SOUTH African financial services giant, Old Mutual Limited (OML) has raised red flags over Zimbabwe’s currency stability, as it continues to designate the Zimbabwe Gold (ZiG) as hyperinflationary after posting declines in group earnings.
This move comes as fiscal and monetary authorities continue to tout the ZiG’s recent stability as evidence that it could buck the country’s history of short-lived currencies.
It also follows Reserve Bank of Zimbabwe data showing that foreign currency reserves grew by more than 150% to US$730 million in June, from US$285 million in April, funds meant to shore up the ZiG.
OML’s determination comes at a time when its local subsidiary, Old Mutual Zimbabwe, is a large investor in the economy, which had investments and securities worth US$565,23 million as of June.
“The government of Zimbabwe gazetted Statutory Instrument 60 of 2024 on 5 April 2024 with these regulations bringing into existence a new currency, namely the Zimbabwe Gold (ZiG). The introduction of the ZiG required a reassessment of the functional currency of the Old Mutual Zimbabwe subsidiaries. It was concluded that a change in functional currency from the Zimbabwean dollar (ZWL) to the ZiG had occurred,” OML said in its newly-released half-year financial report ended June 30, 2025.
“The changes in functional currency were applied prospectively. The ZiG was determined to be a currency of a hyperinflationary economy. Hyperinflationary accounting requires transactions and balances to be stated in terms of the measuring unit currency at the end of the reporting period to account for the effect of loss of purchasing power during the period.
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“To comply with IAS 29 Financial Reporting in Hyperinflationary Economies (IAS 29), the Group estimated a ZWL$ CPI for the period January to March 2024 based on the monthly movement in the Total Consumption Poverty Line (TCPL) and for the period April to June 2024, the official ZiG CPI was used for hyperinflation reporting purposes.”
OML said the impact of applying IAS 29 in the previous reporting period resulted in a net monetary gain of ZAR152 million.
“Post the introduction of the ZiG, the Zimbabwean economy’s response to the new currency was monitored, and based on the economic factors observed since the introduction of the ZiG and the continued and growing trend in the second half of the year, it was determined that the functional currency of the material subsidiaries and holding company of the Zimbabwean group had changed to US dollar, effective 1 July 2024,” OML said.
“The changes in functional currency were applied prospectively. The US dollar is not a currency of a hyperinflationary economy, consequently hyperinflation accounting ceased for the Zimbabwean group effective July 1, 2024.”
OML reported a reduction in its International Financial Reporting Standards (IFRS) profit and headline earnings, driven by a decrease in the Zimbabwe profits owing to the changes in the local unit’s functional currency.
In the half-year period, OML reported an IFRS profit after tax decline of 22% to ZAR4,1 billion compared to the prior year.
The group also recorded a 29% fall in headline earnings to ZAR4,16 billion during the same period from the 2024 comparative.
“Due to continued restrictions on accessing capital through dividends, Zimbabwe’s results remain excluded from adjusted headline earnings,” OML said in its half-year report ended June 30, 2025.
“The reduction in IFRS profit and headline earnings was driven by the decrease in the Zimbabwe profits as we implemented a change in functional currency from Zimbabwe Gold to the United States dollar from July 1, 2024.
“While this resulted in lower IFRS earnings to the group, this had a limited impact on net asset value due to lower currency translation losses reflected in equity.”
The group noted that the key performance indicators in this performance overview exclude the results of its business in Zimbabwe, which is managed on a ring-fenced basis due to persisting fungibility constraints.