RYAN CHIGOCHE
Zimbabwe’s largest financial services group, Old Mutual Zimbabwe, has been hit by a wave of sub- inflationary investment returns, weighing down the group’s performance.
Business Times can report that Old Mutual Zimbabwe suffered a 9% fall in investment and securities in the six months to June 30, 2022.
Infact, returns on equities and other securities investments trailed inflation, which exploded out of control in the reviewed period, resulting in the reported loss. Annual inflation rate hit 192% in June from 60.7% in January. The vicious spiral continues as the annual inflation rate spiked again in August to 258% from 257% in July this year.
Consequently, the company swung into an inflation-adjusted loss of ZWL$8.6bn in the reviewed period from a profit position of ZWL$31bn in the prior comparative period.
“The life assurance company and Old Mutual Holdings’ contribution to the group’s bottom line plunged 61% and 58% weighed down by their exposure on the (fragile) Zimbabwe Stock Exchange (ZSE). The company’s investments in equities and securities declined in real terms, largely weighed down by sub inflationary returns,” Takura Mudekunye, the Old Mutual’s group chief financial officer told an analyst briefing on Tuesday this week.
He added: “The reported loss (of ZWL$8.6bn) was impacted by lower returns on reserves and capital markets which were sub- inflationary.”
The measures put in place by the government to deal with rocketing inflation, local currency and exchange rate volatilities severely affected the local bourse.
The ZSE tumbled into bear territory in the period under review, with the market capitalisation in June plunging to ZWL$1.971 trillion from ZWL$2.3 trillion in May.
At one point during the period under review, ZSE market capitalisation hit more than ZWL$3 trillion.
The bearish sentiment continued even after the reviewed period.
On Tuesday this week, the market capitalisation fell to ZWL$1.706 trillion from
Total assets for the group grew 34% in the reviewed period, largely due to 50% growth in investment in the properties sector, where the group achieved above inflation returns.
The group also realised a 30% growth in loans and advances with USD denominated lending now accounting for more than half of the loan book supported by a line of credit of over US$100m that CABS managed to secure offshore.
Group CEO, Sam Matsekete said “all group companies were adequately capitalised and well positioned to support planned growth”.
Matsekete, however, warned that there is a likelihood of further pain ahead.
“ We see significant uncertainties which need to be addressed to underpin the growth that we would project into the long term and these areas are in the space of the policy regime,” he said, adding “We can support stability that we have seen by maintaining consistent policies as well as ensuring that in monetary and external sectors we have predictability”.
He also said Old Mutual Zimbabwe was pursuing growth opportunities, which remains one of the main efforts.
The managing director of the insurance business, Gloria Zvaravanhu said 75% of the general insurance was covered in US$ in the first six months of the year.
“We have seen our clients react more positively to our call for clients to insure more in US$ to preserve value and 3/4 of our revenue is the United States of America dollars and this has obviously assisted our clients in the sense that they don’t continuously review,’’ Zvaravanhu said.
