MTHANDAZO NYONI MULTINATIONAL investment firm, Cambria Africa says it has suffered write-downs stemming out of Old Mutual’s suspension from the Zimbabwe Stock Exchange (ZSE) about two years ago.
The suspension, which has triggered valuation headaches for investors in Old Mutual and two other counters forced out of the ZSE, was a result of government’s suspicion that fungible counters were aggravating depreciation of the domestic currency, which has been falling since 2016. Fungible counters trade in more than one bourse.
Old Mutual was de-listed from the ZSE alongside seed producer, Seed Co, which became the first to list on Victoria Falls Stock Exchange when it opened in October 2020. Seed Co also traded its stock on the Botswana Stock Exchange.
Johannesburg Securities Exchange (JSE) quoted cement maker, PPC Cement was also caught up in the crackdown.
In its financial results for the six months ended February 28, 2021 Cambria, which trades its stocks on the London Stock Exchange said Old Mutual Zimbabwe’s parent, Old Mutual Plc, should have protected investors.
“By acquiescing to the suspension of Old Mutual (Zimbabwe) and the discontinuation of fungibility by the government of Zimbabwe, Old Mutual Plc has forced the company to indefinitely hold a position in Old Mutual which is neither its core business nor in its investments,” Cambria said.
“The company reiterates its displeasure with the board of Old Mutual plc in not protecting its shareholders in Zimbabwe from the effective freezing of their shareholding in Old Mutual.”
The firm holds 204 047 Old Mutual Limited common shares.
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These were valued at US$200 000 during the review period, based on Old Mutual’s closing price on the ZSE at the time of suspension.
Cambria said it repatriates the stocks to JSE, where it purchased them, or to the United Kingdom where they continue to trade, their value as at June 30, 2021 would be equivalent of US$191 468.
This figure is a drop from US$211 500 on May 28 last year.
Write-downs were a result of depreciation in the value of OM in London during a time when the British pound has been losing traction against the US dollar.
Last week, Old Mutual told businessdigest that it was engaging Zimbabwean authorities over the suspension.
“We are aware of the hardship that the suspension is causing our shareholders. It is a complex environment, and we continue to engage the Zimbabwean government on this matter,” Old Mutual said in emailed responses.
“We will update stakeholders on the outcome of the engagements as soon as we are in a position to do so. We remain fully committed to Zimbabwe, its economy and the people we serve.”
Cambria’s investments in Zimbabwe encompass the Payserv Group and Millchem.
The Payserv Group is the country’s leading provider of payments and business process outsourcing services targeted at financial and related sectors.
The group comprises four business units, Paynet Zimbabwe, AutoPay, Loanserv and Softserv. Millchem is among Zimbabwe’s leading distributors of industrial solvents and metal treatment products. The company was established in 1986 as Millpal and rebranded to Millchem in 2011.
Meanwhile, the company said it has blocked funds of US$1,39 million, seated at the central bank.
“Management successfully negotiated with the Reserve Bank of Zimbabwe (RBZ) the payment at parity of US$1,25 million and carried the same on its books at the end of financial year (FY) 2019 because Cambria had a time determinate commitment from the Reserve Bank governor, John Mangudya, which was honoured in full during FY 2020,” it said.
“Hence, there is reason to believe that the appropriate and conservative approach of converting these blocked funds at the prevailing exchange rate may be a significant underestimation of their realisable value. The company intends to negotiate with the RBZ to achieve a win-win outcome.”
