Monday, August 31, 2009

Cost of Capital in Zimbabwe

With the absence of meaninglul historical share performance, and government stock that can be termed risk free in the market, let alone long term government debt, one wonders whether portfolio theory and determination of cost of capital can be easily applied in Zimbabwe.
I would think companies make use of of payback periods more in our case as a dertermination of investment decision, if models such as NPV and IRR are used, probably a proxy of the South African market is used.
There is a clear indication that corporate finance principles in the stricktest sence face applicability challenges in Zimbabwe. In other economies for example, information on share performance can be tracked as far back as 1900. In Zimbabwe such information is scantly available and the local Central statistical office leaves a lot to be desired.
Universities which used be at the forefront of research in these and other related areas, are scantly resourced and many skills are being lost to the region and beyond.

Dony Mazingaizo has an interest in IFRS and Financial Management

Wednesday, August 26, 2009

IFRS for SMEs in Zimbabwe

The IFRS for SMEs were published by IASB in July 2009 and other Countries such as South Africa adopted the SME standards when they were still an exposure draft. The challenges bedevling the economy will poss serious challenges in the SME sector to be able to adopt the IFRS as some will not be able to meet the costs of training let alone implementing sound financial management systems for their businesses.

There is an opportunity for small businesses to formalise their financial reporting processes, facilitate access to finance and loans, and benefit from long term savings in less stringient IFRS reporting requirements.

Only about 400 disclosures are required instead of 3000 "full" IFRS disclosures. This is alongside simpler measurement and recognition requirements.

Dony Mazingaizo has an interest in IFRS and Financial Management

Wednesday, August 5, 2009

Sustainablity Reporting

Lately i had an opportunity of attending a presentation where Sustainability reporting trends in Zimbabwe were presented. It was amazing to note that not much is being done by Zimbabwean companies to comply with the Requirments of the Enviromental Management Act , Green Reporting Initiatives (GRI) and other sustainability reporting initiatives globally.
Unfortunately there could be serious compliance costs in the future if companies do not position themselves in this important area. With the world looking at green reporting and pressure groups such as Green Peace and Friends of the Earth pushing governments to the limit, African companies need to consider sustainability reporting as an integral part of their risk assessments and corporate strategy.

Dony Mazingaizo has an interest in IFRS and Financial Management