HARARE – Zimbabwe’s central bank has issued a new directive for listed companies to report their financial results in the country’s struggling local currency, and also reduced the portion of proceeds that exporters retain in foreign currency.
Stretched for foreign exchange resources and struggling to entrench usage of the Zimbabwe Gold (ZiG) local unit of exchange, the administration of President Emerson Mnangagwa has been scrambling for ways to contain company closures, de-stocking by retailers and decimation of the formal economy.
This has resulted in new monetary measures announced by the Reserve Bank of Zimbabwe governor, John Mushayavanhu, including a requirement that companies listed on the Zimbabwe Stock Exchange report their financials in the ZiG currency.
With the economy highly dollarised, most Zimbabwe listed companies had started to report their financials in US dollars, mirroring the currency of transactions processed by their businesses.
“Given the need to ensure comparability of financial statements, the Reserve Bank, following consultations with the Public Accountants and Auditors Board (PAAB), requires that all entities adopt a common presentation currency, ZiG, for reporting purposes, with immediate effect, including for the 2024 audited financial statements,” Mushavanhu said last week.
Although listed companies such as Delta Corporation have noted that more than 70% of transactions were in US dollars, Mushayavanhu said the requirement to report financials in local currency was “consistent with the increase in the number and value of transactions settled” in ZiG.
Zimbabwe introduced the ZiG currency in April last year.
Apart from this, the Zimbabwean central bank has reduced the portion of earnings that exporters can retain in foreign currency. Zimbabwean exporters and other businesses argue that all their inputs and working capital is in US dollars.
The Horticultural Development Council said lowering of the forex retention threshold from 70% to 75% “presents significant challenges for the horticulture sector that relies heavily on foreign currency earnings” to sustain production.
Under the forex retention policy, exporters in Zimbabwe get 75% of their earnings in foreign currency while 25% is paid out in the local currency equivalent at the official exchange rate that often trails the thriving parallel exchange rate.
“The horticulture industry operates within tight cost margins, with most inputs—such as power, fuel, seed, fertilisers, packaging, and freight—denominated in US dollars,” said Linda Nielsen, CEO of HDC.
“The reduction in forex retention means exporters will have less hard currency to meet these critical expenses, placing strain on cash flow and investment in the sector.”
Zimbabwean retailers have been among the most affected by the country’s currency uncertainty, with many wholesale and retail companies folding up, rationalising operations and destocking.
The Confederation of Zimbabwe Retailers said over the weekend that the reduction of the foreign currency retention threshold posed challenges for the retail and wholesale sector “in terms of supply chain stability” and pricing.
“Exporters, who also supply goods to local formal retailers and wholesalers, rely heavily on foreign currency for key inputs in their various fields,” said Denford Mutashu, head of the Zimbabwe retailers grouping.
“With reduced forex retention, these exporters may struggle to meet their USD-denominated expenses, leading to higher production costs and possibly further dollarising supply chains.”
