According to the Business Times, the Zimbabwe Stock Exchange will resume trading next week but when it comes back fungible shares will no longer be allowed. This means that the three companies: Old Mutual, PPC and Seed Co International will no longer be allowed to trade. The plan is that these companies will be listed at the Victoria Falls Exchange which will operate under the “Hong Kong” like principle.

Frothing on the mouth

Old Mutual and it’s accomplices are being wrongly accused by the government which blames them for the depreciation of the Zimbabwean dollar. Because Old Mutual shares are fungible, a lot of entities and economist have taken to using the price of Old Mutual shares on the London stock exchange and comparing those to the price of shares on the Zimbabwean stock exchange. This comparison is then used to calculate a parity based rate which is used to estimate the “real” value of the Zimbabwean dollar against the US dollar.

It seems most authorities do not understand what fungible means. The fact that the market can always use the OMIR to estimate the true market value of the Zimbabwean dollar instead of following the dictates of the Reserve Bank of Zimbabwe has both the monetary authorities and their Fiscal counterparts frothing at the mouth. Raving and swearing to delist Old Mutual.

There are other parities

The reason why the OMIR rate was so popular is because it was very accessible and easy to understand. There are however many other ways to estimate the rate in the same manner. Whereas the OMIR used the price of Old Mutual shares in London versus those in Zimbabwe one can easily use the prices of other items such as the price eggs, bread, beef,bitcoin etc and use it to estimate the value of the Zimbabwean dollar.

Blaming bread sellers for a parity based rates using bread would be ridiculous. It’s just that in the case of Old Mutual the company is a white (local parlance for foreign) based behemoth with a controlling stake in a lot of sectors lending itself as an easy target for populist pronouncements.

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