Zimbabwe firms brace for hyperinflation accounting under ZiG

By Bloomberg News

Zimbabwe’s market regulator is seeking clarity from the central bank on new rules that would require companies to report their financial statements in the nation’s gold-backed currency, forcing them to adopt hyperinflationary accounting and increase the cost of doing business.

The Securities and Exchange Commission, is “engaged” with the relevant authorities on the way forward, Justin Bgoni, the Zimbabwe Stock Exchange ’s chief executive officer, said Monday.

Governor John Mushayavanhu earlier this month ordered companies listed on the exchange to adopt the ZiG, short for Zimbabwe Gold, for reporting purposes with “immediate effect” including for the 2024 audited financial statements.

“This requirement is consistent with the increase in the number and value of transactions settled in ZiG since its introduction on April 5,” he said. The ZiG is used in 30% of all transactions in the economy with the remainder done in US dollars.

Since 2023 companies listed on the exchange have been allowed to report their results in US dollars because of the currency’s dominance in the economy and frequent collapse of the Zimbabwean dollar, which was replaced by the ZiG. Many companies, including blue-chip beverage manufacturer Delta Corp, have switched.

ZSE-listed FBC Holdings warned the move could have several negative consequences. It may introduce “accounting complexities, inflation translation risks, investor concerns and regulatory challenges,” the Harare-based lender said in a recent client note.

It will also require companies to adjust accounting software, financial models and auditing procedures  and “the application of IAS 29 — financial reporting in hyperinflationary economies — guidelines, leading to frequent revaluations,” it said.

It urged authorities to rethink their position. “Given that” the ZiG “has demonstrated instabilities in the past, a hybrid approach where businesses can choose the most relevant currency would be more practical,” FBCH said.

The ZiG is the nation’s sixth attempt at a functioning local currency since 2009. It has shed 95% of its value since its debut, amid exchange-rate volatility that forced authorities to devalue the currency in September.

The southern African nation’s difficult operating environment recently led to the exit of global accounting firms Deloitte LLP and PwC LLP.