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Deadlock over Old Mutual listing

by Staff reporter
20 Nov 2020 at 06:09hrs | Views
THE delisting of Old Mutual from the Zimbabwe Stock Exchange (ZSE) and subsequently listing on the new Victoria Falls Stock Exchange (VFEX) is facing major hurdles, amid indications the financial institution and government are deadlocked over corporate governance processes that should precede the procedure.

These relate to giving notices to shareholders across various jurisdictions on Old Mutual's network, voting and securing the approvals.

A source close to the developments said the government and Old Mutual have glaring differences on the full fungibility of shares. Government ordered the company to delist, amid claims the Old Mutual implied rate was driving parallel market exchange rates, as well as valuation of the stocks.

The Old Mutual implied rate was used to determine forward value of the country's local currency. It was derived from Old Mutual's internal calculations of United States dollar value differences of its Harare, Johannesburg and London securities.

Old Mutual's conduct, together with other players, prompted the ZSE, in June, to temporarily suspend trading pending an inquiry. It was around this time that negotiations for Old Mutual to delist from the ZSE and move to the VFEX, which deals only in foreign currency, started.

A top official in the Ministry of Finance indicated Old Mutual recently held highly confidential meetings with Finance minister Mthuli Ncube and the Zimbabwe Stock Exchange CEO Justin Bgoni to iron out contentious issues standing in the way of the major transaction.

"This meeting was a closed-door meeting and attended by the minister and the respective officials. Details of the discussions are being kept a closely guarded secret, perhaps because they could impact trading," a ministry official said.

Upon further inquiry, it emerged that the governance issues being referred to, are in respect of shareholder approvals needed across Old Mutual's network to give life to the transactions.

Old Mutual, a source said, is reportedly pushing for the government to give a directive in the form of some waiver for these corporate governance procedures to be put aside for the purposes of this transaction.

"We can't do that because it can be challenged at law and it's not proper. Corporate governance processes must be followed accordingly anywhere in the world because that's where confidence comes from," the official said.

However, the Ministry of Finance strongly suspects Old Mutual is allegedly trying to buy time and just push for delisting from the ZSE.

"We are aware there is internal politics and that, for instance, Old Mutual and the JSE, prefer it is only listed on the JSE and not in Harare under the current scenario. They want to delist and end there and we are aware. In fact, the issue is that as a government, we can only encourage someone to list, we cannot force them," the source added.

Although efforts to get an official comment from Ncube's office were fruitless, information at hand also suggests Old Mutual might have preferred to trade in US dollars on the ZSE, a position which will not be entertained by government.

Bgoni requested for questions in writing, but he had not responded to them at the time of going to print.

Officials in Bgoni's office indicated he was away on business in New Zealand.

Securities Exchange Commission CEO Tafadzwa Chinamo said he was not aware of such discussions.

Chinamo referred all questions to the Ministry of Finance, Old Mutual and the Zimbabwe Stock Exchange.

Responding to questions sent to Old Mutual, its spokesperson Lilian Mbaiwa confirmed the developments, saying her company remains firmly committed to Zimbabwe despite the Old Mutual Limited share not currently trading on the ZSE.

"We are here for the long term and continue to drive our extensive range of investments and initiatives in Zimbabwe," Mbaiwa said.

"Some governance processes are still underway at the Old Mutual Limited and discussions with relevant authorities in Zimbabwe relating to trading the international stock on the Victoria Falls Stock Exchange are ongoing. We are confident that an amicable position will be reached soon," Mbaiwa added.

Old Mutual could, however, not be drawn to sharing specific points of contention among the parties. Old Mutual opened its business in Zimbabwe in 1902 and listed on the ZSE in 1999.

Source - the independent