Zimbabwe-listed companies get leeway to report financials in US dollars

Zimbabwean companies listed on the stock exchange are now permitted to present their financial statements in US dollars due to the swift dollarization of the economy. The CEO of the Zimbabwe Stock Exchange (ZSE) recently announced that corporate boards and shareholders can decide which currency to use for financial reporting.

Zimbabwe operates under a multi-currency system, including the Zimbabwean dollar, which is increasingly becoming less prominent in transactions, as well as the rand and the US dollar. Notably, listed companies have observed a surge in US dollar transactions. Nevertheless, the government maintains the requirement to price goods and services in the local currency, offering the option to convert prices to US dollars at the official exchange rate.

According to Justin Bgoni, the ZSE CEO, the choice of currency for financial reporting is now in the hands of company boards and shareholders. He emphasized, "Reporting issues are for the board and shareholders… they can use any currency that they feel best represents the performance of their organization. We are in a multicurrency country, so that (financial reporting) could be in US dollars."

However, Zimbabwean entities have faced challenges in converting their accounting sales. They are obligated to use the official exchange rate, which often lags behind the more realistic parallel exchange rate, for pricing. Simultaneously, they have to settle invoices from suppliers and vendors quoted in accordance with the parallel exchange rate.

Moreover, the government has prohibited the exclusive sale of products and commodities, disadvantaging formal companies in competition with informal traders like spaza shops. Maxen Karombo, the CEO of the prominent retailer OK Zimbabwe, has expressed concerns about the unfair disadvantages faced by formal stores in the Zimbabwean economy.

Nonetheless, as the Zimbabwean economy rapidly adopts the US dollar, companies are now granted flexibility to report their financials in US dollars. This transition, however, presents additional challenges in accounting and auditing processes. Edgars Zimbabwe, for instance, had to postpone the release of its financial statements due to these complications.

Edgars is expected to be one of the first Zimbabwean companies to disclose earnings in US dollars when it eventually publishes its delayed interim financials by the end of the month.

Thedias Kasaira, the Managing Director at Imara Edwards Securities in Harare, explained that many Zimbabwe-listed companies are not reporting in US dollars yet, primarily because the majority of their earnings are still in the local currency. She emphasized the importance of companies earning in US dollars if they choose to report in that currency.

The dollarization of Zimbabwe's economy has been accelerating in recent months, with a shift towards US dollar lending by banks and the introduction of US dollar-based products by insurance and other companies. Furthermore, the Reserve Bank of Zimbabwe has recently floated USD treasury bills, signaling the increasing use of US dollars in the country's financial landscape.