When a multi million dollar claim becomes pocket change the headlines write themselves. For British American Tobacco Zimbabwe, known as BATZ, what was once a US$16,35 million foreign currency claim in respect of outstanding dividends and goods has been reduced on the company books to just US$475. That is not a rounding error. It is the product of policy moves, currency switches and accounting consequences that leave shareholders and auditors uneasy.
How a legitimate claim was eroded to cents on the dollar
The story starts with blocked funds: foreign currency owed to BATZ for dividends and goods that were registered under the blocked funds framework. The Reserve Bank of Zimbabwe originally approved and registered the US$16,35 million as blocked funds consistent with exchange control rules, and in 2021 the Treasury formally assumed those liabilities from the RBZ.
Instead of being paid in foreign currency, those blocked balances have been carried through two major currency transitions. On April 5, 2024 Zimbabwe changed the local legal tender from the Zimbabwe dollar, ZWL, to a new unit called Zimbabwe Gold or ZiG. The outstanding blocked funds were converted into ZiG at a stated rate of ZiG1 = ZWL2 498,72. Then, on August 1, 2024, the company changed its functional currency from ZiG back to the US dollar, converting ZiG into USD at a rate of USD1 = ZiG13,79. Those two steps, when applied to the original claim, compressed the multi million dollar figure down to a token US$475 balance recorded in the half year accounts to June 30, 2025.
What the accounts say, and what the auditors warn
BATZ’s half year results to June 30, 2025 show the outcome in stark numbers. The group notes the approved blocked funds were originally recorded as US$16,35 million, then the Treasury assumed the liability in 2021, and following the currency changes the balances now appear as US$475 on the balance sheet with a related asset of the same amount claimed from the RBZ. KPMG, the company auditors, point out that no payments have been made by Treasury or the RBZ and that no legally binding instrument from the RBZ sets out contractual settlement terms for those approved blocked funds. KPMG warns that the accounting treatment materially understates liabilities because the underlying obligation to foreign creditors remains.
Put plainly, the books show a tiny number while the economic reality is that the company and its foreign creditors still have a large unresolved claim. That mismatch is the reason auditors have sounded the alarm.
Who loses when a foreign claim gets converted away
The first victims are the actual foreign shareholders and creditors who were due dividends or payment for goods. Where a claim is denominated in foreign currency, converting it through abrupt policy-driven rate steps can wipe out the real value those external parties expected. For BATZ shareholders that means not just a one-off loss but a distortion of company value and of how future cash flows will be judged.
Second, prospective investors and lenders reading the financial statements may be misled about the company’s true exposure if blocked liabilities are shown at a token figure while the contractual claim exists in larger magnitude. That can lead to mispriced risk and poor investment decisions.
A balance sheet that both grows and hides a legacy problem
Despite the blocked funds saga, BATZ reported stronger overall asset growth. Total assets rose to US$30,01 million at June 30, 2025, from US$25,49 million at the 2024 year end. Cash balances were a big driver of that improvement, rising to nearly US$9,7 million from US$2,1 million, while inventory and receivables remained steady. That improved liquidity gives the company breathing room even as it wrestles with legacy policy issues.
The policy angle: Treasury, RBZ and the Finance Act
The blocked funds were listed as approved blocked funds under Annex 1 of the Finance Act No. 7 of 2021, which provided the legal framework for the state to assume certain liabilities. The practical problem is that assuming a liability on paper is different from settling it in usable foreign currency. Treasury’s assumption of the liability transferred the payment responsibility, but it has not yet produced a binding legal instrument or made payment to settle the claims in foreign exchange. Until those steps happen, the economic claim remains unresolved even if the accounting shows only US$475.
What BATZ and its board are saying
BATZ directors are hopeful that the RBZ will assist in sourcing foreign currency at the rate implied by the registered blocked funds. The company continues to record the foreign liabilities at their original amounts for internal recognition, while the financial statements reflect the conversions triggered by the currency changes. That split in presentation is what has prompted the auditors to highlight the risk of materially understated liabilities.
Why this matters beyond BATZ
This episode is a snapshot of a bigger governance and macroeconomic challenge. When currency regime shifts and policy decisions revalue obligations in unpredictable ways, businesses with legitimate foreign claims risk being effectively expropriated by arithmetic. That outcome undermines confidence in cross-border investment, complicates trade and can chill dividend flows. It also forces companies and their auditors to grapple with how to present a faithful picture of financial health when the legal and economic realities diverge.
BATZ’s blocked funds collapse from US$16,35 million to US$475 is not just an accounting curiosity. It is the result of policy-driven currency conversions combined with an unsettled state assumption of liability. Shareholders who were due dividends face a clear loss in real terms, and auditors warn that the company’s financial statements may not fully reflect the outstanding contractual obligations. For investors, the take away is that balance sheet figures can conceal policy risk. For regulators and the state, it is a reminder that legal assumption of obligations must be matched by clear, enforceable settlement mechanisms.
The original article was by CHEN WILLIAMS from Newsday
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