STRATOSPHERICALLY surging inflation is wreaking havoc on the Zimbabwe Stock Exchange, with most listed companies delaying the publication of financials due to accounting headaches caused by the weakening economy.
According to international research firm Stastica, Zimbabwe has the second highest inflation in Africa after conflict-ridden Sudan. Official statistics show Zimbabwe’s year-onyear inflation for April stood at 96.4%, up from 72.7% in March mainly driven by price increases in fuel, electricity and gas.
Rising inflation and currency volatility have stood out as some of the key issues which arose during the reporting period, with several companies announcing they were coming up with strategies to ensure their balance sheets remain strong. Some companies have in the past been fined or suspended from the ZSE for failing to comply with listing requirements such as timely publication of financials.
Earlier on, Justin Bgoni, the ZSE chief executive, gave listed companies a month-long grace period to publish financials after 31 March following an overwhelming request for extension of compliance by issuers to submit year-end financial statements.
“This will allow issuers to complete their audit processes and finalise financial statements and reports. (Issuers/listed companies) who fail to meet the 30 April 2022 deadline will be penalised for noncompliance,” Bgoni said.
After failing to meet the latest deadline, more companies have now asked for an extension.
Apparel retailer Truworths said it had missed both deadlines due to accounting headaches caused by soaring inflation.
“The reviewed results for the half-year to 9 January 2022 were due for publication on 30 April 2022. There is a delay due to necessary work to be completed in order for publication of financial statements that comply with International Accounting Standard 29 – Financial Reporting in Hyperinflationary Economies. An extension has been granted by the Zimbabwe Stock Exchange (ZSE) to publish the reviewed results on or before 13 May 2022,” Truworths said in a statement.
A few days before the April deadline, ZSE manufacturing concern Zimplow also raised the red flag.
“The Board of Directors of Zimplow Holdings Limited notifies shareholders that Zimplow Holdings will not be able to publish the Abridged Audited Financial Statements for the year ended 31 December 2021 by 30 April 2022,” the company said.
“The delay is due to extensive work necessary to conform to the requirement that Financial Statements are adjusted for hyperinflation so as to comply with International Accounting Standard 29-Financial Reporting in Hyperinflationary Economies. The Board anticipates that the Abridged Audited Financial Statements will be published by 31 May 2022.”
Transport and logistics company Unifreight Africa Limited on Thursday announced that it would delay publishing its full year financials due to the same reason.
IAS Financial Reporting in Hyperinflationary Economies applies where an entity’s functional currency is that of a hyperinflationary economy. The standard does not prescribe when hyperinflation arises, but requires the financial statements (and corresponding figures for previous periods) of an entity with a functional currency that is hyperinflationary to be restated for the changes in the general pricing power of the functional currency.
Zimre Holdings Limited (ZHL), which also missed its deadline, said the delay was due to “unforeseen” circumstances at the company. “The delay is as a result of unforeseen delays at Fidelity Life Assurance Company of Zimbabwe (FLA), which, being a significant component of ZHL, has in turn pushed back the conclusion of the Group consolidation and review by its external auditor,” ZHL said.
The soaring inflation has been a source of worry for the country’s monetary authorities over the past few weeks. The Monetary Policy Committee of the Reserve Bank of Zimbabwe has resolved to maintain high interest rates among other measures in order to tame the runaway inflation
“The committee noted with concern the recent uptick in month-on-month inflation, from 7,7% in March to 15,5% in April, and the increase in annual inflation from 72,7% in March to 96,4% in April 2022,” the committee said.
“The increase in inflation was a result of a combination of global shocks and pass-through effects of the recent exchange rate depreciation on the parallel market, with a significant proportion of the inflationary pressures emanating from the impact of the on-going Russia-Ukraine conflict.”
The past few weeks have seen most companies such as financial institutions and manufacturing firms publishing financials for the period ending 31 December ahead of the extended deadline.
In 2019, the Public Accountants and Auditors Board, mandated with regulating audit and accounting standards in the southern African country, said Zimbabwe had officially become a hyperinflationary economy.
Zimbabwe first experienced hyperinflation from around 2005 till 2008, peaking in 2008 at 500 billion percent. The US$1 became equivalent to Z$2 621 984 228. The domestic currency was ultimately ditched in favour of a multi-currency system dominated by the US dollar.