The Securities and Exchange Commission of Zimbabwe (SECZ) recently issued a directive requiring all licensed companies to use the Zimbabwean dollar (ZiG, ISO code ZWG) as their presentation currency for financial reporting, including the 2024 audited financial statements. This follows the Reserve Bank of Zimbabwe (RBZ) Governor’s announcement in the February 6, 2025 Monetary Policy Statement. This mandate means businesses must convert all transactions conducted in US dollars (USD) and other foreign currencies into ZiG for their public financial statements.

The Directive and Its Rationale

The SECZ notice, SECZ070325, explicitly states the requirement for a common presentation currency, the ZiG, citing the Securities and Exchange Act and the RBZ Governor’s Monetary Policy Statement. The stated aim is to enhance comparability across financial statements. The RBZ Governor’s statement echoed this sentiment, emphasizing the growing number and value of ZiG transactions since its introduction in April 2024.

Analysing the Implications

While the government’s objective of comparability appears reasonable, several factors complicate this new directive. Firstly, the economic reality in Zimbabwe is that the USD remains the dominant currency. Many sectors, particularly mining, operate primarily in USD. Requiring these companies to convert their USD earnings into ZiG for reporting seems counterintuitive, especially when minimal ZiG is involved in their daily operations. Data suggests that up to 80% of transactions in Zimbabwe are conducted in USD, with the ZiG often relegated to a secondary role, primarily for smaller transactions and government-related payments.

Secondly, the ZiG’s volatility raises concerns about the reliability and usefulness of ZiG-denominated financial reports. Since its introduction, the ZiG has experienced significant depreciation against the USD. While the official exchange rate has remained relatively stable in recent months, historical data from ZimPriceCheck reveals a pattern of periods of stability followed by sharp devaluations. This cyclical pattern raises doubts about the long-term stability of the ZiG and the comparability of financial statements over time.

A Questionable Choice

Given the economic landscape and the ZiG’s volatility, the government’s decision to mandate ZiG reporting appears questionable. A more logical approach might have been to allow companies to choose their reporting currency or to mandate the more stable USD. This would have provided a more accurate reflection of economic activity and facilitated meaningful comparisons, especially for assessing the performance of State-Owned Enterprises (SOEs).

While companies are obligated to comply with the directive and report in ZiG, there doesn’t appear to be any restriction preventing dual reporting. Companies could publish their financial statements in both ZiG and USD, providing stakeholders with a more comprehensive view of their financial position.

The mandate to use ZiG for financial reporting raises significant questions about practicality and effectiveness. While the government’s stated aim is comparability, the choice of a volatile currency and the disregard for the prevalence of USD transactions undermine this objective. Dual reporting, presenting financial statements in both ZiG and USD, could offer a more transparent and useful solution for stakeholders.

Frequently Asked Questions (FAQs):

• What is the ZiG? ZiG is the official currency of Zimbabwe, introduced in April 2024. Its ISO code is ZWG.
• Why is the government mandating ZiG reporting? The stated reason is to ensure comparability across financial statements.
• What are the concerns about this directive? The main concerns are the ZiG’s volatility and the dominance of USD transactions in the Zimbabwean economy.
• Can companies report in USD as well? There is no apparent rule preventing dual reporting in both ZiG and USD.
• Where can I find historical exchange rate data? ZimPriceCheck maintains a database of historical exchange rates dating back to 2018.