There is confusion over the valuation of Old Mutual and PPC stocks, which were suspended on the Zimbabwe Stock Exchange (ZSE) in June 2020, and accountants are having to ponder various possible calculations in their clients’ accounts.
It does so amid mounting pressure in the market to use the prevailing share prices for the two stocks on the Johannesburg Stock Exchange (JSE) on which they are traded and calculate their local value at the prevailing interbank auction prices.
Stock valuation is essential to the fees earned by fund managers as well as the asset bases of the companies that hold these stocks in this inflationary environment.
Pension funds and insurance companies, which fund around 70% of the investments in the ZSE, may be the hardest hit.
The information provided shows that the fund managers have urged the market regulator, the Securities Exchange Commission of Zimbabwe (SECZ), to formally issue the policy and bring it into effect in accordance with legal and operational procedures. However, the government is against this move. Instead, valuation based on the share price at the time of suspension is preferred.
However, this runs counter to the government’s own attempts to paint a picture of a free market economy in which even the weak local dollar is valued in an interbank auction system.
An impeccable source close to the government, SECZ and ZSE said the government’s stance on the preferred position is currently delaying the release of a policy on using JSE share prices at interbank rates for audited accounts and other future transactions until the matter is completed.
According to the source involved in the ongoing deliberations, the government appears to be losing the battle.
“This issue is more political than anything, especially given the fact that there was a stalemate between the government and Old Mutual or it could have been resolved and closed in December,” the source said.
As previously reported in this release, Old Mutual sought guidance from the Zimbabwean government in the expectation that the required corporate governance procedures would be removed from the ZSE and listed on the Victoria Falls Stock Exchange (VFEX).
Sources even stated that Old Mutual has no plans to be listed on the VFEX, but the company insists it is committed to the Zimbabwean economy to further expand its investment spectrum. VFEX is a subsidiary of ZSE and was set up for local and regional companies to raise capital in foreign currency.
Market experts say valuing the stocks in question could prove to be a mammoth task for the industry, and investors could lose on the exchange rate scenarios.
“The question is, what are your stocks worth now, and we have pension funds and other companies that need that for their 2020 year-end results,” the source added.
A fund manager said it has been more than seven months since the stocks were suspended and valuation is critical to making the stocks liquid.
The Insurance and Pensions Commission recently said the suspension of Old Mutual and PPC stocks had an impact on the asset.
“Aside from the price, when will these meters be available again? How long can the mutual trust look at stocks? You also need to remember that auditors want value, what are they going to use? “Said a fund manager, who asked for anonymity
The newly appointed chairman of the Association of Investments Managers of Zimbabwe (AIMZ), Farai Gwaka, said his association had reached an agreement with the SECZ.
“We agreed with SECZ that we would use the respective prices of Old Mutual and PPC for the JSE and convert them at the then applicable interbank rate, as we do for some stocks that are not on the ZSE, such as Nedbank. Gwaka told businessdigest.
“That’s how we rated them, so we’re only applying that rating to Old Mutual and PPC stocks.
“The regulator is expected to issue a directive. It should be out soon, and that’s the way in that direction. That was the agreed position between the industry and the regulator. “
Efforts to get a comment from the SECZ were unsuccessful.