Oliver Kazunga, Senior Business Reporter
FORMER Presidential Advisor Ambassador Chris Mutsvangwa has blamed Old Mutual for causing parallel market financial distortions where the exchange rate has “inordinately” risen due to the Old Mutual Implied exchange Rate (OMIR).
Speaking on ZBCtv current affairs programme, Face the Nation, on Wednesday night, Amb Mutsvangwa said the OMIR was being used on the Zimbabwe Stock Exchange (ZSE) to determine the exchange rate and Old Mutual could change it as they wished in determining the exchange rate.
He said when the ZSE was going through demutualisation, Old Mutual requested to be allowed to trade on the local bourse, the Johannesburg and London stock exchanges premised on the idea that this could bring in capital into the country.
“By virtue of Old Mutual’s share certificates being able to be traded on principally these three stock exchanges, it means you can buy Old Mutual (shares) with RTGS today, stuff them in your bank, go to Jo’burg and liquidate them for Rand (South African currency).
“Equally the same, you can buy Old Mutual shares, fly overnight to London, go to the London Stock Exchange where Old Mutual is listed and liquidate them for Pound.
“But that liquidation has to be supported by the currency from the country of origin which is Zimbabwe, so the result was that instead of the water flowing down the valley, the water started going up the mountain, so the capital stock of Zimbabwe was haemorrhaged by that arrangement and today that attribution to Old Mutual gives what is now called Old Mutual Implied Exchange Rate (OMIR),” he said.
“This is the rate which is operating in this country. Old Mutual change that rate as they trade on the ZSE according to their wishes and that is the rate which is determining the exchange rate of this country.”
The ZSE was demutualised in 2016.
Demutualisation of the bourse refers to a process by which a mutual organisation is transformed into a publicly traded firm.
Amb Mutsvangwa said the effect of demutualisation of the ZSE was to take the control of the bourse because the stock exchange is there to raise capital for the country.
When the ZSE was going through the demutualisation process, he said, Old Mutual requested from the Government to be allowed to trade on the three bourses and this was premised on the understanding that Zimbabwe needed capital inflows from those countries with excess capital.
“I have said it before that if there is commotion in the kraal, don’t go for the calves, go for the big bull.
“You don’t accuse the young men on Fourth Street as people who are the main movers of the currency, no that’s wrong.
“The main culprit of the exchange rate rising inordinately in a few days is the existence of the triple trading by a set of counters on the Zimbabwe Stock Exchange,” Amb Mutsvangwa said.
Asked about the need to have the OMIR suspended on the ZSE, Amb Mutsvangwa said:
“My first inclination is to call on Old Mutual to re-examine historically the effect of the fungibility of its stock counter which it requested from the Government when Dr Tsumba (former Reserve Bank of Zimbabwe Governor Leonard Tsumba) was at the Reserve Bank.
“It was a privilege they requested and were accorded, can they be honest enough to the Zimbabwean population to say fungibility has brought capital into Zimbabwe.
“So, if it hasn’t brought capital into Zimbabwe and to the contrary it has caused capital flight, as a responsible corporate citizen of Zimbabwe and really a major one, they should modestly come to the monetary authorities and the President to say what we requested has not been helpful to the country, what is the way forward, if they can’t do that, then it calls on the regulator of the stock exchange to examine the performance of that stock viz-a-viz the parallel market.”
Efforts to get a comment from Old Mutual chief executive officer Mr Jonas Mushosho were unsuccessful as he was said to be out of the country. — @okazunga