Where does the official rate come from?
From 23 June 2020, the Reserve Bank of Zimbabwe started conducting an auction for local companies and individuals who want to buy foreign currency. Participants must be able to bid for USD50,000 and above and they can only enter one bid through their bank which acts as their agent.
The auction is conducted every Tuesday or if a particular Tuesday is a public holiday then on the next working day. At the end of every weekly auction, the RBZ then averages the results of the auction to come up with an average exchange rate. It is that average exchange rate that will be used as the official exchange rate until the next auction.
Where does the black market rate come from?
No one really knows. Changing money outside the formal system of banks and other licensed players is illegal in Zimbabwe. However, there seems to be a rampant activity on this informal market still.
Our guess is that this situation exists because foreign currency is nearly essential to everyone in Zimbabwe (companies and individuals). For example, a lot of basic medication is not available locally and hence people need to import for themselves. However, it is almost impossible to access the forex from the official system. This then creates a situation where those people with such urgent needs are willing to pay more than the official players to access the forex and those who hold it would feel better served selling to such individuals and entity.
We have published the table above with zero figures for the parallel market because the central bank has declared that even being in a WhatsApp group in which the black market rate is quoted will cause them to grab you, shuckle you, throw you into the darkest jail cell and throw away the key. The authorities in Zimbabwe being as ridiculous as they are, they may just decide that just by reading the rate from a Techzim page you are now an exchange rate manipulator. So, black what?
What is the Old Mutual Implied Rate (OMIR)?
Old Mutual is a multinational company traded on the Zimbabwe Stock Exchange as well as the Johannesburg Stock Exchnage in South Africa and the London Stock Exchange. When you buy one share of this company on any of the markets it is perfectly equal to a share bought on any of the others. Old Mutual is Old Mutual.
Because there is a lot of interference in the way local Zim currency is valued, clever people just started to estimate the true value of the local currency using how much Old Mutual shares are worth on the different exchanges. Simple example: If a piece of gold sells for ZW$100 locally and for USD1 in New York. You can use that to imply an exchange rate between the USD and ZW$ of 1:100.
This rate has nothing to do with Old Mutual or its management. It is just a computation that is done by some clever people who want a consistent way to measure the value of Zimbabwean currency.