Ecocash loses ZWG 148,7 million in conversion to new currency

Ecocash Holdings Zimbabwe Limited, a leading diversified digital solutions group, has reported a loss of ZWG 148.7 million following the transition to the newly introduced ZWG currency, which was introduced by the Reserve Bank of Zimbabwe (RBZ) on April 5, 2024.

Presenting the group's financial results for the half-year period ending August 31, 2024, Sherree Shereni, Board Chairperson of Ecocash, explained that the company encountered challenges during the migration from the Zimbabwean Dollar (ZWL) to the ZWG currency. The migration was a part of the RBZ's broader strategy to stabilize the economy and address Zimbabwe's persistent inflation problems.

Shereni noted that the group had to comply with International Financial Reporting Standards (IFRS), particularly IAS 29 on financial reporting in hyperinflationary economies, and IAS 21 on the effects of changes in foreign exchange rates. This process required the company to restate its prior year balances to the new currency using the inflation index as of April 5, 2024. As a result, Ecocash incurred a loss of ZWG 148.7 million due to this adjustment.

"The transition exposed us to monetary losses as we restated opening ZWL balances in line with IAS 29 before converting them to the ZWG," Shereni stated. Despite the loss from the migration process, Ecocash saw a significant boost in its financial performance, with fair value gains of ZWG 1.2 billion on proceeds received from a scheme of reconstruction, which were denominated in shares of Zimbabwe Stock Exchange-listed Econet.

In terms of profitability, Ecocash reported a remarkable increase in its profit before tax, which surged to ZWG 1.66 billion, a substantial jump from ZWG 144.6 million recorded during the same period the previous year.

Following this period of growth, Ecocash's Board of Directors declared a distribution of proceeds from the transfer of its non-banking business units to Econet Wireless Zimbabwe Limited. The distribution included a cash payment of ZWG 910 billion (equivalent to 236,371,255 Econet shares) alongside the same number of shares distributed to stakeholders.

Shereni emphasized the company's commitment to driving innovation and improving operational efficiencies through digital technologies. "We will continue to grow our partnerships and collaborations to meet the ever-changing customer needs," she added. "Our focus remains on providing exceptional service through seamless and efficient banking channels."

Despite the initial financial setback from the currency migration, Ecocash Holdings Zimbabwe Limited is optimistic about the future and its ability to adapt to the evolving economic environment in Zimbabwe.