Zimbabwean businesses grapple with the challenges posed by a fluctuating exchange rate and a widening gap between official and parallel market values of the national currency. The Zimbabwe dollar has experienced an 89% depreciation against the US dollar on the official market this year, prompting companies listed on the Zimbabwe Stock Exchange (ZSE) to explore alternatives in reporting their financial statements, with a notable shift towards the use of US dollars.

Leading the way in this trend is Proplastics, which recently disclosed its half-year results in US dollars. Similarly, Delta, the largest beverage company in the country, revealed during a recent analyst briefing that it is contemplating the transition to US dollar reporting for its full-year financials. With over 80% of its revenue denominated in US dollars, the move aligns with the company’s strategic considerations in response to the currency instability.

Other notable entities, including property company Masholand Holdings and Dairibord, Zimbabwe’s largest dairy producer, have already presented recent trading updates in US dollars, as reported by newZWire. Dairibord, for instance, noted a significant uptick, with 93% of its sales in the quarter ending in September conducted in USD, a substantial increase from the 39% average in the first half of the previous year. This shift towards US dollar reporting is viewed as a proactive measure in addressing the volatility and uncertainty surrounding the Zimbabwean dollar.

The prevalence of the US dollar in the national economy, coupled with the advantages of utilizing a stable and widely accepted currency, has led companies to find it more prudent to report in US dollars. This approach not only enhances transparency and consistency but also aids in navigating the challenges posed by the unpredictable exchange rate.

Imara Asset Management emphasizes that adopting US dollars for company earnings provides investors with a clearer understanding of true profitability. Managing a portfolio exceeding US$100 million, the brokerage argues that reporting in Zimbabwean dollars can obscure financial issues and create a misleading impression of a company’s profitability.

Adding to the momentum, the Reserve Bank of Zimbabwe reports that nearly all bank loans, approximately 94%, are now denominated in USD. This shift reflects a deliberate move by authorities to limit the circulation of the Zimbabwean dollar in a bid to control inflation. The increased reliance on the US dollar for sales, loans, and financial reporting underscores the business community’s preference for a more stable and widely accepted currency in Zimbabwe’s challenging economic landscape.

Photo (By Garikai Dzoma)

By: Delino Gayweh
Serrari Financial Analyst
November 17, 2023