Omega Ukama 
ZIMBABWE’S currency alterations have created property valuation challenges amid indications reporting firms are encountering difficulties translating values across currencies and time.
Dairibord Holdings, chief executive, Anthony Mandiwanza
This piles on the trouble created by the Harare administration’s monetary policy gyrations ― chiefly its premature re-introduction of the Zimbabwe dollar ― which have not only rendered financial statements meaningless, but also landed the country in its second episode of hyperinflation in a decade.
“Property valuations rely on historical market evidence for calculation of inputs. Such market evidence does not exist at present to calculate ZWL$ values,” Anthony Mandiwanza, TSL’s board chairman said in the company’s 2019 annual report published last week.
He said the independent property valuers of the group, which has a thriving real estate segment, were conflicted for example, about converting values at the official exchange rate and ended up settling for a makeshift methodology.
“Given the … concerns, the directors have elected to use a much more conservative basis to value the group’s real estate portfolio … the actual US$ rental yield achieved in the year of five percent to determine the ZWL$ value of the underlying property portfolio,” Mandiwanza said, adding that users of the figures should take caution.
Further, he said the group’s financial statements were not prepared in compliance with accounting standards.
This comes as laws gazetted by government to support the return of the country’s domestic currency have made it impossible for reporting firms to comply with international standards, particularly the rules concerning translation of currencies.
“The reporting period was characterised by multiple exchang’e rates and therefore the board advises users to exercise caution in the interpretation of these statements,” Mandiwanza said.
This also comes as the Insurance and Pensions Commission has insisted that the local insurance and pensions industry should review its asset valuation framework, after “botched” appraisals knocked a combined US$8 billion off their balance sheets last year. This drove the regulator earlier this year to issue specific guidelines for value translation in times of a currency change.
Meanwhile, the currency ambiguity created by government’s constant currency tinkering, which started in October 2018 with the ring-fencing of nostro and domestic balances, has worsened challenges for reporting firms.
“The question of whether the economy is de-dollarising or re-dollarising forms a big part of fair presentation of financial statements … from a policy perspective, we are looking at de-dollarisation, but what is on the ground points to re-dollarisation,” Anesu Daka, a local accounting standards expert, told a Chartered Accountants Academy webinar recently.
“While we still have not solved the issues of the past for us to get clean opinions, the second coming of the US dollar is bringing more challenges,” he said.
Following the reintroduction of the domestic currency last year, government had banned the use of other currencies in “local transactions”, but widespread use of the US dollar continued in the growing informal economy amid rapid deterioration of the local unit.
Further, the government this year rescinded the ban on the use of foreign currencies, even though it insists the economy is on a clear path to de-dollarisation.
And experts say the currency ambiguity has been worsened by the recent introduction of a civil service “nostro-payment”.
