved and registered the group’s blocked funds amounting to US$16,35 million in respect of outstanding dividends and goods consistent with the blocked funds guidelines provided in the Exchange Control Directive RU28 dated February 21, 2019 and Exchange Control Circular No.8 of July 24, 2019,” BATZ said in its financial statement for the half year ended June 30, 2025.
“In 2021, the Treasury assumed the liability from RBZ in relation to the blocked funds. The Treasury is currently working on the appropriate instruments to facilitate settlement of the registered blocked funds which were listed as approved blocked funds under Annex 1 of the Finance Act (no. 7) of 2021 (gazetted on December 21, 2021).”
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BATZ said following the currency change in April from ZWL to ZiG, the outstanding blocked funds were converted to ZiG at a rate of ZiG1:ZWL2 498,72.
“On August 1, 2024 the functional currency was changed from ZiG to USD, and the outstanding blocked funds were converted to USD at a rate of USD1:ZiG13,79,” BATZ said.
“The outstanding balances in respect of approved blocked funds are recorded as US$475, with a related US$475 asset due from the RBZ based on the amounts of ZWL16,3 million.”
BATZ auditors, KPMG, noted that no payments have been made by Treasury or the RBZ to settle the obligation, warning that the accounting treatment materially understates liabilities.
“As described in note 4 to the condensed consolidated financial results for the half year ended June 30, 2025, the group has continued to account for foreign liabilities amounting to US$16,3 million, approved as blocked funds on a 1:1 basis being ZWL16,3 million,” KPMG said.
“As a result, both the US$ denominated liability and the ZWL asset were reflected at a value of ZWL16,3 million in prior years.
“Following the change of local currency on April 5, 2024 (From ZWL to ZiG) and the change in the Company’s functional currency on August 1, 2024, the outstanding US$ denominated liabilities, included under trade and other payables, are now recorded at a value of US$475.”
BATZ directors believe the RBZ will assist the group in sourcing foreign currency at that rate.
However, KPMG said no legally binding instrument had been issued by the RBZ to confirm the contractual terms supporting settlement of the approved blocked funds.
This wipe-out of blocked fund not only prejudices shareholders who were due dividends, but also distorts the company’s true financial position, since auditors caution that the liability to foreign shareholders technically still exists.
At the end of the half-year period, which ended June 30, 2025, BATZ’s balance sheet reflected total assets of US$30,01 million, up from US$25,49 million at year-end 2024.
The growth was largely driven by a stronger cash position, which rose to nearly US$9,7 million from US$2,1 million, alongside steady inventory and receivables.
This expansion in assets signals improved liquidity and operational resilience, even as the company continues to grapple with legacy issues such as the erosion of blocked funds.
“British American Tobacco Zimbabwe (Holdings) Limited (the company) and its subsidiaries (together, the group) manufactures, distributes, and sells, cigarettes through a network of independent retailers, wholesalers, and distributors,” BATZ said.
“The group has a cigarette manufacturing plant in Zimbabwe and sells cigarettes entirely to the Zimbabwean market and exports cut rag outside Zimbabwe.”