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THE value of the interim dividend of 2.45 British pence per share - equal to 36 SA cents/share - recently declared by Old Mutual has been set at Z$453 000bn/share for Zimbabwean shareholders. Now Africa loves big denomination currencies, but this is surely a world record?
Let us work this one out very carefully.
The 2.45p is about US$3.7c. At a certain time last week, one US cent was worth about Z$125 000bn. Following the massive mess on US financial markets, commentators are starting to use the value of one trillion or more to designate the extent of losses suffered by the financial sector.
I think the Zimbabwe exchange rate is currently about Z$125 trillion for every one US cent. This is even after Zimbabwe's central bank chopped of nine zeros from the denomination of their currency earlier this year. But if these zeros were added back, the value of Zimbabwean dollar can be expressed exponentially; that is, something to the power of something.
Back to the practical business of what this means. If the largest denomination Zimbabwean dollar bill is five billion, one would need 90 000 of these to pay out the dividend on one Old Mutual share trading on the Zimbabwean stock exchange.
How do you count 90 000 notes of Z$5bn each? At an exceptional speed of 60 per minute, it will still take 25 hours of non-stop counting. And that's the dividend on only one Old Mutual share. How do you ever count your dividend if you have 100 Old Mutual shares?
It's bananas
In SA, a banana costs about one rand each. How do you buy a banana in Zimbabwe at a cost of at least Z$1 000 000bn each if the largest denomination note is apparently Z$5bn? Even if there is Z$500bn bills in circulation, it will still be a hard task and the banana will probably rot before you finish counting.
Will anybody still living in Zimbabwe please let us know how you do it?
Or has Old Mutual messed up their calculation of the Z$/$, in which case there could be a massive arbitrage opportunity in Zimbabwe dollars. Click here for the Old Mutual Stock Exchange news service announcement on the conversion rate for its dividend.
- Fin24.com
