Old Mutual Says Too Many Zeroes Delay Zimbabwe Payout

By Vernon Wessels and Brian Latham
Nov. 25 (Bloomberg) -- Old Mutual Plc, the largest insurer in Africa, said it is delaying dividend payments to Zimbabweans because the country’s banking system cannot process the zeroes involved in the transaction.
“The banking system in general is having difficulties with the size of the numbers involved,” Matthew Gregorowski, a spokesman for London-based Old Mutual, said by phone today. It was an “temporary processing issue” which would be solved soon, he added.
The Old Mutual first-half dividend amounts to 453 trillion Zimbabwean dollars, the company said in a statement to the Johannesburg stock exchange today, which converts to $9.3 million at the government’s official exchange rate. The dividends were due Nov. 28 and will be paid once the banking difficulties have been resolved, it said.
Zimbabwe has the world’s highest inflation rate, estimated at 231 million percent, spawned by a decade of economic recession that caused shortages of food, fuel and other basic commodities.
The Zimbabwe dollar traded at 48.484 per U.S. dollar on the interbank market yesterday. On the black market, where most Zimbabweans buy their foreign exchange, the rate is 230 trillion against the U.S. currency. The Old Mutual Implied Rate, used as a guide by businesses in Zimbabwe, today valued the currency at 13 quintillion to one U.S. dollar.
‘Dividend Halved’
“It might have been better for Old Mutual to give investors extra shares instead of cash payments as these may be worth something in future,” said John Robertson, an independent economist in Harare. “The value of the dividend will halve each day” because of inflation, he added.
“Everything is difficult to do in Zimbabwe right now,” Robertson said. The economy, crippled by a shortage of goods, foreign currency and skills, has come to a standstill because people cannot withdraw money from banks. “This country needs investment flows, not aid, and this will only come once the political situation has been resolved.”
To contact the reporter on this story: Vernon Wessels in Johannesburg at vwessels@bloomberg.net; Brian Latham via Johannesburg at pmrichardson@bloomberg.net. Last Updated: November 25, 2008 09:47 EST