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Financial reporting implications of Zimbabwe’s new ZiG currency

KC Rottok Chesaina
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Zimbabwe has introduced a new currency known as the ZiG which is short for Zimbabwean Gold. The difference between this currency and its predecessors is that its value is linked to the gold price. The currency started trading in early April and it remains to be seen whether this new batch of notes will be the solution to the country’s longstanding currency problems.

There are multiple companies in South Africa with operations in Zimbabwe and they will have questions as to the impact of the new currency on their financial reporting. There are four fundamental questions that arise.

  1. Does ZIG eliminate hyperinflation accounting?

IAS 29 Financial Reporting in Hyperinflationary Economies applies to the accounting for any entity whose functional currency is the currency of a hyperinflationary economy. A key characteristic of a hyperinflationary economy is one where the current inflation rate over three years is approaching or exceeds 100%.  This has been the case for Zimbabwe which has led to entities accounting for financial statements using the principles in IAS 29 to restate prior year figures for comparability with current year amounts. With a new currency having been introduced, it is expected that goods will be priced in ZiG which will necessitate a reassessment of whether prices are increasing at a hyperinflationary rate. If it is concluded that hyperinflation ceases to exist then IAS 29 ceases and the figures at the end of the previous reporting period translated to ZiG would be the basis for current year accounting without further restatement.

  1. What is the functional currency of entities in Zimbabwe?

Per IAS 21, financial statements should be prepared in accordance with the functional currency of the entity. Functional currency is defined as the currency of the primary economic environment in which the entity operates. It is the currency that mainly influences sales prices for goods and services and influences labour, material and other costs. Entities in Zimbabwe will need to assess whether ZiG has become the new functional currency; if so, the entities will apply translation procedures applicable to the new functional currency prospective from the date of the change.

  1. Is the change to ZiG an event after the reporting period?

In accordance with IAS 10, entities should assess whether events after the reporting period are adjustable or non-adjustable. Events that lead to adjustment of amounts reported at year end are those that reveal conditions that existed at year end while other events are considered non-adjustable. As ZiG was only adopted in April, entities with financial year ends prior to that would treat this as non-adjustable. Per IAS 10.21, these entities would need to disclose the change in functional currency as well as the estimate of the financial effect of adopting ZiG.

  1. What if ZiG lacks exchangeability?

A currency is exchangeable if an entity is able to obtain the currency within a time frame that allows for a normal administrative delay through a market or exchange mechanism. In August 2023, the IASB issued an amendment to IAS 21 dealing with this exact issue, the fact that in several instances an entity has currency units that cannot be exchanged for a significant amount of another currency. There has been long term lack of exchangeability between the US dollar and the Zimbabwean dollar. The amendment to IAS 21 states that an entity should utilise an exchange rate that reflects the rate that an orderly exchange transaction would take place between market participants at the measurement date. In other words, the IFRS 13 fair value principles should be applied if ZiG is found not to be readily exchangeable to other currencies.

By KC Rottok Chesaina, Chief IFRS Officer at Financial Minds Consulting. The above is not financial reporting advice, contact us for any IFRS related consulting and training requirements. Email ask@fineminds.co.za. This was first published here by the Financial Minds.

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Politics

Chamisa wants to form a new government before 2028

Nelson Chamisa
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FORMER Citizens Coalition for Change (CCC) leader Nelson Chamisa has declared that he is not going to wait for the 2028 harmonised elections to tackle issues plaguing the nation.

Chamisa dismissed the results of the August 2023 presidential elections and has since refused to acknowledge President Emmerson Mnangagwa who was declared winner after the chaotic polls.

Several election observer missions, which were in Zimbabwe before, during and after the plebiscite, said the polls were not free, fair and credible.

Chamisa later ditched the CCC after Sengezo Tshabangu, who claimed to be the party’s interim secretary-general, recalled several legislators linked to the former leader.

Speaking on his newly-launched Chamisa News Channel, Chamisa said he was not going to wait for the 2028 elections to fix the problems that are bedevilling the country.

“I know you have questions on when are we going to fix the 2023 error. We are not going to wait for 2028; we are fixing the problem right now. Let’s be united, love and help each other, together we will conquer. Our God is in it, God bless you,” Chamisa said.

The opposition leader left his party after claiming that it had been hijacked by proxies of Mnangagwa’s ruling Zanu PF party.

Chamisa also commented for the first time on the recently introduced Zimbabwe Gold (ZiG) currency asking his followers their experiences after its launch this month.

“Have you started receiving the ZiGs, I wish you all the best,” he said.

The ZiG, introduced earlier this month, is trading at around 17ZiG to the US$1 on the parallel market, although government’s official exchange rate is 13ZiG to the US dollar. Most prices of basic goods have increased and the ripple effects of the cost-of-living crisis are being felt all over.

Employees have witnessed their salaries being overtaken by prices, with typical wage increments now worthless. This has also created challenges for businesses to match wages with rising inflation.

The Zimbabwe National Statistics Agency on Monday said the food poverty line for one person rose by 51,31% to ZiG424,95 this month, amid an acceleration in the annual inflation rate for April to 57,5%.

Last week, Reserve Bank of Zimbabwe governor John Mushayavanhu said authorities considered using cryptocurrency as one of four options to deal with the rapid depreciation of the Zimdollar.

Source: News Day

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Politics

Zimbabwean woman sells her belongings, feeds thousands, and inspires change

Children queue at Samantha’s relief kitchen for food. | Photo courtesy of Kuchengetana Trust
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HARARE, Zimbabwe — At the height of the Covid-19 Pandemic, two harsh realities confronted me: adhering to lockdown protocols and ensuring people had sufficient food. The fear of contracting the virus or facing arrest for violating protocols also felt daunting. Recognizing the need for a sustainable solution to empower people, I initiated the Kuchengetana Trust to assist those in need.

As my efforts became known, lines formed outside my home. With just a few pots, pans, and an old stove, a group of volunteers and I fed an increasing number of people. I prepared porridge for children’s breakfast and distributed food packs for families’ dinners.

In less than two weeks, the number of people coming to eat swelled to 867. When times got tough, I sold my belongings to ensure everyone was fed. I soon realized I ignited a flame beyond my control. I began bartering items I was not using like jeans, sneakers, and jackets, in exchange for maize, cooking oil, salt, and labor. This strategy kept us afloat and allowed us to continue serving people to this day.

The legacy of kindness: continuing family traditions of generosity

One day, I gazed into the eyes of 15 hungry and vulnerable people, feeling a profound sense of helplessness and empathy. I shed tears, witnessing their plight first-hand, and allowed those tears to hydrate my purpose. Raised in a financially stable family, I never experienced the pangs of hunger before bedtime. It felt like a moral obligation to continue to fulfill the hope I kindled in these lovely people, especially the children.

I come from a family with deep-rooted traditions, including the principle of lending a helping hand to our neighbors when we have the means to do so. We hold the belief that God, angels, and our ancestors guide and influence our actions and decisions. Therefore, I see myself as merely carrying out a duty assigned to me—to serve others and, in the process, discover my life’s path.

Samantha Shingirai Muruzoki serving food at her Chitungwiza Kitchen.
Samantha Murozoki, 38, is an immigration lawyer by profession who co-founded a relief kitchen that feeds thousands of vulnerable children in Zimbabwe. Growing up in a financially stable family, she always felt she could bring hope to the vulnerable in her community. She started the Kuchengetana Trust relief kitchen in April 2020 during the first national COVID-19 lockdown in Zimbabwe. Despite testing positive for Covid-19 twice in 2020, Samantha had to juggle two realities: the Covid-19 lockdown and feeding people.

Moreover, growing up in a home always open to extended family, I learned the value of helping individuals from various backgrounds from an early age. This practice became second nature to me. The enduring nature of this tradition reflects the belief that if my family could share our space with others for extended periods, then surely, we will.

Kuchengetana Trust’s journey from small beginnings to serving thousands amidst Covid-19 pandemic

Initially, I aimed to help a small group within my community, but as the Covid-19 Pandemic unfolded, I founded the Kuchengetana Trust supporting people confined during the lockdown. Kuchengetana means “looking after one another” in the Shona language. To my surprise, the initiative blossomed into an oasis, offering sustenance to thousands in Chitungwiza’s Seke Unit A.

When I first started cooking, I received support from both ordinary people and companies, which poured in donations, allowing the plan to thrive. Our success also caught the attention of the local council, which temporarily shut down our soup kitchen due to health regulations. This move intensified political tensions and exacerbated existing divisions. While I understood the council’s concerns about Covid-19 protocols, I could not simply close our doors. Instead, I obtained the necessary license to continue operating.

Samantha began the Kuchengetana Trust relief kitchen in April 2020 during the first COVID-19 lockdown to feed people. | Photo courtesy of Kuchengetana Trust
Samantha began the Kuchengetana Trust relief kitchen in April 2020 during the first COVID-19 lockdown to feed people. | Photo courtesy of Kuchengetana Trust

Unfortunately, I contracted Covid-19 twice during this period. The second bout hit me hard, leaving me incapacitated for about three weeks. Thankfully, my mother stepped in to ensure people still had something to eat. The Kuchengetana Trust expanded, and we now operate four relief kitchens that serve vulnerable groups such as children and the elderly.

When I moved to my place in Mount Pleasant Heights, I noticed a significant disconnect from the realities faced by many. As a result, I decided to extend the same program I had in Chitungwiza to this community. In this new location, I serve porridge in the morning and an early supper, ensuring I cater well to all four kitchens.

The Kuchengetana Trust’s vision for Zimbabwe’s youth in economic hardship

Our mission encompasses providing essential resources like clean water and food and ensuring education for children. Currently, we focus on aiding the most vulnerable groups, shifting from our initial broad approach during the Covid-19 Pandemic. Through careful needs analysis, we identify children who require our support, narrowing our beneficiary base as a result.

Children queue at Samantha's relief kitchens for food. | Photo courtesy of Kuchengetana Trust
Children line up at Samantha’s kitchen, holding their pots and plates for food. | Photo courtesy of Kuchengetana Trust

Our vision includes establishing a piggery and fishery project on a piece of land, which would generate funds to build a home for the children under our care. This initiative willd not only provide them with a stable environment but also cultivate a generation of enterprising Zimbabweans. However, the path to self-sustainability is steep, and we lack the necessary resources to ascend.

Regrettably, we have seen a significant decline in volunteer numbers, primarily due to the absence of incentives. Initially, we saw widespread enthusiasm and support for our cause, with generous donations enabling us to nourish thousands. Now, with reduced support, we face greater challenges in meeting our goals. This may be attributed to donor fatigue or shifting public interest. Despite the project losing some donations, the Kuchengetana Project persists.

Furthermore, the requirement to have staff, which many donors insist upon, hampers our efforts to secure funding. Consequently, we depend on sporadic contributions from individuals, small businesses, and occasional corporate support. Even in the face of challenges, I remain committed to this cause. Questions about my continued involvement, especially post-pandemic, often arise. The answer lies in my upbringing, which instilled the values that drive me to longevity of this project.

Source: Orato

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Politics

Zim’s medical aid industry embraces ZiG

AHFoZ’s Chief Executive Officer, Ms Shylet Sanyanga
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Medical aid societies under the banner of the Association of Healthcare Funders of Zimbabwe (AHFoZ) are optimistic that the newly introduced ZiG will bring about price stability and economic growth.

This comes as the Reserve Bank of Zimbabwe took a significant step on April 5, 2024, by introducing the ZiG currency as a structured currency backed by gold.

Speaking during a Monetary Policy breakfast meeting, AHFoZ’s chief executive officer, Ms Shylet Sanyanga said the introduction of a gold-backed currency has reignited hope in the medical aid industry.

“We are optimistic that the new currency is going to assist the healthcare sector to be sustainable. Members of the public will be able to get good packages using the currency that they have at their disposal,” said Ms Sanyanga.

She also urged all healthcare stakeholders to accept the new currency, emphasising that its value is influenced by public perception.

“We cannot succeed as a country if we do not use our own currency or embrace it. I think we should give it a chance.”

The new currency comes at a time when private healthcare service providers had shifted to charging exclusively in US dollars due to speculation, thereby causing challenges for medical aid societies’ members.

“We are optimistic that our member societies can market their products, consumers will be able to choose and buy products using whatever they have at their disposal.”

Source: Herald

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