Rampant inflation and currency devaluation in Zimbabwe has forced Old Mutual, the Anglo-South African insurer, to change its local dividend payout in just six weeks from just over Zim$20 a share to nearly Zim$1,250 a share.

The astonishing increase is a reflection of inflation which, to judge by Old Mutual’s own calculations, is running at an annualised rate of about 1,700 per cent. However that assumes that the crippled economy under its dictatorial President, Robert Mugabe, will not deteriorate further.

Economists believe that inflation could hit 4,000 per cent or more by the end of the year.

The dire state of the Zimbabwean economy was underlined in a short statement from Old Mutual yesterday which set out its final dividend using revised currency calculations.

Just a fortnight ago, Old Mutual said that its 4.15p per share dividend would pay out Zim$20.77 per share, based on the official currency rate of Zim$500 for £1.

The company then factored in inflation of about 200 per cent for the six weeks between setting the dividend and paying it out on May 31 and promised a Zim$40.64 per share payout, bringing an equivalent annual inflation rate of about 1,700 per cent.

But last week Gideon Gono, Governor of Zimbabwe’s Reserve Bank, devalued the Zimbabwe dollar by more than 90 per cent. Exchange rates mean that Zimbabwean locals need about Zim$30,000 to buy just £1.

The dividend will now be Zim$1,246.49 per share, Old Mutual told the London Stock Exchange yesterday.

Old Mutual’s statement added: “No further adjustment will be made to this for the effects of inflation between April 19 and May 31.”

One economist has predicted that inflation will peak at 5,742 per cent by September, before declining to 4,000 per cent at the end of the year.

For Old Mutual, the currency conversion will make no difference to its actual cash payout in sterling terms.

However Old Mutual shareholders who would usually leave their cash in the bank may find it safer to spend it as fast as possible, particularly in Zimbabwe, where it is said that cars are the new hard currency. 36 years The average life expectancy in Zimbabwe – the lowest in the world Source: Reuters

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