Zimbabwe’s ruling party said it will expel Old Mutual from its financial system, sowing confusion over the status of the insurance giant in the country and what will happen next in the government’s battle to fix its chaotic currency system.
The highest decision-making body of the Zimbabwe African National Union-Patriotic Front on Friday said it endorsed a decision to “eject Old Mutual from the financial system” and to shut down the country’s biggest mobile-money platform, Ecocash. The institutions have caused “runaway inflation through illegal parallel exchange-market rates,” the party’s acting spokesman, Patrick Chinamasa, said after the meeting in Harare.
The government wants to stop companies from using differences in the 175-year-old insurer’s share prices in London, Johannesburg and Harare to determine a potential forward rate for the currency. Measures that were being considered included suspending Old Mutual’s shares from the local bourse, having the securities traded in dollars, or moving it to a planned foreign-exchange based market, people familiar with the matter said earlier this month.
“When they say it is ejected, I’m not sure what he means,” said Lloyd Mlotshwa, the head of equities at Harare-based IH Securities. “I’m not sure it’s a delisting yet, at this point it’s a confusing statement.”
Chinamasa didn’t give further details or respond to calls and text messages from Bloomberg seeking comment.
The local stock exchange has been shut for two weeks after security forces forced the government to cease trading and halt most mobile-money transactions, people familiar with the matter said last month. Clive Mphambela, a Treasury spokesman, declined to comment. A spokesperson for Old Mutual in Johannesburg didn’t respond to calls and a text message seeking comment. Nick Mangwana, a government spokesman, didn’t immediately reply to a text message.
A perennial shortage of cash means anyone who has banknotes is able to negotiate exchange rates with brokers who pay the funds onto mobile-money platforms. The brokers can then sell the hard cash at an even higher rate. The Old Mutual Implied Rate values the Zimbabwean dollar at 122 against the greenback, compared with a black-market rate of about 100, and Friday’s closing price of 65.8765. The government in June abandoned a peg of 25:1 that was put in place in March.
Justin Bgoni, the chief executive officer of the stock exchange, said he is aware of the comments from the ruling party, but wasn’t sure what it implied and would rather wait for official communication from authorities before commenting.
Sean Gammon, managing director of Harare-based Imara Edwards Securities, said the comments by Zanu-PF were probably directed at delisting Old Mutual rather than its removal from the entire financial services sector. Old Mutual spans banking, property and insurance in the country.
The last communication received from authorities was that inspections would be conducted into stockbroker trades in the coming days, he said. Once concluded, trading should resume.