Bad news for Zimbabwe-The scary side of the Zimbabwe Stock Exchange bull run

Then, just as now, central bank was all out of ideas about how to solve the currency crisis.

Gideon Gono, three years into his job, was tinkering with the currency, just as John Mangudya today, also in his third year, is battling for a solution.

Around this time in 2007, Gono was stuck between devaluing the currency or losing his job.

The “D word” was an evil term that got ministers fired.

The official rate was Z$250 on the dollar, well overvalued.

Trying to disguise it, Gono introduced what he called a “drought mitigation accelerator factor of 60″.

Under this plan, exporters would be paid 60 times the official rate as an incentive.

It was devaluation by another name.

Still, it never worked.

Today, Mangudya is also in a currency fix.

He has watched his own “export incentive”, the bond note, get devalued on the streets.

Just as importers under Gono had raided the black market for forex, businesses today have to source currency on the informal market.

The foreign payments backlog is now close to a billion dollars.

With no credible forex rate, the Old Mutual Implied Rate – a comparison of Old Mutual share prices in Zimbabwe and those in South Africa and London – became the proxy exchange rate in 2007.

In 2017, the Old Mutual share price is once again being used to gauge the value of the currency in Zimbabwe; the electronic dollars.

In June last year, Old Mutual shares on the ZSE cost some 17.5 percent less than they did in London and on the JSE.

Central bank had increased the fungibility limits on Old Mutual shares to 49 percent from 40 percent, which meant shareholders could move more shares from Zimbabwe to South Africa or London.

However, from that 17.5 percent discount, Old Mutual stock, as of yesterday, has now swung to a 50 percent premium in Zimbabwe.

Once again, just as it did in 2007, the share price is pointing to a virtual devaluation.

Continued next page

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