Old Mutual proposes exit plan for frozen Zimbabwean shares

Old Mutual Ltd. is considering a proposal to allow Zimbabwean shareholders to sell their frozen shares, providing a long-awaited relief for the 30,000 affected investors. The shares, suspended since June 2020 due to their role in exacerbating Zimbabwe’s currency crisis, could soon be sold on Johannesburg’s stock exchange under a plan initiated by Zimbabwean authorities. This move aims to alleviate the financial strain on pensioners and other stakeholders while navigating complex exchange-control rules. Old Mutual is working closely with authorities to ensure a commercially viable solution that respects the interests of all shareholders.

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By Ray Ndlovu

Old Mutual Ltd. is studying a proposal to give holders of its Zimbabwean stock an option to sell, allowing them to get paid out for shares that have been suspended for four years.

Under the plan, Zimbabwean investors would get a one-time opportunity to sell the shares on Johannesburg’s stock exchange, according to Shelton Sibanda, chairman of the Fund Managers Association of Zimbabwe. 

Authorities froze the shares in June 2020, complaining that trading in the South African insurer’s stock was contributing to a local currency crisis. 

Businesses were using Old Mutual’s cross-listings in London, Johannesburg and Harare as a proxy to calculate the true cost of goods and services as inflation spiraled and the Zimbabwe dollar crashed. The insurer said this week that Zimbabwean authorities approached it in April with the share-sale plan.

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Africa’s biggest insurer by assets is “engaging” with authorities “to clarify the practical aspects of their proposal to achieve an outcome that is commercially viable and respects the interests of our shareholders in Zimbabwe,” Old Mutual said in an emailed response to questions. 

Old Mutual has about 30,000 Zimbabwean shareholders, including pension funds, property companies, banks and retail investors. Besides insurance, the company provides banking services through the Central African Building Society Ltd. and is one of the largest property owners in the country.

The Zimbabwean Old Mutual shares would be transferred to the Johannesburg-traded register and funds from their sale repatriated in line with exchange-control rules, Sibanda said. 

“It’s not the best solution, but it’s a compromise to also help pensioners, who are suffering as a result,” he said by phone Thursday. 

Zimbabwe’s Secretary for Finance and Economic Development, George Guvamatanga, didn’t immediately respond to calls to his mobile phone or questions sent to him about the proposal.

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The southern African nation’s long-running currency crisis reached a tipping point four years ago, when authorities blamed trading in Old Mutual shares for undermining the Zimbabwean dollar. Businesses developed a measure known as the “Old Mutual Implied Rate,” or OMIR, calculated from the Harare share price relative to the levels on foreign stock exchanges, to use in transactions.

Old Mutual has always denied any wrongdoing. 

Its shares traded 1.3% higher by 1:33 p.m. in Johannesburg Friday. They’ve slipped 6.1% this year, compared with the 4.7% gain in South Africa’s main equity index.

Once the largest and most sought-after security on the Zimbabwe Stock Exchange, these Old Mutual shares have become effectively worthless because of the suspension, according to Lloyd Mlotshwa, head of research at Harare brokerage IH Securities.

“It is not tradable and at this point we cannot unlock any value,” he said. “It represents dead capital to the holder, which is unfortunate.”

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